A Chilling Decision for Creditor Work

May 27, 2011 – In The News
Investment Dealers' Digest
A November 2010 ruling that claimed a law firm wrongly used an intermediary to help them win an appointment makes financial restructuring and bankruptcy attorneys cautious about representing creditors. Now, many law firms are warning others to err on the side of caution.

Lawyers say it is not unusual for them to exchange information with nonlawyers before a creditors committee is formed. But the ruling, which outlines the limits of such collaboration, may have an impact on how future committees select professionals. Richard Meth advises that transparency and disclosure of relationships is the best way to avoid problems.

"Transparency is a must. Disclosure -- at the time of 'the pitch,' at the time of retention/application to the court and continuing thereafter -- is an unconditional requirement, though the nature and extent of disclosure will vary from case to case, depending upon the circumstances, " said Meth in a March speech alongside Jessica D. Gabel of Georgia State University College of Law at the 35th annual Judge Alexander L. Paskay Seminar on bankruptcy law and practice.