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On November 18, 2010, Judge Gerber of the Southern District of New York Bankruptcy Court issued a decision on payment of non-fiduciary professional fees in In re Adelphia Communications Corp. [1] The Court allowed a number of distressed investors to be reimbursed for legal fees and other expenditures spent in competing for larger recoveries from the estate.  In the Chapter 11 cases, 14 ad hoc committees and individual creditors sought reimbursement under a provision of the Debtors’ confirmed and effective Chapter

The Federal District Court of New Jersey recently examined the reasonableness of professional fees to a prevailing party arising from lengthy litigation involving clean-up cost allocations of a New Jersey Superfund site. In reducing the prevailing party’s fee application, the Court, in United States v. NCH Corp., [1] applied bankruptcy-court precedent [2] to establish billing increments of six minutes (e.g., a one-tenth of an hour).

The following question was recently posed to the South Carolina Ethics Advisory Committee (the “Committee”): As part of a confidential settlement agreement that does not require court approval, can the settling defendant require the plaintiff’s lawyer to not identify or use the defendant’s name for “commercial or commercially-related publicity purposes,” even if the matter is of public record and nothing was filed in the case under seal? [1] By these terms, the settling defendant essentially sought to “prevent…[plaintiff's lawyer] from

Upon a chapter 11 filing, that fictional entity, the debtor in possession (DIP), is born. Distinct from the debtor itself, the DIP has duties, obligations and rights akin to the chapter 7 trustee. [1] All of the debtor’s property passes to the bankruptcy estate, with the DIP becoming a fiduciary of the estate, with a duty to creditors of the estate and a duty not to waste the estate’s assets.

When a client is willing and able to pay a hefty retainer up front, it is difficult to question the source. To keep that retainer, one must investigate any fact that could cause a reasonable person to question the client’s right to use the funds. Blindly accepting funds could lead to disgorgement, so inquire as to the source of the funds before accepting them in good faith. This duty to investigate is illustrated by In re Parklex Associates Inc. [1]

“Bad facts make [for] bad law.” [1] The flip side is that sometimes, easy facts make for easy decisions, but serve as a reminder of some basic rules. In In re Muscle Improvement Inc., [2] one of Judge Samuel L. Bufford’s (ret.) last decisions, presents an example of the latter.

In a per curiam decision, the Second Circuit recently joined other circuits in holding that “claims of professional malpractice based on services rendered pursuant to a bankruptcy petition are subject to the bankruptcy court’s original but not exclusive jurisdiction under Section 1334(b) of title 28.”[1] In 2001, Aston Baker (the debtor) filed a chapter 7 petition, then it was converted to a chapter 11 case.[2] The bankruptcy court appointed Charles Simpson and his law

In July 2010, the U.S. Bankruptcy Court for the District of New Mexico declined to dismiss a cause of action by a chapter 7 trustee against a lawyer who had submitted an offer from a third party to purchase estate property, leaving for trial whether the lawyer may be held personally liable on the contract. The opinion in Gonzales v.

American Bar Association (ABA) Model Rule 7.3 prohibits a lawyer from soliciting professional employment in person, by live telephone or real-time electronic contact where pecuniary gain is a significant motive and the prospective client is not a lawyer and does not have a family, close personal or prior professional relationship with the lawyer.[1] Under the rule, where pecuniary gain is the motive and no relationship exists, Rule 7.3’s prohibition is an absolute, categorical ban based on method of contact, but what are these forbidd

In today’s economic climate, it is not uncommon for law firms to encounter trouble collecting outstanding legal fees. Although not preferred, law firms may ultimately have no choice but to commence collection actions against former clients. It is uncommon, however, for law firms to commence involuntary bankruptcies against former clients to recover unpaid fees.