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Reigle v. Ogle (In Re Renninger Mason Contractors, Inc.)
Citations: 58 B.R. 516; 1986 Bankr. LEXIS 6500; 14 Bankr. Ct. Dec. (CRR) 187Docket: 19-10756
Court: United States Bankruptcy Court, E.D. Pennsylvania; March 14, 1986; Us Bankruptcy; United States Bankruptcy Court
In the case of In re Renninger Mason Contractors, Inc., the United States Bankruptcy Court for the Eastern District of Pennsylvania addressed a motion by defendant Donald Ogle to disqualify the special counsel for the trustee, Frederick L. Reigle, and to impose sanctions on both the trustee and the special counsel. The special counsel, the law firm Bingaman, Hess, Coblentz and Bell, was appointed to assist the trustee specifically in recovering alleged preferential transfers from the debtor. The defendant argued that former 11 U.S.C. 327(c) barred the simultaneous representation of the trustee and the three petitioning creditors. However, the court found that this statute does not apply to special counsel acting for a limited purpose, as established in precedent cases. The court reasoned that the rationale behind the statute's restrictions is less applicable when the attorney represents creditors rather than the debtor. Consequently, the court concluded that the motion to disqualify the special counsel was denied, affirming that the employment of special counsel who also represents creditors does not create a conflict of interest in this context. Bingaman's disqualification is not warranted under former 11 U.S.C. 327(c) or 11 U.S.C. 327(a). The defendant claims a conflict of interest arises from Bingaman's simultaneous representation of three creditors and the trustee, particularly as the American Bank and Trust Company, the largest creditor, may influence the trustee's decisions. The defendant argues that this dual representation compromises the trustee's ability to provide detached, independent advice. However, it is noted that Bingaman's clients did not receive any alleged preferential transfers, and the interests of the Bank and the estate align in maximizing recovery. The argument that Bingaman might be overly aggressive in pursuing recovery does not constitute an adverse interest under 11 U.S.C. 327(a). Additionally, the defendant's claims regarding improper influence on the trustee's distribution of estate funds lack supporting evidence and are dismissed. The allegation of violating Canon 9 of the lawyer's Code of Professional Responsibility is also rejected, as Bingaman's conduct does not present any impropriety or the appearance of impropriety due to the well-defined nature of the representation. Consequently, the motion to disqualify Bingaman is denied, and the trustee's application for Bingaman's employment meets the necessary disclosure requirements under Bankruptcy Rule 2014(a).