MEMORANDUM DECISION ON OBJECTION BY UNITED STATES TRUSTEE TO THE PROPOSED RETENTION OF OTTERBOURG, STEINDLER, HOUSTON & ROSEN, P.C., AND ERNST & YOUNG LLP AS COUNSEL AND ACCOUNTANTS AND FINANCIAL ADVISORS, RESPECTIVELY, TO THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS
Bradlees and Caldor (as those terms are defined below) are mid-to high-end discount retail merchandisers with chapter 11 cases pending in this court. By court order, Brad-lees’ Official Committee of Unsecured Creditors (the “Bradlees Committee”) retained Otterbourg, Steindler, Houston & Rosen, P.C. (“Otterbourg”), as its counsel and Ernst & Young LLP (“Ernst”, with “Otterbourg” collectively to be referred to as the “Professionals”), as its accountants and financial ad-visors. Caldor’s Official Committee of Unsecured Creditors (the “Caldor Committee”, with the Bradlees Committee collectively to be referred to as the “Committees”) has moved pursuant to § 1103 of the Bankruptcy Code (the “Code”) for leave to retain the Professionals in these cases. The United States Trustee (the “Trustee”) objects to the motion alleging that the proposed retention is barred under § 1103(b) because the Committees are adverse to one another inasmuch as Bradlees and Caldor are competitors. The Trustee advocates that position notwithstanding that three members of the Bradlees Committee presently sit on the Caldor Committee and Bradlees and Caldor have retained the same accountants, all without objection by the Trustee. For the reasons stated herein the Trustee’s objection is overruled, and the Committee is authorized to retain the Professionals. 1
Facts
Except as otherwise noted, the facts herein are taken from a stipulation among the Pro *169 fessionals and Trustee. On June 25, 1995, Bradlees Corp. and certain affiliated companies (collectively, “Bradlees”) filed separate petitions under chapter 11 of the Code in this district. Pursuant to §§ 1107 and 1108 of the Code, Bradlees has continued in possession and control of its business and assets as a debtor in possession. On July 6, 1995, after the initial meeting of creditors, the Trustee appointed the Bradlees Committee. By court orders (Lifland, C.J.) dated July 17, 1995 and August 15, 1995, respectively, the Bradlees Committee retained Otterbourg as its counsel and Ernst as its accountants and financial advisors.
On September 18, 1995, Caldor Corporation and 21 affiliated corporations (collectively, “Caldor”) filed separate petitions for relief under chapter 11 of the Code in this district. On September 27, 1995, immediately after the initial meeting of Caldor creditors, the Trustee appointed the Caldor Committee. As empaneled, four members of the Caldor Committee also served as members of the Bradlees Committee: Mattel Toys, VF Corporation, American Credit Indemnity and United Food & Commercial Workers. On or about November 6, 1995, VF Corporation resigned from the Caldor Committee. See Affidavit of Kurt J. Wolff sworn to on December 7, 1995, and submitted in opposition to the Trustee’s objection, ¶ 18. At the initial creditors meeting, and in the presence of representatives of the Trustee, Caldor advised Caldor Committee members that it had no objection to membership overlaps with the Bradlees Committee or to the selection in this case of professionals who might represent the Bradlees Committee. As the docket in each case reflects, on the consent of the Trustee, both debtors have retained Deloitte & Touche LLP to serve as their accountants. At the initial meeting, the Caldor Committee selected Otterbourg as its counsel following interviews of, and presentations by, eight law firms. Prior to its selection, Otterbourg disclosed orally and in writing its representation of the Bradlees Committee. The Caldor Committee solicited proposals from Ernst and three other firms to serve as its accountants and financial advisors. Ernst submitted a Proposal to Serve which outlined its qualifications and experience in the field of retail restructuring, and disclosed its engagement by the Bradlees Committee, as well as certain other retailers. The Caldor Committee selected Ernst after interviewing each of the solicited firms. During its interview Ernst again disclosed its representation of the Bradlees Committee. Ernst also advised that, if retained in this case, it would staff the case with personnel having no connection with the Bradlees case. As of the commencement of the Caldor case it instituted an “information barrier” shielding the Ernst personnel slated to work on the Caldor case from any Bradlees matters. After concluding its interviews, the Caldor Committee selected Ernst. Since that time, at Caldor’s request, Otterbourg, Ernst and each committee member have executed confidentiality stipulations.
The Trustee objects to the Professionals’ retention. The Caldor Committee has been provided with copies of that objection and has reaffirmed its application to retain them. It believes that its functioning will be substantially harmed if it is not permitted to be served by the Professionals. Caldor supports the committee, maintaining that if the Trustee’s objection is sustained the chapter 11 cases will be disrupted resulting in unwarranted delay in the reorganization process. The pre-petition bank group also supports the committee contending that a change of professionals at this time would be extremely detrimental to Caldor’s reorganization effort, and would cause unacceptable delay.
Discussion
A creditors’ committee stands as a fiduciary to the class of creditors it represents.
E.g.,
Woods
v. City National Bank,
*170 (1) consult with the trustee or debtor in possession concerning administration of the case;
(2) investigate the acts, conduct, assets, liabilities, and financial condition of the debtor, the operation of the debtor’s business and the desirability of the continuance of such business, and any other matter relevant to the case or to the formulation of a plan;
(8) participate in the formulation of a plan, advise those represented by such committee of such committee’s determinations as to any plan formulated, and collect and file with the court acceptances or rejections of apian;_
11 U.S.C. § 1103(c). To that end, an official committee may “select and authorize the employment ... of one or more attorneys, accountants, or other agents, to represent or perform services for such committee.” 11 U.S.C. § 1103(a). Professionals retained by an official committee owe fiduciary duties to the committee.
E.g., In re Arlan’s Dept. Stores, Inc.,
Public policy favors permitting parties to retain professionals of their choice.
In re Codesco, Inc.,
An attorney or accountant employed to represent a committee appointed under section 1102 of this title may not, while employed by such committee, represent any other entity having an adverse interest in connection with the case. Representation of one or more creditors of the same class as represented by the committee shall not per se constitute the representation of an adverse interest.
11 U.S.C. § 1103(b). The Trustee construes the phrase “adverse interest in connection with the case” to apply when the professional represents, in any context — whether or not in the underlying bankruptcy case — an entity that has an interest adverse to that of the committee, whether or not the interest arises in the bankruptcy case. The Trustee contends that because Bradlees and Caldor compete in the same market niche, the interests of the Committees are adverse and the Professionals are barred from representing the Caldor Committee, even though Bradlees does not have a claim in and is not a party to this proceeding. Alternatively, they contend that Otterbourg’s retention is barred under Canons 4, 5 and 9 of the Code of Professional Responsibility. The Professionals argue that the interests of the Committees are not adverse because Caldor and Bradlees are not creditors of each other and the Committees do not compete with one another. They also contend that, in any event, there are no disqualifying conflicts here because they do not seek to represent the Bradlees Committee in connection with this case. Finally, Otterbourg contends that its retention is not barred by the Code of Professional Responsibility.
Under § 327(a) of the Code, a debtor may retain an attorney (i) who does not hold or represent an interest adverse to the estate and (ii) who is disinterested. The Trustee argues that we should be guided by decisions under § 327(a) in determining whether the Bradlees Committee has an “adverse interest” for purposes of § 1103(b). The Professionals deny that § 327(a) is relevant to our analysis arguing that Code § 1103(b) does not reference that section and does not otherwise mandate that a proposed attorney or accountant not hold an adverse interest or be disinterested. However, under § 328(c) of the Code, a professional person retained under § 1103 will be denied allow-
*171
anee of compensation and reimbursement of expenses if, at any time during that person’s employment, he is not a disinterested person or holds an interest adverse to the interest of the estate with respect to the matter on which such professional person is employed.
See
11 U.S.C. § 328(c). Thus, § 327(a) is relevant herein and it is appropriate now to consider whether the Professionals meet the standards enunciated therein.
See, e.g., In re Celotex Corp.,
The Trustee’s concludes that there is an actual or potential conflict of interest barring the Professionals’ retention by the Cal-dor Committee because Bradlees and Caldor allegedly are “mirror image competitors” whose reorganizations are “bound to” involve competition in one of the following scenarios: (i) a potential merger of the two retailers; (ii) a potential buyout of one of the two retailers by a national discounter like Wal-Mart Stores, Inc. (“Wal-Mart”), Kmart or Target Stores, Inc. (“Target”); (iii) a possible liquidation of one of the retailers; and (iv) competition between the two retailers in purchasing the stores of other troubled discounters.
Caldor and Bradlees operate virtually the same number of stores (136 and 166, respectively) in practically all of the same states. Both operate in New York, New Jersey, Pennsylvania, Rhode Island, Massachusetts, Connecticut, New Hampshire and Virginia. Caldor has operations in Maryland and Delaware while Bradlees operates in Maine. In states where their operations overlap, 92 of Caldor’s 166 stores are within a five to ten mile radius of a Bradlees store. Existing stores are approximately the same size, with Caldor stores averaging approximately 75,-750 square feet and Bradlees stores averaging approximately 73,000 square feet. Their merchandising strategy is similar with both offering a mix of soft-line and hard-line goods and soft home furnishings. Both count Jamesway, Clover, Ames, Wal-Mart and Kmart as competitors. They pay close attention to one another’s operations. For example, they monitor and respond as appropriate to the promotional campaigns of each other and numerous other retail stores. Thus, the stipulated record amply demonstrates that Caldor and Bradlees are economic competitors and in that sense, they are adverse to one another. ■ However, the parties agree that neither the debtors nor the Committees hold or assert claims against each other and none assert competing claims to an economic interest. Thus, notwithstanding debtors’ sta
*172
tus as economic competitors, the Committees do not hold disqualifying “adverse interests” for purposes of § 1103(b), because neither the Committees, nor the debtors, are likely to become “rival claimants.”
In re Tri Mfg. & Sales Co.,
for two or more entities (1) to possess or assert mutually exclusive claims to the same economic interest, thus creating either an actual or potential dispute between the rival claimants as to which, if any, of them the disputed right or title to the interest in question attaches under valid and applicable law; or (2) to possess a predisposition or interest under circumstances that render such a bias in favor of or against one of the entities.
Id.
at 826-27. Focusing on the second prong of the
Roberts
definition, the
Tri Mfg.
court found a disqualifying conflict because “a competitor of debtor will have a different ‘predisposition’ in evaluating the desirability of the continuance of debtor’s business than will an ordinary creditor.”
Although we could devise a set of facts under which the Trustee’s concerns enumerated above regarding “potential” competition among the debtors, and thus the Committees, might prove valid, the record does not support those concerns. “[I]nter-ests are not considered ‘adverse’ merely because it is possible to conceive a set of circumstances under which they might clash.”
In re Leslie Fay Companies, Inc.,
The evidence relied on by the Trustee in support of its assertion that Caldor and Bradlees are merger candidates consists of the following:
• On April 4, 1995, executives from Caldor and Bradlees conducted very preliminary discussions regarding the possibility of some sort of combination of the two entities. After that meeting, Caldor was notified that Bradlees did not want to pursue further discussions.
*173 • On November 14, 1995, executives from Bradlees and Caldor met again to conduct very preliminary discussions regarding some sort of combination of the two entities. Subsequent to that meeting, Bradlees’ bankruptcy counsel, Stuart Hirschfield, Esq., was quoted in the press as stating that “Caldor merger overtures to Bradlees are now a dead issue.”
• There is a possibility that Caldor and Bradlees will meet once more to discuss the possibility of a merger.
• Reports by financial analysts recommending merger and press reports discussing those recommendations.
• A report that in October 1995, Peter Thomer, Bradlees’ President and Chief Financial Officer was approached by a representative of a major New York investment banking firm who suggested a business combination with Caldor and representative of a large New York commercial bank who indicated that the bank would be interested in funding a “joint plan of reorganization” for the two companies.
The Trustee concedes that published reports in October 1995 quote Don Clarke, Caldor’s Chief Executive Officer, as stating that Cal-dor intends to emerge from reorganization as an independent entity. On this record we conclude that while certain financial analysts believe a merger or some other combination of the retailers is in the retailers’ best interest, neither debtor concurs with that assessment at this time and neither debtor is pursuing that possibility, seriously or otherwise, at this time. Moreover, we find no merit to the Trustee’s assertion that the Professionals alleged duty to investigate whether a merger, acquisition or other arrangement with Bradlees is in the best interests of the estate creates an actual conflict of interest disqualifying them from representing the Caldor Committee. As noted previously, a committee is authorized, but not directed, to investigate the operation of the debtor’s business and the desirability of the continuance of such business. See 11 U.S.C. § 1103(c)(2). However, the Professionals can undertake that analysis without specific reference to Bradlees, Hills, Clover or any other Caldor competitor, and there is no evidence that the Professionals cannot or will not do so.
The Trustee’s concern about a possible buyout of one of the two retailers by Wal-Mart, Kmart, or Target is even more speculative. As support for that thesis, the Trustee relies on the following publicly available information:
• The 10-K report filed on behalf of Wal-Mart Stores, Inc. for the year ended January 28, 1995, reported that Wal-Mart Stores, Inc. had become the largest retailer in America with net sales of approximately $82,000,000,000, through its operation of 1,990 Wal-Mart stores, 428 Sam’s Club stores and 143 Wal-Mart Supercen-ters. In 1989 Wal-Mart had 14 stores in the nine Northeastern states where Brad-lees has store locations and the tén states where Caldor has its stores. By 1994, Wal-Mart increased its store locations in the same region to 188 and 187, respectively-
• In Dayton Hudson Corp.’s January 28,1995 10-K report, Target Stores, Inc. is described as “an upscale discounter, providing quality merchandise at low prices in guest-friendly stores.” Caldor’s 10-K report for the year ended January 28, 1995, states that it “seeks to be the leading upscale discount retailer in its markets, positioning itself between the traditional discounter and the department store.” At the beginning of 1995 Target did not have any stores in the states in which Caldor operates its stores.
Conspicuously absent from this “evidence” is any mention of Kmart or mention that either Wal-Mart or Target seeks to buy Caldor, Bradlees, or any other regional retailer.
The likelihood that one or the other retailer will liquidate is even more remote than the likelihood of a buyout by a national discounter. There is no evidence that Bradlees is even contemplating liquidation, and published reports in October 1995, quote Cal-dor’s Don Clark as stating that Caldor will emerge from this case as an independent entity.
Finally, it is undisputed that in or about mid November 1992, Caldor outbid Bradlees for all or certain of six leases then held by *174 Alexanders Department Stores. Later that month, Caldor sold one such lease to Brad-lees for approximately $16.5 million. Caldor concedes that one reason it sold that lease was because the site was in close proximity to an existing Caldor store. From these facts the Trustee posits a potential conflict among the retailers in purchasing the stores of other troubled retailers. However, there is no evidence that either entity is expanding its operations, or even intends to do so. On this record, the actions taken over three years ago by the retailers do not provide a basis for finding a potential conflict of interest among the Committees today.
In sum, on this record, the Trustee’s assertion of a disqualifying adverse interest among the Committees is rejected as the product of “hypothetical conflicts” and “horrible imaginings”.
See, e.g., In re Stamford Color Photo, Inc.,
A person employed to represent a committee appointed under § 1102 of this title may not, while employed by such committee, represent any other entity in connection with the case.
Prior to the 1984 amendment, a professional retained by an official committee under § 1103(b) was
per se
barred from representing any other entity in the case.
E.g., In re Saxon Indus., Inc.,
The amendment did not alter then existing law barring counsel retained by an official committee from simultaneously representing an individual creditor and the creditors’ committee if the individual creditor has retained counsel to litigate issues potentially adverse to the committee.
E.g., In re Oliver’s Stores, Inc.,
In Daido the Purchaser’s interests were adverse to the committee’s because the Purchaser presumably sought to pay as little as possible for the debtors’ assets in the face of committee efforts to maximize the purchase price. No similar conflict exists here because Bradlees has not and likely will not seek to purchase Caldor assets. Moreover, the Trustee has stipulated that Caldor and Bradlees are unrelated except that they compete in the same market niche, are not affiliated entities and do not hold claims against each other, and that the Bradlees Committee is not a creditor in this case. The Bradlees Committee’s alleged interests in the Caldor case; i.e. as the fiduciary of the creditors of an economic competitor of Caldor, are not adverse to the Caldor Committee, and even if adverse, are so attenuated that they provide no basis for disqualifying the Professionals. Moreover, contrary to the Trustee’s urging, Daido is relevant because, as explained below, Otterbourg’s representation of the Cal-dor Committee does not violate Canons 4, 5 or 9 of the Code of Professional Responsibility.
The Trustee’s construction of the statute violates settled principles of statutory construction because it effectively reads the phrase “in connection with the case” out of § 1103(b), leaving only consideration of whether an “adverse interest” exists.
See e.g., Mountain States Tel. & Tel. Co. v. Pueblo of Santa Ana,
The parties’ dispute turns on whether the phrase ‘in connection with the case’ refers to the word ‘represent’ or the word ‘interest’ ....
sjs ifc # # ‡
In interpreting § 1103(b), Collier on Bankruptcy states: “With respect to attorneys and accountants, the committee may appoint such professional persons to represent the committee so long as any other party represented by such attorney in connection with the case does not have an adverse interest in the interests represented by the committee.” 5 Collier on Bankruptcy, § 1103.0 at 1103-9 (15th ed. 1994) (emphasis added). Thus Collier suggests that the phrase ‘in connection with’ refers to the word ‘represent’.
The legislative history supports Collier’s view.... Rather than prohibiting all dual representation in connection with the bankruptcy case, the section now prohibits only dual representation in connection with the case where the represented parties have adverse interests. Nothing suggests that the phrase ‘in connection with the case’ is to be given a meaning different than that it held prior to the [1984] amendment.
Daido Steel Corp. v. Official Committee of Unsecured Creditors,
The Trustee argues that the Professionals’ construction of the statute leads to the untenable result that we could not disqualify the Professionals even if an actual conflict were developing between the Committees, until the conflict became “connected” with the case, by which time the Committees and the case might have been prejudiced. However, the Code of Professional Responsibility
2
and the Rules of Professional Conduct of the American Institute of Certified Public Accountants (“AICPA Code”) mandate that Otterbourg and Ernst, respectively, police themselves and disclose any developing conflict which may color their impartiality and/or objectivity before it affects representation of the Caldor Committee. Disciplinary Rule (“DR”) 5-105(B), promulgated under Canon 5 of the Code of Professional Responsibility, obliges counsel to discontinue multiple employment if “the exercise of independent professional judgment in behalf of a client will be or is likely to be adversely affected by the lawyer’s representation of another client, or if it would be likely to involve the lawyer in representing differing interests_” Pursuant to DR 5-105(C), an attorney may represent multiple clients if it is obvious that he can adequately represent the interest of each client “and if each [client] consents to the representation after full disclosure of the possible effect of such representation” on the attorney’s exercise of independent professional judgment. Rule 102 of the AICPA Code mandates that certified public accountants maintain objectivity and integrity, be free from conflicts of interest, and not knowingly misrepresent facts or subordinate their judgments to others. If a conflict of interest develops during the course of an accountant’s representation of a client, the accountant cannot continue to service the client unless the conflict is disclosed and consent is obtained from the relevant parties.
See
Affidavit of Thomas P. Kelley sworn to December 6, 1995, and annexed to Ernst Opposition to the Trustee’s Objection ¶ 17 (citing Interpretation 102-2). Moreover, although Bankruptcy Rule 2014 only requires disclosure of conflicts of interest in connection with a professionals’ initial retention, § 328(c) provides that to be compensated, the Professionals must maintain their disinterestedness and refrain from representing or holding an interest adverse to the estate with respect to the matter on which they are employed.
See
11 U.S.C. § 328(c).
Compare In re Southmark Corp.,
Ernst instituted an information barrier with respect to these matters on September 21,1995, before it was retained by the Caldor Committee. At that time Ernst created separate teams for the two engagements. There is no overlap in staffing between the Caldor team and the Bradlees team. Ernst has instituted procedures to ensure that the two teams will not accidentally consult with the same persons, that work product will be retained separately, and that computer files cannot be inadvertently accessed. The services that Ernst is rendering to the Bradlees Committee are based in its New York office. Ernst’s work for the Caldor Committee is based in its Atlanta office. The only exceptions, a retired Ernst partner who serves as a consultant, and a manager, are located in the New York office and have been advised as to the need for maintaining the strictest separation between the two engagements. Further, Ernst requires all of its professionals to comply with the requirements of the AICPA Code. Prior to Ernst’s engagement by the Caldor Committee and before the institution of the information barrier, a member of Ernst’s Bradlees team called the Atlanta office to obtain some publicly available information concerning an executive compensation matter that had arisen in a prior bankruptcy. Two accountants spent 3.2 hours responding to the request, which had nothing directly to do with Bradlees. All parties have stipulated that neither individual learned anything confidential.
Otterbourg deployed its information barrier on October 2, 1995, five days after its selection as Committee counsel, and completed its implementation by October 10, 1995. Otterbourg created two teams of professional employees (members of the Firm, associates and paralegals). One team renders professional services to the Bradlees Committee and the other team renders professional services to the Caldor Committee. Following Otterbourg’s selection by the Caldor Committee on September 27, 1995, the following attorneys who, prior to that date, had recorded time in the Bradlees case, were assigned by Otterbourg to work either on the Caldor case or in connection with the Trustee’s Objection to Otterbourg’s retention by the Cal-dor Committee: Kurt J. Wolff, William M. Silverman, Scott L. Hazan, Richard J. Rubin, Alan Kardon and Rosanne A. Finkel. Since, October 10, 1995, they have not worked on any Bradlees matter. Between September 27,1995 and October 10,1995, these individuals recorded de minimis hours in the Brad-lees case primarily in connection with the transfer of duties to different attorneys or with respect to the Trustee’s objection.
If a conflict arises among the Committees, either or both can retain special counsel or financial advisors, as necessary.
See, e.g., In re Leslie Fay Companies, Inc.,
Finally, the eases cited by the Trustee do not support a different result. In
In re Proof of the Pudding, Inc.,
Courts look to the Code of Professional Responsibility in analyzing conflicts under the Bankruptcy Code.
See, e.g., In re GHR Energy Corp.,
The Trustee contends that Otter-bourg’s retention is barred by Canons 4, 5 and 9 of the Code of Professional Responsibility. Disqualification is proper thereunder
(1) where an attorney’s conflict of interests in violation of Canons 5 and 9 of the Code of Professional Responsibility undermines the court’s confidence in the vigor of the attorney’s representation of his client, or more commonly (2) where the attorney is at least potentially in a position to use privileged information concerning the other side through prior representation, for example, in violation of Canons 4 and 9, thus giving his client an unfair advantage.
Board of Education v. Nyquist,
Canon 4 of the Code of Professional Responsibility requires a lawyer to preserve the confidences and secrets of his client. For these purposes,
“[c]onfidenee” refers to information protected by the attorney client privilege under applicable law, and “secret” refers to *179 other information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would be likely to be detrimental to the client.
Code of Professional Responsibility DR 4-101(A). The Trustee argues that Otterbourg is disqualified from representing the Caldor Committee under Canon 4 because concurrent representation of both Committees creates the possibility that Otterbourg may inadvertently disclose privileged information obtained in representing the Caldor Committee to the Bradlees Committee. Disqualification under DR 4-101 is rooted in concepts of fundamental fairness; “allowing an attorney who is in a position to use confidential information gained through a relationship with the client’s adversary would give the client an unfair advantage.”
Liu v. Real Estate Inv. Group, Inc.,
Canon 5 of the Code of Professional Responsibility mandates that an attorney exercise independent professional judgment on behalf of a client. Accordingly,
[ejxcept with the consent of the client after full disclosure, a lawyer shall not accept employment if the exercise of professional judgment on behalf of the client will be or reasonably may be affected by the lawyer’s own financial, business, property, or personal interests.
Code of Professional Responsibility DR 5-101(A). DR 5-105 provides:
A. A lawyer shall decline proffered employment if the exercise of independent professional judgment in behalf of a client will be or is likely to be adversely affected by the acceptance of the proffered employment, or if it would be likely to involve the lawyer in representing differing interests, except to the extent permitted under DR 5-105(C).
B. A lawyer shall not continue multiple employment if the exercise of independent professional judgment in behalf of a client will be or is likely to be adversely affected by the lawyer’s representation of another client, or if it would be likely to involve the lawyer in representing differing interests, except to the extent permitted under DR 5-105(C).
*180 C. In the situations covered by DR 5-105(A) and (B), a lawyer may represent multiple clients if it is obvious that the lawyer can adequately represent the interest of each and if each consents to the representation after full disclosure on the possible effect of such representation on the exercise of the lawyer’s independent professional judgment on behalf of each.
D. While lawyers are associated in a law firm, none of them shall knowingly accept or continue employment when any one of them practicing alone would be prohibited from doing so under DR 5-101(A), DR 5-105(A), (B) or (C), DR 5-108 or DR 9-101(B).
Code of Professional Responsibility DR 5-105. For these purposes, the term “differing interests” means “every interest that will adversely affect either the judgment or the loyalty of a lawyer to a client whether it be a conflicting, inconsistent, diverse or other interest.”
See
Code of Professional Responsibility Preamble, Definitions. The Trustee contends that Otterbourg’s concurrent representation of the Committees violates Canon 5 because the interests of the Committees are adverse and because Otterbourg’s ability to vigorously represent each committee may be influenced by the dual representation. As support, the Trustee cites
Cinema 5, Ltd. v. Cinerama, Inc.,
Canon 9 of the Code of Professional Responsibility provides that the attorney should avoid even the appearance of impropriety. Courts are reluctant to rest a disqualification exclusively upon Canon 9 and generally require proof that another Canon has been violated.
Hartford Accident and Indem. Co. v. RJR Nabisco, Inc.,
Conclusion
Based on the foregoing, the Trustee’s objection to the retention of the Professionals is overruled.
SETTLE ORDER.
Notes
. Our subject matter jurisdiction of this matter is predicated on 28 U.S.C. §§ 1334(b) and 157(a) and the "Standing Order of Referral of Cases to Bankruptcy Judges” of the United States District Court for the Southern District of New York, dated July 10, 1984 (Ward, Acting C.J.). This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A).
. All references are to the Code of Professional Responsibility, as adopted in New York State. See N.Y.Jud.Law app. at 350 (McKinney 1992).
. In
Cinema 5 Ltd. v. Cinerama, Inc.,
. In
Fund of Funds, Ltd. v. Arthur Andersen & Co.,