United States Bankruptcy Court 

Eastern District of Virginia 

Alexandria Division 

In re: 

Terence Michael Hynes, 

Kathryn Wilson Hynes, Case No. 16-10556-BFK 

 Debtor. Chapter 11 

Response to Application to Employ Special Tax Counsel and Accountant 

 The debtors have filed an application to approve the employment of Burton 

J. Haynes, P.C. (“Applicant”) as special tax counsel and accountant pursuant to 

Section 327(e) of the Bankruptcy Code. Docket No. 27. 

 The application should not be approved for four reasons: 

1. Bankruptcy Code does not permit an accountant to be retained under Section 

327(e). 

2. The services to be rendered by the Applicant are not for a “specified special 

purpose” but are central of the administration of this case. Accordingly, the 

Applicant should be a “disinterested person” as defined by the Bankruptcy 

Code, and be retained, if a disinterested person, pursuant to Section 327(a). 

3. The Verified Statement submitted by the Applicant, Docket No. 27-1, does 

not provide sufficient information regarding the Applicant’s connections 

with the Debtor. 

4. The Applicant may have a conflict of interest with the Debtor in that the 

Applicant paid the costs of this case. Disclosure of Compensation of 

Attorney, Docket No. 1. 

 

Retention of Accountant Under Section 327(e) 

Section 327(e) provides as follows: 

The trustee, with the court's approval, may employ, for a specified 

special purpose, other than to represent the trustee in conducting 

the case, an attorney that has represented the debtor, if in the best 

interest of the estate, and if such attorney does not represent or 

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hold any interest adverse to the debtor or to the estate with respect 

to the matter on which such attorney is to be employed 

 Section 327(e) only applies to attorneys, not accountants. As stated by one 

court: 

Section 327(e), however, references only the appointment of 

special counsel. For whatever reason, Congress chose not to extend 

this accommodation to any other profession. 

In re S. Shore Golf Club Holding Co., Inc., 182 B.R. 94, 95 

(Bankr. W.D.N.Y. 1995) 

Services to be Rendered are not for Specified Special Purpose 

 In addition, Section 327(e) is for the appointment of an attorney for a 

“specified special purpose.” As further stated in the S. Shore Gulf Club case, page 

95: “A professional does not acquire “special” status merely because a debtor 

proposes to assign that nomenclature. Rather, the Court must examine the duties 

that are to be performed.”

The services to be rendered by the Applicant are central to the 

reorganization process. Their centrality does not override the Code’s requirement 

regarding the limited duties of a special counsel. As stated: 

A professional whose services may be vital to the debtor's 

reorganization effort, but who is not “disinterested” and 

eligible for employment under § 327(a), cannot circumvent 

that requirement by trying to characterize the employment 

as “special counsel” under § 327(e). In re Tidewater 

Memorial Hospital, Inc., 110 B.R. 221, 228 

(Bankr.E.D.Va.1989). 

In re Running Horse, L.L.C., 371 B.R. 446, 452 (Bankr. 

E.D. Cal. 2007) 

As stated by one court: 

Furthermore, attorneys cannot purport to serve as special 

counsel to bypass disinterestedness requirements while in 

fact acting as bankruptcy counsel. In re Congoleum Corp.,

426 F.3d 675, 692 (3d Cir.2005) (special counsel's role in 

plan process was too expansive for § 327(e) and conflicts 

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disqualified lawyer from § 327(a) employment); see also In 

re Running Horse, L.L.C., 371 B.R. 446, 451–52 

(Bankr.E.D.Cal.2007) (law firm employed as special 

counsel could not represent Chapter 11 debtor in 

“conducting the case,” which included matters related to 

formulation of a Chapter 11 plan and liquidation of the 

debtor's assets.); In re ACT Mfg., Inc., 281 B.R. 468, 484 

(Bankr.D.Mass.2002) (attorneys who are retained as special 

counsel put their fees at risk when they become involved in 

management of bankruptcy case, rather than confine their 

involvement to matters for which they were retained 

In re nCoat, Inc., No. 10-11512, 2012 WL 1354581, at *1 

(Bankr. M.D.N.C. Apr. 18, 2012) 

Inadequate Disclosure in Declaration 

All that is disclosed in the Verified Statement is that the Applicant 

represented the debtors previously, nothing more. This is insufficient. 

Additional information is necessary. The nature of services rendered, dates 

for the services, and the amounts paid to the Applicant, and the dates that the 

payments were made. 

Applicant may have a Conflict of Interest 

 The Applicant was the source of compensation for the debtors’ bankruptcy 

counsel. Disclosure of Compensation of Attorney for Debtor. Docket No. 1, page 

13. The Applicant paid the costs of this case, including filing fees, from money 

paid to him by the debtors. Was this a gift or loan? What was the motivation? 

The very fact of this transaction raises a concern that requires more information. 

 The application should be denied. 

April 15, 2016 Judy A. Robbins 

 United States Trustee 

 /s/ Jack Frankel 

 Jack Frankel, Attorney 

 Office of United States Trustee 

 115 S Union Street 

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 Alexandria, VA 22314 

 (703) 557-7229 

 

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