John P. Fitzgerald, III

Acting United States Trustee

For Region 4

Jack Frankel, Attorney

115 S Union Street

Alexandria, VA 22314

(703) 557-7229

United States Bankruptcy Court

Eastern District of Virginia

Alexandria Division

In re:

WW Contractors, Inc., Case No. 18-12095-BFK

Debtor. Chapter 11

Hearing: August 14, 2018, at 11:00 am

 Courtroom I, 2nd Floor

Objection to the Employment of 

Saul Ewing Arnstein & Lehr LLP as Special Litigation Counsel

 Comes Now, John P. Fitzgerald, III, Acting United States Trustee for Region 4, 

and files this objection to the Debtor’s Application to Approve the Employment of 

Saul Ewing Arnstein & Lehr LLP (“Applicant”) as Special Litigation Counsel to 

the Debtor. Docket No. 52.

 In support of this objection the following representations are made:

1. Pre-petition, the Debtor commenced litigation against Sarai Investment 

Corporation and related parties in the Circuit Court of Maryland for 

Baltimore City in which the Debtor alleged numerous causes of action 

against the Defendants. The litigation was subsequently removed to the 

United States District Court for the District of Maryland. Application, ⁋ 4.

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2. Pre-petition, the Debtor had retained the Business & Technology Law Group 

to represent the Debtor in this litigation. Application, footnote 1.

3. The Debtor now wants to replace the Business & Technology Law Group 

and retain the Applicant for the district court litigation.

4. The Debtor wants the Court to approve the employment of the Applicant 

pursuant to Section 327(a) of the Bankruptcy Code. Application ⁋ 2. 

Objections

Basis for Employment Under Section 327(a) Not Explained

1. It is unclear why the Debtor seeks the Court to approve the employment of 

the Applicant under Section 327(a) instead of 327(e) of the Bankruptcy 

Code.

2. The United States Trustee assumes from representations made by the 

Debtor’s representative at the meeting of creditors that the district court 

litigation is central (or critical) to the reorganization of the Debtor. 

3. A law firm employed as special counsel cannot represent a debtor in 

“conducting the case.” In re Running Horse, L.L.C. (371 B.R. 446, 453) 

(Bankr. E.D. CA 2007).

4. Section 327(e) of the Bankruptcy Code allows an exception to the rule that 

professionals retained by the estate must be both disinterested and not hold 

or represent an interest adverse to the estate. 11 U.S.C. Section 327(a).

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5. Section 327(e) of the Bankruptcy Code states:

(e) 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 hold any interest adverse to the debtor or to the estate with respect 

to the matter on which such attorney is to be employed.

(emphasis added)

6. The special purpose must be unrelated to the reorganization. In re 

Congloeum Corp., 426 F.3d. 675, 689 (3rd Cir. 2005) (“The “special 

purpose” must be unrelated to the reorganization and must be explicitly 

described in the application.”

7. Section 327(e) should not be used to bypass the requirements of Section 

327(a). As Judge Tice stated in In re Tidewater Memorial Hosp., Inc. 110 

B.R. 22, 227 (1989):

 A purpose of § 327(e) is to allow counsel who cannot 

meet the disinterestedness requirement of § 327(a) 

nevertheless to render valuable services to the debtor in 

matters where counsel has no adverse interest. § 327(e) is 

specific, however, in prohibiting special counsel from 

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representing the debtor “in conducting the case”. 11 

U.S.C. § 327(e) (1988).

8. In a recent case considering Section 327(e) employment, Roper and 

Twardowsky, LLC, 566 B.R. 734 (Bankr. NJ 2017), the court stated, having 

surveyed the law in other cases, that the employment of special counsel 

should be denied if the services to be rendered by proposed special counsel 

“overlapped” those normally performed by general bankruptcy counsel. 

The plain language of Section 327(e) makes it clear that a 

trustee “may employ [counsel], for a specified special purpose, 

other than to represent the trustee in conducting the 

case....” 11 U.S.C. § 327(e) (emphasis added). Case law 

examining this quoted portion of the statute is limited. 

However, a survey of available case law illustrates a pattern 

where courts have refused to authorize the employment of 

special counsel—whose services would overlap with those 

customarily reserved for general bankruptcy counsel—

regardless of how much familiarity with and understanding of 

the debtor's affairs special counsel brings to the case

In re Roper & Twardowsky, LLC, 566 B.R. 734, 750 (Bankr. 

D.N.J. 2017) (italic emphasis added).

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 In the present case, it appears that the Applicant would be involved in a matter 

central to the reorganization of the Debtor. The Applicant would be conducting 

the case. As stated in In re Running Horse, LLC 371 B.R. 446, 453 (Bankr. E.D. 

CA 2007 “The term “conducting the case” is not defined in the Bankruptcy Code. 

However, the term has been recognized to include matters related to formulation of 

a chapter 11 plan, and/or liquidation of the debtor's assets.” Accordingly, the 

Applicant would not be a special counsel because the employment is central to the 

reorganization of the Debtor.

Basis for Causes of Action to be Pursued in District Court Not Disclosed

9. The Application does not provide sufficient information regarding the nature 

of the Debtor’s “alleged numerous causes of action.” In other words, what 

did Sarai Investment Corporation and related parties do or not do to the 

Debtor? What are the Debtor’s damages?

10. Without this information, the Application should not be approved.

No Retainer Agreement Attached

11. A copy of the Applicant’s retainer agreement with the Debtor, 

if any, should have accompanied the Application.

Amount(s) Paid to Prior Counsel Not Disclosed

12. The Application should disclose the amount(s) paid and date(s) 

paid to prior counsel, Business & Technology Law Group. The 

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Application should also disclose whether there is any unpaid 

amount due prior counsel. 

Method for Objecting to Application Not Disclosed

13. The Application does not disclose the method of objecting to 

the Application as required by Local Bankruptcy Rule 2014-1. 

The rule states in part:

RULE 2014-1 SERVICE OF MOTION FOR AN ORDER

AUTHORIZING EMPLOYMENTIN A CHAPTER 11 CASE

The motion, declaration and any proposed order shall be served on the 

parties listed below. Any party moving for an order authorizing 

employment in a proceeding under chapter 11 of the Bankruptcy Code 

shall, in plain language, inform all such parties of the filing of the 

motion, disclosing in full and complete detail any actual or potential 

conflicts of interest, and shall specify the method for objecting to the 

proposed order. Any objections to the proposed employment shall be 

made in writing, filed with the Court, with a copy served on the movant

and the parties listed below, within 14 days from the date of service of 

the motion.

 (emphasis added)

14. Creditor and public confidence in the administration of bankruptcy cases 

rests upon the adherence to the rules governing the employment of 

bankruptcy professionals. 

15. Wherefore, the Application should be denied.

July 25, 2018 John P. Fitzgerald, III

Acting United States Trustee

For Region 4

/s/ Jack Frankel

Jack Frankel, Attorney

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Office of United States Trustee

115 S Union Street

Alexandria, VA 22314

(703) 557-7229

Certificate of Service

 I hereby certify that on the 25th day of July, 2018, I e-mailed a copy of this 

objection and notice of objection and hearing to Aryeh E. Stein, Esq., Attorney for 

Debtor, Email: astein@meridianlawfirm.com. 

/s/ Jack Frankel

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