In re Glenview Health Care Facility, Inc., 620 B.R. 582

Background:

Glenview Health Care Facility, Inc. filed chapter 11; an Official Committee of Unsecured Creditors formed and sought to retain Dentons Bingham Greenebaum LLP (DBG) as counsel.
DBG disclosed a prior, concluded representation (estate planning work) for insider shareholder Lisa Howlett (ended 2017); invoices referenced a buy-sell agreement but no agreement was consummated according to DBG.
Debtor objected to DBG’s employment, asserting the prior representation created an adverse interest and potential access to confidential Debtor information.
The bankruptcy court denied the Committee’s application, relying on 11 U.S.C. § 1103 and Kentucky Rules of Professional Conduct (KRPC) 1.9 and 1.10, and imposed disqualification without an evidentiary hearing.
The Committee dissolved; DBG timely appealed. The Bankruptcy Appellate Panel vacated the disqualification and remanded, finding legal error and an inadequate factual record.

Issues:

Issue	DBG's Argument	Debtor's Argument	Held
Whether §1103 contains a trustee-style disinterestedness requirement that bars prior, concluded representations	§1103 lacks the §327 disinterestedness requirement; prior, concluded representations do not bar committee employment	Committee counsel must meet disinterestedness concerns (and compensation rules reflect such limits)	Court erred by importing a §327-style disinterestedness requirement into §1103; prior concluded representation alone does not bar appointment
Whether KRPC 1.9 (duties to former clients) disqualifies DBG because matters are substantially related/confidential	Prior estate‑planning work was not substantially related to the bankruptcy and did not yield confidential info material to the case	Prior work (including buy‑sell work) involved Debtor information substantially related to reorganization/confidential	Debtor failed to meet burden; bankruptcy court relied on speculation and a thin record—disqualification on KRPC 1.9 grounds was not justified without stronger proof
Whether imputed disqualification under KRPC 1.10 defeats DBG’s proposed screening	Screening, firm walling and notice under KRPC 1.10(d) would cure imputed conflict	Presumption that confidences are shared across the firm makes screening insufficient here	Bankruptcy court failed to address or justify rejecting Rule 1.10(d); must consider screening exception on remand
Justiciability/mootness given Committee dissolution	Appeal is live because collateral consequences (ability to seek fees) create a case or controversy; DBG has pecuniary interest	Committee dissolution moots any employment approval and renders appeal non‑justiciable	Panel found appeal justiciable (collateral consequences and DBG’s pecuniary interest suffice)

Key Cases Cited

Federated Dep't Stores, 44 F.3d 1310 (6th Cir. 1995) (collateral‑consequences doctrine and standard for appellate review)
Dana Corp. v. Blue Cross & Blue Shield Mut. of N. Ohio, 900 F.2d 882 (6th Cir. 1990) (three‑part disqualification test: prior relationship, substantial relation, confidential information)
Bowers v. Ophthalmology Grp., 733 F.3d 647 (6th Cir. 2013) (guidance on evaluating whether matters are substantially related/confidential)
Marcum v. Scorsone, 457 S.W.3d 710 (Ky. 2015) (Kentucky rule discourages disqualification on mere appearance; evidentiary hearing often required)
In re Universal Bldg. Prod., 486 B.R. 650 (Bankr. D. Del. 2010) (prior, concluded representations generally do not disqualify committee counsel)
In re Valley‑Vulcan Mold Co., 237 B.R. 322 (B.A.P. 6th Cir. 1999) (high burden to disqualify committee counsel; deference to committee's choice)
Snyder v. Sachs, 472 U.S. 634 (U.S. 1985) (federal courts may look to state ethics rules for guidance though federal law governs admission and discipline)