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In re Russell 150, LC (Case No. 11-51041) 10/03/2011

            The debtor wired funds to its law firm pursuant to a retainer agreement; however, the wire transfer was not received by the firm until the day following the filing of the petition.  The debtor sought to have the Court approve the provisional application of the wired funds to pre-petition fees of the firm as well as approve the application of employment of the same firm.  The United States trustee opposed the application of employment on the grounds that at the time of the petition, the firm was a creditor of the debtor and was not “disinterested” as defined in the Bankruptcy Code.  The Court thus had to consider whether the wire transfer initiated before the petition, but not received until after the petition, constituted full prepetition payment of the claim.  The Court found that the firm had a claim pre-petition, was non-disinterested, and thus could not serve as counsel under 11 U.S.C. § 327(a).  The Court held that the firm must waive its fees for the pre-petition work or be barred from continuing as the debtor’s counsel.

Date: 
Monday, October 3, 2011
Category: 
Attorneys Fees
Chapter 11 Issues
Disinterestedness and Conflicts of Interest
Chapter: 
11