465 B.R. 704
Bankr. N.D. Ga.2012Background
- Chapter 13 debtor-in-possession controls litigation and property of the estate, raising §327(e) retention questions.
- Debtors retained Flynn to pursue a pre-petition workers’ compensation claim denied on appeal.
- Chapter 13 Trustee objected to plan for lack of a retention order for Flynn and requested plan denial absent approval.
- Court previously held no per se rule requiring Court approval of special counsel as a condition of confirmation, but noted facts may warrant different results.
- Debtors’ counsel issued a Notice directing Flynn to file or have the Trustee file the §327(e) application; issue was reserved for briefing.
- Holding disputed whether the “trustee” in §327(e) includes a chapter 13 debtor-in-possession and who must file the application to retain special counsel.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who may file the §327(e) application in Chapter 13 | Debtors: trustee must file regardless of control of litigation | Court should treat debtor-in-possession as equivalent to trustee for §327(e) | Debtor-in-possession may file the §327(e) application |
| Do Chapter 13 debtors have standing to pursue and control the litigation | Debtor controls litigation and may pursue claim | Debtors have standing and control the litigation as estate representatives | |
| Is Rule 2014 filing by the applicant or the attorney responsible for employment | Debtor must file with supporting statements | Attorney could file on debtor's behalf | Applicant (debtor) must file; attorney cannot file the application |
| Should retention be approved before plan confirmation | Better practice to obtain court approval prior to confirmation | Better practice noted; not required for confirmation under these facts |
Key Cases Cited
- Cable v. Ivy Tech State Coll., 200 F.3d 467 (7th Cir. 1999) (trustee/debtor-in-possession includes ability to prosecute for estate)
- Crosby v. Monroe Cnty., 394 F.3d 1328 (11th Cir. 2004) (Chapter 13 debtor can sue and control litigation for estate)
- Maritime Elec. Co. v. United Jersey Bank, 959 F.2d 1194 (3d Cir. 1992) (debtor-in-possession standing and control of litigation in bankruptcy)