to pay professionals. Therefore,
professionals take a significant risk
in relying entirely on confirmation
as the event to guarantee payment of
their fees. Professionals that rely on
confirmation essentially render their
fees a contingency arrangement based
on an uncertain litigation outcome. J
1 Debts owed prior to the filing of the
bankruptcy petition are referred to as
“prepetition,” and those owed for goods
and services supplied after the petition
are referred to as “post-petition.”
2 See, e.g., Specker Motor Sales Co. v.
Eisen, 393 F.3d 659 (6th Cir. 2004);
Judith Greenstone Miller, “Protecting
Professional Fees From Disgorgement,”
ABI Journal at 40 (June 2006).
3 See Waldron v. Adams & Reese, LLP (In
re Am. Int’l Refinery, Inc.), 676 F.3d 455,
462-63 (5th Cir. 2012) (sanction, but not
disqualification, for failure to disclose
payments from third party); In re Glenn Elec.
Sales Corp., 99 B. R. 596, 601-602 (D. N. J.
1988)(disqualification for failure to disclose
that affiliate of the debtor’s secured creditor
paid counsel’s retainer); In re Nashville
Senior Living, Case No. 08-07254 (Bankr.
M.D. Tenn.)(disqualification of committee
counsel for failure to disclose pre- and post-petition payments from certain committee
members prior to committee formation).
4 Compare In re Hathaway Ranch P’ship,
116 B.R. 208, 219 (Bankr. C.D. Cal. 1990)
(impermissible as per se conflict); In re
Bobby guy is an attorney with the law firm of
Frost Brown Todd LLC in Nashville, Tennessee,
and specializes in fixing, buying, and selling
struggling companies. He is the co-founder of the
FBT/TrBK Distress Indices ( distressindex.com), and
is certified as a specialist in business bankruptcy
by the American Board of Certification. He can be
reached at 615-251-5557 or email@example.com.
WPMK, Inc., 42 B.R. 157, 163 (Bankr. D.
Haw. 1984)(same), with Waldron, 676 F.3d
at 462-63 (totality of the circumstances
test); In re 7677 E. Berry Ave. Assocs.,
LP, 419 B.R. 833, 844 (Bankr. D. Colo.
2009) (same); In re Mo. Mining, Inc., 186
B.R. 946, 948-50 (Bankr,. W. D. Mo. 1995)
(multifactor test); In re Kelton, 109 B.R. 641
(Bankr. D. Vt. 1989) (multifactor test).
5 Compare In re Cooper Commons LLC, 512
F.3d 533 (9th Cir. 2008); Evanston Beauty
Salon Supply, Inc., 136 BR 171. (Bankr.
N.D. Ill 1992); with In Re Machinery, Inc.,
287 BR 755 (Bankr. E. D. Mo 2002).
6 In re Blackwood Assoc., L.P., 153 F.3d 61 (2nd
Cir. 1998); In re Flagstaff Foodservice Corp.,
739 F.2d 73 (2nd Cir. 1984); In re Senior-G&A
Operating Co., Inc., 957 F.2d 1290 (5th Cir.
1992); In re Buttermilk Towne Center, LLC
442 B. R. 558 (6th Cir. BAP 2010). Richard
B. Levin, "Almost All You Ever Wanted to
Know About Carve Out," Amer. Bankr. L.
J. 445 (2002, Vol. 76). See also Hartford
Underwriters Ins. Co. v. Union Planters
Bank, N. A., 530 U. S. 1, 6 (2000) (interpreting
Section 506(c) to be unavailable to any
party but the debtor, so that committees
cannot bring surcharge actions).
7 Indeed, in the DIP financing context,
many courts view a carve-out for debtor
professionals, committee professionals, and
U. S. Trustee fees as the price of admission.
See, e.g, Letter from Hon. Peter J. Walsh,
U. S. Bankr. Judge for the Dist. Of Delaware,
to Delaware Bankr. Counsel, “First Day
DIP Financing Orders” (April 2, 1998).
8 See, e.g., Specker Motor Sales Co. v.
Eisen, 393 F.3d 659 (6th Cir. 2004).
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