Ashley Senary Dahlberg is a senior associate in the
San Antonio office of Norton Rose Fulbright US LLP,
where she practices complex commercial litigation.
Further, ordinary course of business
defenses can often protect against
disgorgement in instances in which
the advisor and client regularly did
business with one another. Even an
isolated prepetition payment has been
found to survive such an attack. 8
While paying clients are the ones
professionals love, they know that
bankruptcy is often in the best interests
of clients. Working together, even a
bankrupt client and its advisors may be
able to sustain their relationship through
the storm or, at least, to avoid the strain
that comes with escaping avoidance. J
1 1 U. S.C. A. § 328 (Limitation on
compensation of professional persons).
2 Generally, there are t wo requirements for
the debtor’s retention of professionals:
( 1) the professional must meet the
“disinterested person” standard, pursuant
to Section 101 of the Bankruptcy Code;
and ( 2) the professional must not hold
or represent an interest adverse to the
estate. 11 U. S.C. § 327(a). The phrase
“disinterested person” is defined in
Section 101( 14) of the Bankruptcy Code.
3 Prepetition attorney’s fees claims are
subject to discharge in the debtor’s
bankruptcy. See In re Klein, 197 B.R.
760, 762–63 (Bankr. E.D. N. Y. 1996).
4 See In re King, 392 B. R. 62, 70 (Bankr.
S. D.N. Y. 2008) (discussing types
of retainer agreements and risks
regarding different types).
6 See In re Glemaud, 11-31697, 2013 WL
4498677, at 9 (Bankr. D. Conn. Aug. 21,
2013) (finding that services, arising as a
consequence of and related to the debtors’
financial difficulties, affected assets
and properties that were also part of the
bankruptcy estate); In re Rheuban, 121
B.R. 368, 377–78 (Bankr. C. D. Cal. 1990)
(disgorging nearly $200,000 in legal fees
received prebankruptcy); In re Keller Fin.
Services of Florida, Inc., 248 B. R. 859, 879
(Bankr. M.D. Fla. 2000) (“The Phrase [‘in
connection with’] may include services
related to the precipitating cause of the
bankruptcy, or services which are inextricably
intertwined with the bankruptcy”); In re
Storey, Case No. 08–00198, 2009 Bankr.
LEXIS 2547, 1 (Bankr. D.D.C. June 29, 2009)
(Services are “in connection with” the
bankruptcy case “if it can be objectively
determined that the services rendered or
to be rendered by the attorney have or will
have an impact on the bankruptcy case.”)
7 See In re First Jersey Securities, Inc.,
180 F.3d 504, 511 (3d Cir. 1999).
8 Wood v. Stratos Product Development,
LLC (In re Ahaza Systems, Inc.),
482 F.3d 1118 (9th Cir. 2007).
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