561 B.R. 420
Bankr. N.D. Ill.2015Background
- CEOC is lead debtor in jointly administered Caesars bankruptcy cases; CEOC is majority-owned by CEC, with Hamlet entities and Apollo/TPG structure giving indirect control over CEOC and CEC.
- Kirkland & Ellis was hired in 2014 as restructuring counsel for CEOC; independent CEOC directors selected Kirkland after a June/July 2014 pitch and a drafted engagement letter.
- Engagement letter stated Kirkland would represent only the Company and not shareholders or non-debtor affiliates, while acknowledging post-petition fee terms and a classic retainer.
- A substantial retainer regime existed (initial $8 million classic retainer with replenishment), with post-petition invoicing that reduced the retainer balance; retainer described as earned upon receipt.
- By January 12, 2015, CEOC’s pre-petition and post-petition retainer activity left Kirkland with about $8 million held; involuntary petitions were filed January 12, 2015, and voluntary petitions followed January 15, 2015.
- Noteholders Committee objected to Kirkland’s retention on bias/adverse-interest grounds and argued about retainer-type ownership and disclosure; the court granted the retention.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Kirkland satisfies section 327(a) given Apollo/TPG connections. | Noteholders argue bias in favor of Apollo/TPG. | Kirkland claims no disqualifying bias; represents only CEOC subsidiaries. | Yes; no demonstrable bias established; retention allowed. |
| Whether Kirkland’s retainer creates an interest adverse to the estate. | Committee contends retainer is security or otherwise adverse. | Retainer is classic/advance payment; not an estate asset. | No; retainer was at least an advance payment; not property of the estate; no adverse interest. |
| Whether disclosure under Rule 2014 was adequate. | Noteholders allege undisclosed SGC representation. | Argument forfeited; no evidence of SGC representation; disclosures adequate. | Forfeited; no non-disclosure warranting denial; disclosure sufficient. |
| Whether procedural posture issues affect the decision. | Noteholders rely on Rule 2014/327(a) synthesis. | Court should decide on merits of 327(a). | Decided on merits; retention granted. |
Key Cases Cited
- In re Crivello, 134 F.3d 831, 134 F.3d 831 (7th Cir. 1998) (two-part test: disinterestedness and not hold/adverse to estate; bias suffices under certain circumstances)
- In re Roberts, 46 B.R. 815, 46 B.R. 815 (Bankr. Utah 1985) (defines interest adverse to the estate under §327(a))
- In re Rental Sys., L.L.C., 511 B.R. 882, 511 B.R. 882 (Bankr. N.D. Ill. 2014) (courts rely on Crivello; disinterestedness and lack of adverse interest considered)
- Marvel Entm’t Grp., Inc., 140 F.3d 463, 140 F.3d 463 (3d Cir. 1998) (recognizes non-disqualifying mere appearance of impropriety limits)
- In re Project Orange Assocs., L.C., 431 B.R. 363, 431 B.R. 363 (Bankr. S.D.N.Y. 2010) (discretionary standard for professional retention under §327(a))
- In re Granite Partners, L.P., 219 B.R. 22, 219 B.R. 22 (Bankr. S.D.N.Y. 1998) (reflects §327(a) two-prong approach and case-by-case analysis)