In re Maxus Energy Corporation

Case Type:
Case Status:
21-2496 (3rd Circuit, Sep 09,2022) Published
Attorney moved from a law firm representing one party in a bankruptcy dispute to the firm representing the opposing party. The ABA's Model Rules of Professional Conduct impute the attorney's conflict to her new firm unless she “is timely screened from any participation in the matter and is apportioned no part of the fee therefrom.” The new firm timely screened the attorney. Because the Model Rules state that a timely screen, together with certain other requirements, prevents conflict imputation, the Court affirmed the Bankruptcy Court order denying disqualification of the new firm.
Procedural context:
The attorney's client at her former firm moved to disqualify the new firm from representing the former client's opposing party in the bankruptcy case. The United States Bankruptcy Court for the District of Delaware denied the motion. The attorney's former client moved for a direct appeal to the United States Court of Appeals for the Third Circuit, which the Bankruptcy Court granted.
This case stems from the Chapter 11 bankruptcy of Maxus Energy Corporation (“Maxus”). In 2018, Maxus Liquidating Trust (“Trust”) sued Maxus’s parents, YPF S.A., YPF International S.A., YPF Holdings, Inc., and CLH Holdings, Inc. (collectively, “YPF”), asserting fraudulent conveyance and alter ego claims. White & Case represented the Trust. Sidley Austin represented YPF. The attorney worked for Sidley Austin and represented YPF in the Maxus matter. The attorney then left Sidley Austin and joined White & Case. When she did so, White & Case followed the Model Rules. From the start, The attorney went through a standard conflict-screening process. White & Case implemented an ethical wall, which the parties agreed qualifies as a screen, beginning on the attorney's first day; obtained her acknowledgment that she would comply with it; and periodically certified her compliance. White & Case did not give any portion of its fee from the YPF adversary proceeding to the attorney. White & Case gave YPF written notice of the attorney’s employment the day she began with the firm. The letter explained the nature of White & Case’s screen and included a statement of the firm’s and of the attorney’s compliance with the Model Rules. White & Case also stated that review may be available before a tribunal. The firm agreed to respond promptly to any written inquiries or objections about the screening procedures. It provided additional information to YPF attorneys in their later discussions. The attorney says she never breached the screen. Believing that no screen would suffice, YPF moved to disqualify White & Case from continuing to represent the Trust.
Greenaway, Jr; Porter; and Phipps. Circuit Judges

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