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Vol 13, Num 1 l March 2015

Ethics and Professional Compensation

► In This Issue:

Choice of Ethics Rules for Non-Court Matters: Which Jurisdiction’s Ethical Rules Govern Conduct Related to Out-of-Court Transactions?


Lesley S. Welwarth
Pepper Hamilton LLP

Lawyers focusing on corporate bankruptcy matters, especially those who work at firms with a large national presence, often represent clients throughout the country and are commonly admitted to practice in more than one jurisdiction. Further, bankruptcy attorneys often blend their practice with bankruptcy court litigation and out-of-court restructuring and transactional matters. So what happens when a dual-licensed bankruptcy attorney handling a non-court matter is subject to a state’s disciplinary authority? Which jurisdictional rules will govern that attorney’s conduct? Last month, the New York State Bar Association (NYSBA) Committee on Professional Ethics addressed this issue. See NYSBA Ethics Opinion 1027.
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ISO’S Cloud Privacy Standard: A Guide for Lawyers’ “Reasonable Efforts” to Protect Client Information


Jack Pringle
Adams and Reese LLP
Columbia, S.C.


Lyndey Zwing
Adams and Reese LLP
Columbia, S.C.

Rule 1.1 of the Model Rules of Professional Conduct requires that all lawyers provide “competent representation to a client.” In August 2012, the ABA added new language to Model Rule 1.1, comment 8:

To maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in the law and its practice, including the benefits and risks associated with relevant technology, engage in continuing study and education and comply with all continuing legal education requirements to which the lawyer is subject. (new language in italics).

Because a lawyer’ “competence” now includes the ability to evaluate and use computer technology, attorneys must understand computer technology tools for their own benefit and for their clients.

Cloud Computing and Its Information Benefits and Risks
One such technology tool is cloud computing, broadly defined as contracting with another company (a ”cloud services provider“) to provide computing resources, such as networks, storage, software applications and other services. The key difference between cloud computing services and traditional computer hardware and software is that cloud computing software resides on the cloud service provider’s servers and is delivered via the Internet rather than being installed on the lawyer’ computer. As a result, information is stored on the cloud service provider’s servers rather than on the lawyer’ own computers.
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Prohibited and Allowed Fee-Sharing Under 11 U.S.C. § 504


John C. Hoard
Rubin & Levin P.C.

At times, it is necessary to hire special or co-counsel in a bankruptcy case when the case involves matters that are beyond the expertise of debtor’s counsel, such as tax law or personal-injury litigation. These employments can run afoul of the Bankruptcy Code if the applications to hire and payment of attorney fees are not handled in an appropriate manner. Section 504 of the Code prohibits fee-sharing among persons who are not employed by the same firm. The prohibition applies to any “person receiving compensation or reimbursement under section 503(b)(2) or 503(b)(4) and includes trustees, ombudsmen, examiners, attorneys, accountants, appraisers, auctioneers and other professional persons employed under section 327 or 1103 of the Bankruptcy Code.” In addition, the Bankruptcy Code and Federal Rules of Bankruptcy Procedure require full disclosure of any fee-sharing or agreement to share fees. Courts narrowly review any application where fee-sharing is suggested.
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Bonfire of the Ambiguities: A Case Study on Restructuring Fees in River Road Hotel


Tina M. Talarchyk
The Telarchyk Firm
Palm Beach, Fla.

After a significant amount of litigation including an appeal, remand and trial over a two-year period, the bankruptcy court overseeing In re River Road Hotel Partners LLC ultimately determined that FBR Capital Markets & Co., located in Arlington, Va. (FBR), was entitled to payment of its restructuring fee of $2,666,965.73 and expenses of $12,179.01. FBR’s engagement letter with the debtors from 2009 called for a restructuring fee based on the percentage of indebtedness involved in any restructuring. The proverbial match that started the “bonfire of the ambiguities” was that the debtors’ plan failed while a third-party plan was confirmed, but the FBR engagement letter was ambiguous as to its entitlement to a restructuring fee in the event that a third-party plan was confirmed. Professionals entering into engagement letters that contemplate a restructuring fee may learn valuable lessons from FBR’s battle.
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Why Come to the ABI Annual Spring Meeting?

The Ethics & Professional Compensation Committee will be teaming up with the Bankruptcy Litigation Committee at this year’s Annual Spring Meeting to present a session titled Trustee-Selection in Commercial Bankruptcy Cases: Who Wins the Battle to Control the Estate?   Speakers for this panel include Eve H. Karasik of Gordon Silver in Los Angeles (Moderator); Ramona D. Elliott of the Office of the U.S. Trustee in Washington, D.C.; Edward T. Gavin of Gavin/Solmonese LLC in Wilmington, Del.; and James A. Lodoen of Lindquist & Vennum LLP in Minneapolis.

The committees invite you to attend the reception that they will be hosting after their session—this is a great time to chat with the speakers and network with like-minded colleagues!

Join us on April 16 at the Renaissance Washington D.C.!

In the video above, James Markus (Markus Williams Young & Zimmermann, LLC; Denver) and James Patrick Shea (Armstrong Teasdale LLP; Las Vegas) make the case for attending this year’s Annual Spring Meeting.

April 16-19, 2015 American Bankruptcy Institute 33rd Annual Spring Meeting


14th Annual Litibation Skills Symposium

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Tel. (703)-739-0800
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