Samys OC, LLC, 24-11166

Background

Three debtor entities (Samys OC, LLC; S&O Investments, Inc.; American Warrior Construction, Inc.) filed Chapter 11 bankruptcy petitions after significant inter-company and partner disputes.
The debtors sought to jointly employ Hinkle Law Firm as bankruptcy counsel for all entities; Hinkle had prior professional relationships with the individual principal Amro Samy and his spouse.
Objectors (notably Cairo of Western Kansas, LLC, a major co-owner/creditor and the U.S. Trustee) raised concerns over the adequacy of Hinkle’s conflict disclosures, actual/potential conflicts of interest, and the law firm’s disinterestedness under 11 U.S.C. § 327.
Material pre-petition intercompany debts and transfers existed, some undocumented, between the debtor entities (and with the individual principal), creating intertwined creditor-debtor relationships.
Hinkle also employed an associate (Ms. Stevens) who previously worked at a law firm representing Cairo, participating in confidential litigation strategy meetings relevant to the disputes at issue.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Adequacy of Disclosures under Rule 2014	Hinkle failed to disclose material intercompany connections and prior associate’s connection with Cairo in initial filings	Amended affidavits and supplemental disclosures cured any deficiencies	Disclosures were initially insufficient but the issue became moot as motions are denied on broader conflict grounds
Conflict of Interest / Disinterestedness under § 327(a)	Intercompany claims create adverse interests, making it impossible for a single law firm to represent all estates impartially	The debts are minor, interests aligned (due to shared majority creditors), conflicts can be waived, or addressed with conflicts counsel	The intercompany relationships are central and adverse; Hinkle cannot satisfy impartiality/prudently advise each entity; conflict counsel not sufficient
Conflict due to Prior Representation/Employment of Ms. Stevens	Hinkle’s employment of an associate with confidential knowledge from prior adverse representation of Cairo taints the whole firm under Kansas ethics rules	Ms. Stevens does not recall confidential information; screening could be used; a letter agreement partly addressed this in prior unrelated case	Under Kansas Rules of Professional Conduct, screening is not permitted; conflict is not waivable; entire firm is disqualified
Effect of Retainer Paid by One Debtor for All	Retainer paid by an individual debtor for all may create avoidable transfer and adverse interests for Hinkle	Payment is proper, typical for joint representation, not a bar	Payment source heightens potential conflict, reinforces lack of disinterestedness

Key Cases Cited

In re Interwest Bus. Equip., Inc., 23 F.3d 311 (10th Cir. 1994) (representation by a single firm of related debtors with inter-company debt is a disqualifying conflict under § 327)
In re Cook, 223 B.R. 782 (10th Cir. BAP 1998) (outlining definitions of adverse interest and disinterestedness in bankruptcy)
In re Smitty’s Truck Stop, Inc., 210 B.R. 844 (10th Cir. BAP 1997) (full disclosure of potential conflicts required under Rule 2014)
Zimmerman v. Mahaska Bottling Co., 19 P.3d 784 (Kan. 2001) (imputation of conflict from non-attorney law firm staff under Kansas rules)