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Vol 14, Num 4 l November 2016

Technology and Intellectual Property

► In This Issue:

Proxy Games; Is It Merely an Unfair Advantage or an Ethical Violation to Serve as a Member of the Creditors’ Committee and Then Become Co-Counsel?

ABI

Frederick B. Rosner
The Rosner Law Group
Wilmington, Del. 

 

 

Competition among law firms to be selected as counsel to an Official Committee of Unsecured Creditor is notoriously stiff.  The financial rewards are substantial and work begets more work.  Every new engagement is another line in the pitch book, and one less for the competition.

The Local Rules of the Delaware bankruptcy court require out of state counsel to align with Delaware-barred counsel.  Accordingly, Committee formation meetings conducted in Delaware present an opportunity for Delaware firms to compete for the local role.  Delaware lawyers routinely meet with creditors before the Committee is formed, discuss the case, and present their credentials and hourly rates.  But after the Committee is formed, prospective Delaware counsel are ushered out of the Committee meeting room, the door is closed, and all marketing efforts come to an end.  Delaware counsel then wait patiently to hear which firm the Committee has selected to serve as its Delaware counsel.
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The EOUST View

ABI

Nan Roberts Eitel
Executive Office for
United States Trustees

Washington, D.C.

By making official committees of creditors mandatory, Congress recognized that committees can be vital to the success of a chapter 11 case.  That is why the United States Trustee Program (“USTP”) expends great effort to solicit and to appoint a “representative” group and to provide its members with a charge that explains their important fiduciary duties to act on behalf of their constituency.  Most committees operate very well and faithfully carry out their fiduciary obligations, thereby benefitting all stakeholders.  Sometimes, however, issues do arise, and the USTP addresses those issues within the confines of its authority.

One issue that arises from time to time is the abuse of proxies, which are permitted under the Federal Rules of Bankruptcy Procedure.  The United States Trustee Program has long maintained that professionals holding a creditor’s proxy in conjunction with committee formation may not “pitch” to represent the committee.  Both the ethics and the optics are suspect because the proxy-holder for the newly appointed committee member must act as a fiduciary for the committee’s constituency and seeking to be hired certainly suggests self-dealing and a conflict of interest.  Whenever the United States Trustee receives complaints about misconduct in the committee’s process to retain professionals, the complaints have been and will be investigated. And the United States Trustee continues to urge professionals and stakeholders to come forward whenever they may have evidence of misconduct.
» Read More

ABI

 

ABI's Winter Leadership Conference is right around the corner! Next week the Unsecured Trade Creditors Commtitee will be teaming up with the Asset Sales Committee to present their session titled "Disruptive Engagement: The Role of Creditors’ Committees and Individual Creditors in Asset Sales." The panel for this exciting and practical session includes Melissa A. Hager (Morrison & Foerster LLP; New York), Brian S. Hermann (Paul, Weiss, Rifkind, Wharton & Garrison LLP; New York), Mark S. Indelicato (Hahn & Hessen LLP; New York) and Elissa D. Miller (SulmeyerKupetz, APC; Los Angeles).

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Winter Leadership Conference

 

24th Annual Southwest Bankruptcy Conference

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