Reid and Hellyer, APC v. Laski (In re Wrightwood Guest Ranch, LLC)
Ethical issues abound when a committee counsel’s own financial interest conflicts with its client’s interests.
- Rochelle Quick Take
View Rochelle Summary- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- 16-56856 and 16-56869 (9th Circuit, Jul 25,2018) Published
- Tag(s):
- Ruling:
- A law firm representing a creditor or a party in interest in a bankruptcy case has to unequivocally state its own objection, not just its client's objection, to a proposed settlement in order to preserve the law firm's right to appeal the order approving the settlement. Courts are not required to "understand" when a lawyer's objection on behalf of a client is also made by the lawyer when the lawyer does not affirmatively state its own (and not just its client's) opposition.
- Procedural context:
- The bankruptcy court approved a settlement in an involuntary chapter 11 case that did not create a reserve to pay the debtor's counsel or counsel for the creditors' committee. Counsel for the debtor and for the creditors' committee both appealed the settlement, but did not seek a stay a stay of the sale of the debtor's property that was the linchpin of the settlement. On appeal, the district court affirmed the bankruptcy court's order approving the settlement because the law firms did not have standing to appeal. The law firms did not (1) object to the settlement on their own behalf or (2) appear on at the hearing to approve the settlement on the respective firm's own behalf. Appearing at the hearing on behalf of a client was insufficient.
- Facts:
- The bankruptcy court approved a settlement between a debtor in an involuntary chapter 11 case and the secured creditor. The settlement included reserves for payments to unsecured creditors and the chapter 11 trustee and his professionals. The settlement did not provide for payment of administrative expenses such as attorney's fees for the creditors' committee and for the debtor. The creditors' committee filed a written objection to the settlement. No objection, however, was filed on behalf of the creditors' committee counsel or counsel for the debtor. Further, neither the debtor's counsel nor the creditors' committee counsel stated at the hearing to approve the settlement that they were appearing on behalf of the respective law firm (administrative creditor) or that they, as administrative creditors, opposed the settlement.
- Judge(s):
- Jay S. Bybee, Paul J. Watford, and John M. Rogers (United States Court of Appeals for the Sixth Circuit, sitting by designation)