Maiman v. Spizz (In Re Ampal-American Israel Corp.)
691 F. App'x 12
| 2d Cir. | 2017Background
- Ampal-American Israel Corp. filed Chapter 11 in 2012; case converted to Chapter 7 and creditors elected Alex Spizz as Chapter 7 Trustee in 2013.
- Trustee initially retained Spizz’s law firm (Spizz Cohen) as general bankruptcy counsel; Spizz later joined Tarter, Krinsky & Drogin LLP (TKD) after Spizz Cohen dissolved in April 2015.
- TKD had previously represented creditor Mishmeret (an indenture trustee) and Mishmeret’s counsel, Ofer Shapira, but TKD said those representations ended by July 2014.
- Trustee sought court approval under 11 U.S.C. § 327(a) to retain TKD as substitute general bankruptcy counsel; Maiman (former CEO and controlling shareholder) objected and cross-moved under 11 U.S.C. § 324(a) to remove the Trustee for cause.
- Bankruptcy court held TKD no longer represented interests adverse to the estate and had no actual conflict under § 327(c); it granted retention and denied removal. The district court affirmed; the Second Circuit affirmed.
Issues
| Issue | Plaintiff's Argument (Maiman) | Defendant's Argument (Spizz/Trustee) | Held |
|---|---|---|---|
| Whether TKD ‘‘represents an interest adverse to the estate’’ under § 327(a) | TKD still represents Mishmeret/Shapira (through duties, privileged materials, or ongoing loyalties) so it is adverse | TKD’s representation of Mishmeret/Shapira ended by July 2014; no present adverse representation | TKD did not presently represent adverse interests; retention under § 327(a) proper |
| Whether TKD has an ‘‘actual’’ conflict under § 327(c) | Prior representation creates a conflict that disqualifies TKD | § 327(c) requires an actual (present) conflict; prior, ceased representations do not create an actual conflict | No actual conflict shown; § 327(c) disqualification not required |
| Whether AroChem permits retention despite prior adverse representations | AroChem is distinguishable; prior representation can still preclude retention | AroChem holds disqualification under § 327(a) requires present representation; past relationships alone insufficient | AroChem applies: past representation without present adverse representation does not mandate disqualification |
| Whether Trustee should be removed for cause under § 324(a) | Trustee’s move to TKD and prior ties justify removal for cause | No fraud or actual injury alleged; no basis for removal given lack of present conflict | Denial of removal was not an abuse of discretion; removal requires fraud or actual injury |
Key Cases Cited
- In re AroChem Corp., 176 F.3d 610 (2d Cir. 1999) (attorney disqualification under § 327(a) depends on present representation, not past relationships)
- In re Cacioli, 463 F.3d 229 (2d Cir. 2006) (district court review of bankruptcy court orders is plenary for legal issues and clear-error for factual findings)
- In re Freeport Italian Bakery, Inc., 340 F.2d 50 (2d Cir. 1965) (removal for cause focuses on fraud and actual injury, not formal relationships)
- In re Smith, 507 F.3d 64 (2d Cir. 2007) (standard for abuse of discretion review in bankruptcy contexts)
- In re Eloise Curtis, Inc., 326 F.2d 698 (2d Cir. 1964) (court discussed standards for trustee removal)