Bankr. M.D.N.C.: In re NCOAT- Application for Fees as Special Counsel

Summary:

Previously, the bankruptcy court granted the Debtor’s Motion to Employ Jones and DJP (the “Special Counsel Motion”) for the “limited purposes” of representing the Debtor “with respect to such corporate and securities matters as may be requested.” The Special Counsel Motion disclosed the fact that DJP was prepetition counsel to the Debtor and was owed a prepetition debt, but did not state the amount owed, which was in excess of $500,000. The Debtor asserted in the Special Counsel Motion that since special counsel employed under Section 327(e) of the Bankruptcy Code are not subject to the same strict disinterestedness standards as general bankruptcy counsel employed under Section 327(a), the existence of such a relationship and a prepetition debt did not disqualify DJP from representing the Debtor as special counsel.

While special counsel employed under Section 327(e) need not be disinterested, it may not hold an interest adverse to the debtor or estate with respect to the matters for which counsel is to be employed. See, e.g., In re Tidewater Mem. Hosp. Inc., 1102 B.R. 221, 228 (Bankr. E.D. Va. 1989). The employment must be for a special purpose and may not involve the general administration of the estate. In re Brokers, Inc., No. 04-53451, slip op. (Bankr. M.D.N.C. Jan 14, 2005) (J. Aron). Furthermore, attorneys cannot purport to serve as special counsel to bypass disinterestedness requirements while in fact acting as bankruptcy counsel. Accordingly, it was “was incumbent upon DJP to avoid work that approached the line between general bankruptcy services and specialized corporate and securities work” and the other parties in the bankruptcy case were entitled to wait until an actual Application for Compensation was filed to decide if DJP had “crossed that line.” From the description of services provided in the Application, the bankruptcy court “was able to identify no services that are associated with specialized corporate and securities work and only one expense”, with all other activities involving the general administration of the estate. DJP was provided one further opportunity to amend or supplement its Application to show work done as special counsel only.

For a copy of the opinion, please see:

NCOAT- Application for Fees as Special Counsel.pdf

About

1. Bachelor of Arts degree in English Literature from Washington University, 1993. 2. Juris Doctor degree from George Washington University, 1996. Admissions to Practice of Law: North Carolina Bar, 1996. Federal District Courts for the Eastern and Middle Districts of North Carolina. Specialty Certification: North Carolina State Bar: Certified as a Specialist in Consumer Bankruptcy. Areas of Practice: Practice limited to consumer and business debtor bankruptcy law, 1998 to present. Memberships: National Association of Consumer Bankruptcy Attorneys (NACBA). North Carolina Academy of Trial Lawyers (NCATL). North Carolina Bar Association, Bankruptcy Section. Lectures prepared and presented: North Carolina Academy of Trial Lawyers seminar on bankruptcy; Topic: Counseling the Consumer Debtor Prior to Court - C.Y.A. Forms to Help 'Gird They Loins'; 2001. Middle District Bankruptcy Seminar; Topic: Preparing Chapter 13 Plans; 2002. NACBA National Convention; Topic: Efficient Office Practices; 2003. NACBA National Convention; Topic: Chapter 7 vs. Chapter 13 Debates; 2004. Middle District Bankruptcy Seminar; Topic: Chapter 7 & 13 Hot Issues; 2004. Positions held: NACBA National Convention; Convention Chair; 2008. NACBA National Convention; Panel Moderator: Topic: Basic Bankruptcy Issues; 2008. NACBA National Convention; Panel Moderator; Topic: Chapter 13-Disposable Income and Other Issues; 2007. NACBA National Convention; Panel Moderator; Topic: Representing Members of the Military and Their Families; 2007. NACBA, Member of National Board of Directors, 2006 to present. NCATL, Chair of the Bankruptcy Section, 2003 to 2007. NACBA, Chair of the North Carolina Section, 2003 to 2007. NC Bar Association, Bankruptcy Section, Bankruptcy Council Member, 2004 to present.

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