1 

UNITED STATES BANKRUPTCY COURT FOR 

THE SOUTHERN DISTRICT OF FLORIDA 

WEST PALM BEACH DIVISION

IN RE: : CHAPTER 11

: 

21 DROPS, LLC, : CASE NO. 21-21960-MAM

: 

Debtor. : 

UNITED STATES TRUSTEE RESPONSE TO DEBTOR’S REQUEST 

FOR JUDICIAL DETERINATION OF CONFLICT (ECF #63) 

MARY IDA TOWNSON, United States Trustee, in furtherance of the administrative 

responsibilities imposed pursuant to 28 U.S.C. §586(a), files her response to the Debtor’s Request for 

Judicial Determination of Conflict (the “Request”) (ECF #63). In support thereof, the United States 

Trustee states as follows:

PRELIMINARY STATEMENT

1. The Debtor filed this Request seeking a Court determination regarding whether its 

desired counsel, Busch Mills Slomka, LLP (the “Firm”) has a conflict of interest and, therefore, 

unable to be employed as counsel pursuant to 11 U.S.C. § 327. 

2. The Debtor argues that, despite the fact the Firm represented an equity holder in prepetition litigation against other equity holders, the Firm has no conflict of interest and its 

employment should be approved. 

3. The United States Trustee submits that, based on the prepetition and post-petition

facts and circumstances and statements made in the Request and other pleadings, the Firm has an 

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interest adverse to the estate resulting in a conflict of interest preventing its employment under 11 

U.S.C. §§ 327(a) and (c)1. 

BACKGROUND

4. The Debtor filed a Chapter 11 Subchapter V petition on December 23, 2021. The 

Debtor filed a skeletal petition, listing only eight parties on its creditor matrix (ECF #1).

5. The petition was signed by Kavita Shai, as President. 

6. On December 28, 2021, the United States Trustee appointed Aleida Martina-Molina 

as Subchapter V trustee (ECF #4). 

7. On December 30, 2021, the Debtor filed a Case Management Summary (ECF #10). 

The Case Management Summary disclosed that the reason for filing the Chapter 11 bankruptcy was 

as follows: 

8. On January 7, 2022, the Court entered an order dismissing the case for Debtor’s 

failure to timely file various pleadings, including a list of 20 largest unsecured creditors and small 

business documents (ECF #13). 

9. On January 24, 2022, the Court reinstated the Chapter 11 case after the Debtor filed 

its required pleadings (ECF #26). 

1 The United States Trustee notes that the Debtor has not filed an application to employ the Firm at this time, however, 

assuming an application were to be employed the United States Trustee would file an objection which would then result 

in the operation of 11 U.S.C. § 327(c).

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10. The Debtor’s schedules, signed by Kavita Sahai under penalty of perjury and filed 

on January 13, 2022 (ECF #18), disclosed the following:

a. Assets totaling $143,700 comprised of the following general items:

i. Cash $28,000

ii. Accounts Receivable $22,000

iii. Inventory $41,700

iv. Intangibles $2,000

v. Other (undescribed) $50,000

b. No secured debt

c. Priority unsecured debt totaling $130,000 all due to Kavita Sahai as wages, 

salaries and commissions

d. General unsecured debt totaling $21,440, comprised of 

i. Chase Credit Card $1,440

ii. Kavita Sahai $20,0000

11. The Statement of Financial Affairs, Question 28 lists the following equity 

ownership:

12. The List of Equity Shareholders states that Ms. Sahai is president and that Richard 

F. Caster 2009 Caster Trustee, Cary M. Caster 2010 Irrevocable Trustee (jointly, the “Casters”) and 

Turtle Tail, LLC are common shareholders.

13. The Debtor filed a second Case Management Summary on January 14, 2022 (ECF 

#25), which provided information that is different than what is disclosed on the schedules. For 

example, the Case Management Summary indicates that Ms. Sahai is owed accrued wages in an 

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amount that differs from the schedules as well as sales taxes owed to the State of Florida in the 

amount of $450. Additionally, the assets listed on question 9 of the Case Management Summary 

differ from that described in the schedules. 

14. A third Case Management Summary was filed by the Debtor on February 28, 2022 

(ECF #47). This Case Management Summary also provided information different than what was 

disclosed on the schedules. According to this new document, questions 8 and 9 claim the following:

15. On March 4, 2022, more than two and one-half months after the petition date, the 

Debtor filed its Application to Employ Busch Mills & Slomka as Attorney (the “Application”) 

(ECF #49). The Application was not signed by the Debtor, but rather by the Firm. Attached to the 

Application was a copy of an Engagement Letter required to be filed with the Court pursuant to 

Local Rule 2014-1(A). 

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16. The Engagement Letter disclosed the following information:

a. The Engagement Letter was dated October 6, 2020, more than 14 months prior to 

the bankruptcy petition date.

b. The Engagement Letter does not mention the filing of a bankruptcy case.

c. The Engagement Letter indicates that the Firm was retained by both Ms. Sahai and 

the Debtor in relation to a membership dispute regarding the Debtor.

17. On March 25, 2022, the United States Trustee filed her objection to the Application 

(ECF #57).

18. On April 4, 2022, the Court entered an order denying approval of the Application 

without prejudice (ECF #61).

19. On April 8, 2022, the Debtor filed the Request. The Request provides the following 

additional facts not previously disclosed:

a. Turtle Tail, LLC owns 51% of the Debtor but allegedly is not actively involved in 

the operations.

b. Ms. Sahai purchased the interests of Turtle Tail, LLC in order to have a controlling 

interest in the Debtor. 

c. The Debtor’s remaining equity disputes the validity of the purchase of equity in 

Turtle Tail, LLC by Ms. Sahai.

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d. Turtle Tail, LLC and Ms. Sahai retained the Applicant to resolve disputes with the 

other equity interests. 

e. Litigation in Palm Beach initiated by the Applicant on behalf of its clients was 

dismissed without a determination of the merits.

f. The litigation ended on our about June 5, 2021 some 6 months prior to the 

bankruptcy petition. 

g. The Firm claims that its representation of the parties terminated at that time (June 5, 

2021). 

h. The Firm did not obtain a new Engagement Letter when it prepared the bankruptcy 

petition on behalf of the Debtor. 

20. On April 14, 2022, the Casters filed a Motion to Dismiss Case for Lack of Good 

Faith and Related Relief (the “Motion to Dismiss”) (ECF #65). Attached as Exhibit “C” to the 

Motion is a letter dated July 13, 2021 from the Firm to counsel for the Casters wherein counsel 

threatened to file bankruptcy on behalf of 21 Drops, LLC. 

21. In the Motion to Dismiss, the Castors further allege that the Debtor has used the 

credit of Ms. Sahai’s spouse without Court authority. 

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ARGUMENT

22. A debtor in possession has all the rights and powers of trustee and is obligated to 

perform all the functions and duties of a trustee. 11 U.S.C. § 1107(a). 

23. Bankruptcy Code § 1107(a) and § 327 and Bankruptcy Rule 2014(a) govern the 

employment of professionals to represent or assist the debtor-in-possession in carrying out its duties 

under Title 11. Section 327 provides in pertinent part as follows: 

(a) Except as otherwise provided in this section, the trustee, with the court’s 

approval, may employ one or more attorneys...that do not hold or represent an interest

adverse to the estate, and that are disinterested persons, to represent or assist the 

trustee in carrying out the trustee’s duties under this title.

(c) In a case under chapter 7, 12, or 11 of this title, a person is not 

disqualified for employment under this section solely because of such person’s 

employment by or representation of a creditor, unless there is an objection by 

another creditor of the United States trustee, in which case the court shall disapprove 

such employment if there is an actual conflict of interest.

24. Bankruptcy Code Section 101(14) defines a disinterested person to be a “person 

that 

(A) is not a creditor, an equity security holder, or insider; 

(B) is not and was not, within 2 years before the date of filing of the petition, 

a director, officer or employee of the debtor; and 

(C) does not have an interest materially adverse to the interest of the estate 

or of any class of creditor or equity security holders, by reason of any direct 

or indirect relationship to, connection with, or interest in the debtor, or for 

any other reason.” 

25. The Court has an independent duty to ensure that counsel employed pursuant to § 

327(a) is disinterested and does not represent an interest adverse to the estate. In re Git-n-Go, Inc.

321 B.R. 54 (Bankr. N.D.Ok. 2004). “Conflicts of interest are prohibited by Sections 327(a) and 

328(c) of the Bankruptcy Code...These provisions create an ongoing duty on the part of all 

professionals hired by the estate to avoid conflicts of interest.” In re Creative Desperation, Inc.,

415 B.R. 882, 896 (Bankr. S.D.Fla. 2009). 

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26. While the Bankruptcy Code does not define “adverse interest,” courts have held that

a representation by counsel between parties that have competing interests results in a conflict in 

interest and an adverse interest to the estate. An adverse interest would include “an economic 

interest that would tend to lessen the value of the bankruptcy estate or that would create either an 

actual or potential dispute in which the estate is a rival claimant...or...a predisposition under the 

circumstances that render such a bias against the estate.” In re Prince, 40 F.3d 356, 361 (11th Cir. 

1994) quoting, In re Roberts, 46 B.R. 815, 822-823 (Bankr. D.Utah 1985). See also, In re Rusty 

Jones, Inc., 134 B.R. 321 (Bankr. N.D.Ill. 1991); In re Rivers, 167 B.R. 288 (Bankr. N.D.Ga. 

1994). “An actual conflict exists if there is ‘an active competition between two interests, in which

one interest can only be served at the expense of the other.’” Id at 58., citing In re BH & P, Inc.,103

B.R. 556, 563 (Bankr. D.N.J. 1989), aff’d in pertinent part, 119 B.R. 35 (D.N.J. 1990).

27. “While the use of adverse interest differs slightly between section 327(a) and 

section 101(14) (in section 327(a) the professional must not hold or represent an interest adverse to 

the estate, while to be disinterested, the professional must not have an interest materially adverse to 

the interest of the estate, or any class of creditors or equity holders), courts have generally 

combined them and stated that adverse interest test is objective and precludes ‘any interest or 

relationship, however slight, that would even faintly color the independence and impartial attitude 

required by the Code and Bankruptcy Rules’.” In re Nilhan Developers, LLC, 2021 Bankr. LEXIS 

1036, 2021 WL 159354 (Bankr. N.D.Ga. 2021) citing In re Black & White Stripes, LLC, 623 B.R. 

50 (Bankr. S.D.N.Y. 2020) (quoting In re Granite Partners, L.P., 219 B.R. 22,33 (Bankr. S.D.N.Y. 

1998)). “In determining whether a professional holds an adverse interest, the issue is whether he 

was able to make unbiased or impartial decisions in the best interest of the estate.” In re 

Fundamental Long Term Care, 613 B.R. 484, 492 (Bankr. M.D.Fla. 2020 ) citing, In re New River 

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Dry Dock, Inc., 497 Fed. Appx. 882, 887 (11th Cir. 2012). The United States Trustee submits that 

the facts disclosed in the Request clearly demonstrate that the Firm represents both the interests of 

the Debtor and Ms. Sahai. The Firm also provided new information now disclosing that it currently 

represents or previously represented another entity, Turtle Tail, LLC. Despite its claim that the 

Firm ceased representing the parties in June, 2021, the Castors provided documentation 

establishing that that the Firm, in July 2021, on behalf of Ms. Sahai, the Debtor and Turtle Tail, 

LLC threatened to place 21 Drops, LLC into a bankruptcy if the Castors refused to settle. 

28. The United States Trustee further notes the many discrepancies in the schedules and 

documents filed with the Court regarding the actual debt owed to creditors. The Firm has prepared 

the documents, each showing different amounts due to Ms. Sahai, debt owed to taxing authorities 

not disclosed on schedules and post-petition borrowings without Court authority. Ms. Sahai signed 

the documents as being true and correct under penalty of perjury. The Debtor has a fiduciary 

obligation to vet the actual creditors, disclose which are disputed and which are actually owed 

money. It is clear from a review of the documents that the Firm and the Debtor are unable to fairly 

state what is owed to Ms. Sahai and whether it is actual or disputed. The only reason the United 

States Trustee can find for this failure is because the Firm also represents Ms. Sahai’s interests in 

this matter.

29. The Firm cannot represent the Debtor and act impartially with respect to creditors 

and equity as a result of its prior representations of Ms. Sahai. Simply put, the Firm cannot serve 

two masters.

30. Furthermore, pursuant to 11 U.S.C. §327(c), upon objection filed by the United

States Trustee or a creditor and upon the finding of an actual conflict of interest, the Court must 

deny approval of employment of bankruptcy counsel under §327(a). While there may be situations 

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allowing for counsel to represent both a Debtor and a creditor, such as allowing counsel to 

represent parties in matters unrelated to the bankruptcy proceeding or if there exists a large

bankruptcy case “where every competent professional in a particular field is already employed by a

creditor or party in interest,” the facts in this proceeding do not rise to the level of such an 

exception. 

31. Applicant’s request to represent the Debtors should be denied. In re Big Mac 

Marine, Inc., 326 B.R. 150 (B.A.P. 8th Cir. 2005). In Big Mac Marine, counsel for the Debtor

represented both the Debtor and the largest creditor in the case, who were also the shareholders.

Upon objections filed by the United States Trustee and the secured creditor in the case, the

bankruptcy court held that counsel could not represent both parties without having conflicting 

allegiances and denied approval. Later, counsel sought to have the order denying approval of 

employment vacated and filed a fee application. The bankruptcy court refused to vacate the order 

and denied the request for fees. On appeal, the Bankruptcy Appellate Panel for the 8th Circuit

affirmed the bankruptcy court, holding that counsel had an actual conflict of interest at the time and 

could not represent the debtors under section 327(c). “If employed as counsel for the Debtor, he

would also have an obligation to represent all Debtor’s creditors and objectively analyze the

validity of the...claims, or indeed to being a creditor at all...Multiple representation in these two 

cases was out of the question.” Id. at 154-55.

32. The same facts apply to this case. Applicant needs to objectively analyze claims of

all parties, including claims held by the estate against others. Applicant cannot objectively 

determine whether the claim held by Ms. Sahai is valid or whether this estate has a claim against

Ms. Sahai when it is counsel for both entities.

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CONCLUSION

33. Pre-petition, the Firm represented Ms. Sahai, the Debtor and possibly Turtle Tail, LLC 

in litigation against the Castors. The Firm, on behalf of its clients threatened to place the Debtor 

into bankruptcy in order to continue if the Castors would not settle. Upon the filing of the petition, 

the only significant creditor listed is Ms. Sahai. The amounts allegedly due to Ms. Sahai are 

different in every pleading. Based on the information provided by the Debtor, the Firm and the 

Castors, and despite argument to the contrary, the Firm appears to still represent Ms. Sahai and 

possible Turtle Tail, LLC. The Debtor seeks approval to have the Firm represent the Debtor as 

bankruptcy counsel pursuant to 11 U.S.C. §327(a). Applicant has an actual conflict of interest and 

therefore is not disinterested. Pursuant to §327(c), upon objection filed by the United States Trustee

or a creditor, if the Court finds an actual conflict of interest, the Court must deny approval of 

employment of counsel. 

WHEREFORE, the United States Trustee files this response to the Debtor’s Request and

respectfully requests to be heard and to grant such other relief as the Court deems just and proper. 

 MARY IDA TOWNSON

United States Trustee

 /s/ Heidi A. Feinman 

HEIDI A. FEINMAN

Trial Attorney

 Florida Bar No. 0879460 

Office of the U.S. Trustee 

51 SW 1st Avenue 

Room 1204 

Miami, FL 33130 

(305) 536-7285 

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CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the UNITED STATES TRUSTEE 

RESPONSE TO DEBTOR’S REQUEST FOR JUDICIAL DETERINATION OF 

CONFLICT (ECF #63) was electronically filed with the Court using the CM/ECF system,

which sent notification to all parties of interest participating in the CM/ECF system.

Aleida Martinez-Molina Martinez@SubV-Trustee.com, katherine@axslawgroup.com 

Clive N. Morgan cmorgan@buschmills.com, pleadings@buschmills.com 

John S Schank jschank@fwblaw.net 

David Neal Stern dnstern@fwblaw.net, twolosh@fwblaw.net; jbnoonan@fwblaw.net 

 

 Done this the 22nd day of April 2022. 

 

 

 /s/ Heidi A. Feinman 

HEIDI A. FEINMAN

Trial Attorney

Office of the U.S. Trustee

51 SW First Avenue Miami, FL 33130 

(305) 536-7285 

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