Office of United States Trustee

Jack Frankel, Attorney

115 S Union Street

Alexandria, VA 22314

(703) 557‐7229

Jack.I.Frankel@USDOJ.GOV  

United States Bankruptcy Court 

Eastern District of Virginia 

Alexandria Division 

In re: 

Flooring Solutions, Inc. Case No. 16-12380-BFK 

 Debtor. Chapter 7 

 Hearing August 16, 2016, 09:30 am 

 Courtroom III, 3rd Floor 

Objection to Trustee’s Application to Employ Counsel 

 Comes Now, Judy A. Robbins, United States Trustee, and files this 

objection to the Trustee’s Application to Employ Counsel, Henry & O’Donnell, 

P.C. (“Henry & O’Donnell”). Docket No. 64. 

Summary 

 The overriding principle in approving the employment a fiduciary in an 

estate in bankruptcy is to ensure that the fiduciary’s undivided loyalty to the estate 

is not compromised or eroded. In this case, Henry & O’Donnell represented 

Sonabank. Sonabank is the debtor’s principal secured creditor. Sonabank has a 

security interest and lien on virtually all of the debtor’s assets. While Henry & 

O’Donnell no longer represent Sonabank, Henry & O’Donnell still has an on-going 

duty of loyalty to the former client. The former client’s interests and the interests 

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of the estate, especially the unsecured creditors’ interests, are adverse. Henry & 

O’Donnell is not a disinterested person. The application should be denied. 

Statement of Facts 

1. On July 8, 2016, Flooring Solutions, Inc., filed a petition for relief under 

chapter 7 of the Bankruptcy Code. 

2. Klinette H. Kindred was appointed interim trustee. No trustee was elected 

and Klinette H. Kindred is the case trustee. 

3. On July 15, 2016, Sonabank filed a Motion for Relief from the Automatic 

Stay. Docket No. 18. 

4. Sonabank was represented by Henry & O’Donnell. 

5. In the Motion for Relief from the Automatic Stay, ¶ 5, Sonabank alleged: 

FSI [the debtor] granted a security interest to Sonabank... 

Under the terms of the Security Agreement, FSI granted 

and provided to Sonabank a security interest in and lien 

against virtually all assets of FSI, including all equipment, 

furniture, fixtures, inventory, chattel paper, accounts and 

general intangibles, contracts and contract rights.” 

(hereinafter the “Collateral”). 

6. On July 19, 2016, the Court entered an Order granting Sonabank relief from 

the automatic stay. Docket No. 32. 

7. The order stated, in part, that the debtor provided to Sonabank a first priority 

security interest in and lien against virtually all the assets of the debtor. 

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8. On July 29, 2016, the trustee filed Trustee’s Application to Employ Counsel. 

Docket No. 64. 

9. The Trustee seeks to retain counsel, Henry & O’Donnell, to, render services 

that include, among other things, 

taking necessary action to protect and preserve the estate and any 

assets of the estate, including the prosecution of actions and 

proceedings on behalf of the estate, the defense of any actions and 

proceedings commenced against the estate, negotiations 

concerning all litigation and assisting the Trustee in reviewing, 

estimating, objecting to and resolving claims asserted against the 

estate. 

Trustee’s Application to Employ Counsel, ¶6 f 

10. It is further disclosed that Sonabank is now represented by 

separate counsel “on all matters pertaining to this case and 

further expressly consented to H&O’s proposed representation 

of the Chapter 7 Trustee herein.” Application, ¶ 9 c. 

11. The debtor has also filed an objection to the employment of Henry & 

O’Donnell. Response to Application to Employ Counsel to the Trustee. 

Docket No. 70. 

12. The debtor alleges, in ¶ 7, that “The funds in Debtor’s bank 

account were depleted despite Sonabank’s loan documents 

specifically excluding a lien on certain assets.” 

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Argument 

 The Virginia Rules of Professional Conduct govern the conduct 

of attorneys practicing before this Court.1

Henry & O’Donnell has a duty of loyalty to its former client, 

Sonabank. 

Henry & O’Donnell’s prior representation of Sonabank, the 

principal secured creditor, and its proposed representation of the 

chapter 7 trustee and estate, are intertwined. Approving the 

application would place Henry & O’Donnell in a situation thwart with 

professional ethical challenges. 

 Virginia Rule of Professional Conduct 1.9 states: 

Conflict of Interest: Former Client 

(a) A lawyer who has formerly represented a client in a 

matter shall not thereafter represent another person in the 

same or substantially related matter in which that person’s 

interests are materially adverse to the interests of the 

former client unless both the present and former client 

consent after consultation. 

(b) A lawyer shall not knowingly represent a person in the 

same or substantially related matter in which a firm with 

which the lawyer formerly was associated had previously 

represented a client: 

(1) whose interests are materially adverse to that person, and 

                                                            

1 Local Bankruptcy Rule 2090‐1(I) states “Professional Ethics:  The ethical standards relating to the practice of law

in this Court shall be the Virginia Rules of Professional Conduct now in force and as hereafter modified or

supplemented.” (emphasis in original)

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(2) about whom the lawyer had acquired information 

protected by Rule 1.6 and 1.9(c) that is material to the 

matter; 

unless both the present and former client consent after 

consultation. 

(c) A lawyer who has formerly represented a client in a 

matter or whose present or former firm has formerly 

represented a client in a matter shall not thereafter: 

(1) use information relating to or gained in the course of the 

representation to the disadvantage of the former client 

except as Rule 1.6 or Rule 3.3 would permit or require 

with respect to a client, or when the information has 

become generally known; or 

(2) reveal information relating to the representation except a 

Rule 1.6 or Rule 3.3 would permit or require with respect 

to a client. 

Henry & O’Donnell, by the former representation of Sonabank, are 

presumed to possess confidential information regarding Sonabank’s claim in this 

case. It is an irrebuttable presumption. 

As former Chief Judge Tice stated regarding representing a former client: 

Once it is determined that an attorney-client relationship 

existed and that the matters are determined to be 

substantially related, then an irrebuttable presumption 

arises that relevant confidences were exchanged so that the 

attorney and the attorney's law firm must be disqualified.3

Rogers v. Pittston Co., 800 F.Supp. at 354 n. 5; see also

Virginia Code of Responsibility DR 5–105(E) (1992); 

Virginia Legal Ethic Opinion No. 758 (January 13, 1986 

Footnote 3: 

The irrebuttable presumption prevents the former clientpresent adversary from being put into the dilemma of 

having to reveal confidences in order to obtain a 

disqualification. See Government of India v. Cook 

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Industries, Inc., 569 F.2d 737, 741 (2d Cir.1978) 

(Mansfield, J., concurring). However, in some cases where 

an attorney can show that no confidential information was 

gained, the former client's interest may be outweighed by 

the attorney's interest in maintaining the attorney's 

reputation, which may needlessly suffer unless counsel is 

given an opportunity to clear counsel's name. Id. Therefore, 

it has been argued that trial courts should have the 

discretion in an appropriate case to permit the door to be 

opened for rebuttal of the presumption through the use of in 

camera or other protective devices to safeguard the interest 

of the former client. Id. In fact, this in camera approach 

was used, albeit with the consent of the parties, by Judge 

Leisure in United States Football League v. National 

Football League where he found the purpose for the 

irrebuttable presumption rule had been removed and thus 

found it inapplicable. United States Football League v. 

National Football League, 605 F.Supp. at 1462. Despite the 

flexibility and appeal of this approach, the prevailing rule is 

that the presumption is irrebuttable. See e.g., In re 

American Airlines, Inc., AMR Corp., 972 F.2d 605, 614 

(5th Cir.1992); Duncan v. Merrill Lynch, Pierce, Fenner & 

Smith, 646 F.2d 1020, 1028 (5th Cir.1981); Westinghouse 

Electric Corp. v. Gulf Oil Corp., 588 F.2d 221, 224 (7th 

Cir.1978); Government of India v. Cook Industries, Inc.,

569 F.2d 737, 740 (2d Cir.1978); Rogers v. Pittston Co.,

800 F.Supp. 350, 354 (W.D.Va.1992). 

In re Stokes, 156 B.R. 181, 186 (Bankr. E.D. Va. 1993) 

 

Further, as this Court stated: 

The twin goals under Virginia Rules of Professional Conduct 1.9 

are the preservation of confidentiality for the former client, and the 

continuing duty of loyalty. One Judge from this District analyzed 

the issue as follows: 

The key to assessing “the question of attorney disqualification in 

the successive representation context” is assessing the 

substantiality of the relationship between the present and the prior 

representation. Tessier, 731 F.Supp. at 730. An attorney-client 

relationship with the past client is, of course, a predicate to the 

consideration of a conflict. Id. And, “once an attorney-client 

relationship has been established, an irrebuttable presumption 

arises that confidential information was conveyed to the attorney in 

the prior matter;” the moving party does not have the evidentiary 

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burden of showing actual disclosure of confidences. Id. at 731. 

Where, as here, an attorney-client relationship was formed, and the 

interests of the past and former clients are materially adverse, then 

disqualification turns solely on whether the past and present 

representation are substantially related. 

Sunbeam Prods. v. Hamilton Beach Brands, Inc., 727 F.Supp.2d 

469, 472 (E.D.Va.2010). 

In re Dickson Properties, LLC, No. 11-11656-BFK, 2012 WL 

2026760, at *7 (Bankr. E.D. Va. June 5, 2012) 

The allegation made by the debtor in its objection to the employment of 

Henry & O’Donnell is a concern. While the United States Trustee has no 

information regarding this allegation, the matter should be reviewed by the trustee 

and her attorney. 

Will Henry & O’Donnell, as counsel to the trustee and former counsel to 

Sonabank, be able to investigate this allegation with a “jaundice eye and scowling 

mien?” 

In making that determination, the Court should consider the guidance of the 

Fourth Circuit. 

In determining whether to disqualify counsel for conflict of 

interest, the trial court is not to weigh the circumstances “with hairsplitting nicety” but, in the proper exercise of its supervisory 

power over the members of the bar and with a view of preventing 

“the appearance of impropriety,” it is to resolve all doubts in favor 

of disqualification. Neither is the court to consider whether the 

motives of counsel in seeking to appear despite his conflict are 

pure or corrupt; in either case the disqualification is plain. 

United States v. Clarkson, 567 F.2d 270, 273 (4th Cir. 1977), 

footnote 3 (citations omitted) 

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 Henry & O’Donnell is an experienced bankruptcy firm. It is important that 

parties have counsel of their own choosing. 

Nevertheless, as stated previously, the employment process of Section 

327(a) of the Bankruptcy Code serves to insure that the undivided loyalty of a 

fiduciary to an estate in bankruptcy is not strained. Creditor and public confidence 

in the administration of bankruptcy cases is a consideration in employing 

professionals. The application should be denied. 

 Judy A. Robbins 

 United States Trustee 

 /s/ Jack Frankel 

 Jack Frankel, Attorney 

 Office of United States Trustee 

 115 S Union Street 

 Alexandria, VA 22314 

 (703) 557-7229 

Certificate of Service 

 I hereby certify that on the 11th day of August, 2016, I e-mailed a copy of 

this objection to kkindred@tbrclaw.com and kmo@henrylaw.com. 

 /s/ Jack Frankel 

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