PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

No. 21

- 2496

____________

In re : MAXUS ENERGY CORPORATION, Debtor

THE MAXUS LIQUIDATING TRUST

v.

YPF S.A.; YPF INTERNATIONAL S.A.; YPF HOLDINGS, INC.; CLH HOLDINGS, INC.; REPSOL S.A.; REPSOL EXPLORACION, S.A.; REPSOL USA HOLDINGS, CORP.; REPSOL E&P USA. INC.; REPSOL OFFSHORE E&P USA, INC.; REPSOL E&P T&T LIMITED; REPSOL SERVICES COMPANY; JESSICA C. LAURI A, formerly

Jessica C. Boelter

YPF S.A.; YPF International S.A.; YPF Holdings, Inc.;

CLH Holdings, Inc., Appellants

____________

On Appeal from the United States Bankruptcy Court

for the District of Delaware ( No. 18

- BK

- 50489 ) Bankruptcy Judge: Honorable Christopher S. Sontchi2 ____________

Argued: May 3, 2022

Before: GREENAWAY , JR.

, PORTER , and PHIPPS

,

Circuit Judges

.

(Filed: September 9, 2022 )

____________

Victor L. Hou [ARGUED]

Ari D. MacKinnon Jeffrey A. Rosenthal Cleary Gottlieb Steen & Hamilton One Liberty Plaza New York, NY 10006

Adam G. Landis

Matthew B. McGuire

Landis Rath & Cobb

919 Market Street Suite 1800, P.O. Box 2087 Wilmington, DE 19801

Counsel for Appellants CLH Holdings Inc., YPF Holdings Inc., YPF International S.A., and YPF S.A.

Rosemary J. Piergiovanni

Farnan

919 North Market Street

12th Floor Wilmington, DE 198013 Catherine E. Stetson [ARGUED]

Johannah C. Walker Hogan Lovells US 555 Thirteenth Street, N.W. Columbia Square Washington, DC 20004

Counsel for Appellee Maxus Liquidating Trust

____________

OPINION OF THE COURT

____________
PORTER, Circuit Judge

.

Jessica Lauria

, née Boelter (“Boelter”), moved from a law firm representing one party in a bankruptcy dispute to the firm representing the opposing party. Boelter’s then fiancé also

worked for the new firm. The American Bar Association’s

Model Rules of Professional Conduct (“Model Rules”)

, incorporated by the Bankruptcy Court’s local rules, imputes

Boelter’s conflict to her new firm unless she , among other things, “is timely screened from any participation in the matter and is apportioned no part of the fee therefrom.” Model Rules

of Pro. Conduct r. 1.10(a)(2) (Am. Bar Ass’n, 2020)

. The new firm, White & Case LLP, time ly screened Boelter. But Boelter’s former client moved to disqualify White & Case, arguing that a screen was not enough. The Bankruptcy Court denied the motion, holding White & Case’s screen was sufficient to prevent Boelter’s conflict from being imputed t o the entire firm. Because the Model Rules state that a timely4 screen , together with certain other requirements, prevents conflict imputation, we will affirm the Bankruptcy Court. 1

I

This case stems from the Chapter 11 bankruptcy of Maxus Energy Corporati on (“Maxus”). In 2018, Maxus Liquidating Trust (“Trust”) sued Maxus’s parent s , YPF S.A., YPF International S.A., YPF Holdings, Inc., and CLH Holdings, Inc. (collectively, “YPF”), asserting fraudulent conveyance and alter ego claims.

White & Case represented the Trust from the start. Sidley Austin LLP represents YPF. Cleary Gottlieb Steen & Hamilton LLP represents YPF on issues related to the Motion to Disqualify and this appeal.

Boelter was a partner in Sidley’s restructuring group.

S he participated in Sidley’s initial pitch to represent YPF. She helped negotiate the engagement letter, worked with others on certain motions, was admitted pro hac vice in the proceeding, was copied on email correspondence with YPF , attended

1 As other courts have done, the Bankruptcy Court incorporated an external set of disqualification standards, in

this case the Model Rules. See Bankr. D. Del. R. 9010

- 1(f); cf.,

e.g. , United States v. Miller , 624 F.2d 1198, 1200 (3d Cir. 1980). Without a challenge to that incorporation, our analysis proceeds under tho se rules. Although a court may still use its inherent authority to disqualify counsel or a firm for reasons beyond those in the incorporated rules, we are satisfied that in

these circumstances the Model Rules suffice and no need exists

to invoke inherent authority to address additional

considerations.5 several meetin gs, and was considered by YPF executives as “an integral part” of its legal team. J.A. 54. She billed a total

300 hours to the YPF representation , mostly early on.

Thomas Lauria (“Lauria”) is a partner in White & Case’s restructuring group. Lauria did not record any time

related to the case. He was listed as counsel for one of Maxus’s creditors during the Chapter 11 proceedings, but he never entered an appearance. Boelter started dating Lauria in 2017

, before she pitched Sidley to YPF. In late 2018 Boelter and

Lauria’s relationship became exclusive, and they lived together starting in 2019. Sidley knew of the relationship, but it is

unclear from the record whether YPF knew.

While engaged to marry Lauria, Boelter moved to his firm, White & Case. When she di d so, White & Case followed the Model Rules. From the start, Boelter went through a

standard conflict

- screening process. White & Case implemented an ethical wall, which both parties agree qualifies

as a screen, beginning on Boelter’s first day ; obtained he r acknowledgment that she would comply with it ; and periodically certified her compliance. 2 White & Case did not give any portion of its fee from the YPF adversary proceeding to Boelter. White & Case gave YPF written notice of Boelter’s employment the day she began with the firm. The letter explained the nature of White & Case’s screen and inclu ded a

2 White & Case used both an inclusionary and an exclusionary screen. The inclusionary screen prohibits all attorneys and staff from involvement in the YPF representation if not assigned to

it. Those excluded attorneys and staff cannot access records or other information related to the representation. The exclusionary screen prevents Boelter , specifically, from involvement in the YPF representation in any way.6 statement of the firm’s and of Boelter’s compliance with the Model Rules. White & Case also stated that review may be available before a tribunal. The firm agreed to respond promptly to any written inquiries or objections about the screening procedur es. In fact, it provided additional

information to YPF attorneys in their later discussions. Boelter says she never breached the screen.

YPF never thought a ny screen could be good enough. So it moved to disqualify White & Case from representing the

Trust. The Bankruptcy Court denied the motion after applying a multifactored test, holding that exceptional circumstances did not exist to impute Boelter’s conflict to the entire firm despite

a screen . YPF then moved for direct appeal, which the Bankruptcy Court granted. This Court authorized YPF ’s appeal

.

II

We have jurisdiction to hear certified, direct appeals

“ from final judgments, orders, and decrees ,” as well as certain “interlocutory orders and decrees

, ” from bankruptcy courts. 28 U.S.C. § § 158(a), 158(d)( 2)(A). As relevant here, o ur jurisdiction over a non

- final bankruptcy court order has two prerequisites : The bankruptcy court must certify that its order “involves a question of law as to which there is no controlling decision of the court of appeals for the circuit or of the Supreme7 Court of the United States,” and the court of appeals must “authorize[] th e direct appeal.” Id. § 158(d)(2)(A). 3

The Bankruptcy Court certified two of the six issues

YPF requested. And we granted permission to appeal on those two issues plus one other . But it does not matter which issues

the Bankruptcy Court certified or we aut horized. That is

because we will “treat certified questions under 28 U.S.C. § 158(d)(2)(A) essentially as we treat certified questions from district courts under 28 U.S.C. § 1292(b).” In re Franchise Servs. of N. Am., Inc. , 891 F.3d 198, 206 (5th Cir. 2018 ). We

will do so because “appellate jurisdiction applies to the order certified to the court of appeals, and is not tied to the particular question formulated by the district court.” Yamaha Motor Corp. v. Calhoun , 516 U.S. 199, 205 (1996). Here, too, secti on 158(d)(2)(A) requires the lower court to certify a “judgment, order, or decree,” not a specific issue, for appeal. Because all

of the requirements of section 158(d)(2)(A) are met here, we have jurisdiction to review the entire order subject to this appeal.

III

The Bankruptcy Court for the District of Delaware incorporated the Model Rules in its local rules govern ing professional conduct. See Int’l Bus. Mach. v. Levin , 579 F.2d 271, 279 n.2 ( 3d Cir. 1978) (“[T]he conduct of practitioners

3 The Bankruptcy Court could also certify that “ the judgment, order, or decree involves a question of law requiring resolution of conflicting decisions ” or that “ an immediate appeal from the judgment, order, or decree may materially advance the progress of the case or proceeding in which the appe al is

taken .” 28 U.S.C

. § 158 (d)(2)(A)(ii)

– ( iii).8 before the f

ederal courts must be governed by the rules of those courts.”) ; see also Law v. Siegel , 571 U.S. 415, 420

– 21 (2014) (noting a bankruptcy court’s inherent power to sanction). 4 We review the Bankruptcy Court’s interpretation of the Model Rules as a question of law subject to de novo review. United

States v. Miller , 624 F.2d 1198, 1201 ( 3d. Cir. 1980). We review the Bankruptcy Court’s denial of disqualification as a

sanction for abuse of discretion. Id. An abuse of discretion requires “a clearly erroneous finding of fact, an erroneous legal conclusion, or an improper application of law to fact.” In re

Prosser , 777 F.3d 154, 161 (3d Cir. 2015). I n short, an abuse of discretion occurs “where no reasonable p erson would adopt ”

the lower court’s view. United States v. Foster , 891 F.3d 93, 107 n.11 (3d Cir. 2018).

4 The Bankruptcy Court’s local rules state:

Subject to such modifications as may be required or permitted by federal statute, court rule or decision, all attorneys admitted or authorized to practice before this Court, including attorneys admitted on motion or otherwise, shall also be governed by the Model Rules of Professional Conduct of the American Bar Association, as may be amended from time to time.

Bankr. D. Del. R. 9010

- 1(f). The Bankruptcy Court’s local rules incorporate d neither the Model Rule’s commentary nor the American Bar Association’s Formal Opinions interpreting

the Model Rules , so both are nonbinding though we consider their persuasive value.9 A

To begin, Model Rule 1.9 prohibits a lawyer who has formerly represented a client in a matter from “represent[ing] another person in the same or a substantially related matter in which that person’s interests are materially adverse to the

interests of the former client.” Model Rules of Pro. Conduct r.

1.9

. Both parties agree that Model Rule 1.9 prohibits Boelter

from participating in White & Case ’s r epresentation of the

Trust

, and both parties agree that she did not try to do so.

Model Rule 1.10(a), though, states that no lawyer at a

firm “ shall knowingly represent a client when any one of them practicing alone would be prohibited from doing so by Ru les 1.7 or 1.9, unless” :

(i) the disqualified lawyer is timely screened from any participation in the matter and is apportioned no part of the fee therefrom; (ii) written notice is promptly given to any affected

former client to enable the former client to ascertain compliance wit h the provisions of this

Rule

. . . ; a statement of the firm’s and of the screened lawyer’s compliance with these Rules; a statement that review may be available before a tribunal; and an agreement by the firm to respond promptly to any written inquiries or objections by the former client about the screening procedures; and (iii) certifications of compliance with these Rules and with the screening procedures are provided to the former client by the screened lawyer and by a partner of the firm, at reasonabl e intervals upon the former10 client’s written request and upon termination of the screening procedures.

Model Rules of Pro. Conduct r. 1.10(a)(2). The word “unless” signals a condition subsequent , so meeting the conditions of

what follows relieves the preceding dut y . Here, if a firm

adheres to the condition s subsequent by screening the disqualified attorney, allocat ing to him no part of the fee from the conflicted representation , and follow ing the other procedures in Model Rule 1.10(a)(2), the disqualified attorney’s conflict cannot be imputed to the entire firm.

The Bankruptcy Court suggested an “exceptional circumstances” exception to Model Rule 1.10(a)(2). White & Case agreed with this approach. The Bankruptcy Court also analyzed the case under a multifactored test from an unpublished district court opinion. See Enzo Life Scis., Inc. v. Adipogen Corp. , No. 1:11

- CV

- 00088

- RGA, 2013 WL 6138791, at *3

– 4 (D. Del. Nov. 20, 2013). 5 YPF thought this

multifactored test should be the rule. Both those approaches ignore the ordinary meaning of Model Rule 1.10(a)(2), which

does not create an “exceptional circumstances” standard or incorporate a multifactored tes t with no basis in the rule’s text.

5 The test originated in a Pennsylvania Supreme Court dissenting opinion written before the Model Rules allowed screening to prevent conflict imputation

, and it cites a different persuasive authority for each prong of the test. See Maritrans GP Inc. v. Pepper, Hamilton & Scheetz, 602 A.2d 1277, 1289 (Pa. 1992) (Nix, C. J., dissenting).11 Whether a firm’s conflict

- of

- interest procedures qualify as a “screen” under Model Rule 1.0(k) is a different question

. Model Rule 1.0(k) defines a screen as “the isolation of a lawyer from any participation in a matte r through the timely imposition of procedures within a firm that are reasonably adequate under the circumstances to protect information that

the isolated lawyer is obligated to protect under these Rules or

other law. ” Model Rules of Pro. Conduct r. 1.0(k). Courts must determine, based on the facts of each case, whether a firm’s

conflict

- of

- interest procedures qualify as an effective screen. Of course, disqualification remains an option if individual lawyers disregard th e limitations imposed by an otherwise adequate screen.

YPF also argues that White & Case failed to adhere to Model Rule 1.10(a)(2)(i) because it did not ensure that Lauria

, too

, “is apportioned no part of the fee therefrom.” But the rule

directs that only the “disqualified lawyer” must be “apportioned no part of the fee” from the matter at issue

. Model

Rules of Pro. Conduct r. 1.10(a)(2)(i). Here, that means

Boelter , not her spouse, must not receive proceeds of fees arising from the conflicted representatio n. The Bankruptcy Court correctly reached the same conclusion.

B

The Bankruptcy Court did not abuse its discretion when it held that White & Case complied with Model Rule 1.10(a)(2), and thus is not disqualified from representing the Trust. The Bankruptcy Court found that “ White & Case implemented a thorough, robust ethical screen between M s. Boelter and the YPF adversary proceeding and all related issues immediately upon Ms. Boelter joining the firm.” J.A. 22. Indeed, YPF does not dispute that White & Case’s conflict

- of

-12 interest procedures are a screen. Boelter will not receive any part of the fees from White & Case’s representation of YPF. 6 The Bankruptcy Court , moreover, found that White & Case gave YPF “prompt and exhaustive notice of the screening procedures, as well as repeated statements that White & Case and Ms. Boelter would comply with the screening procedures.”

J.A. 22. And White & Case said it would respond promptly to any inquiries from YPF about the screen, including inviting YPF to provide input. White & Case further stated that review may be available before a tribunal. The Ba nkruptcy Court thus reasonably concluded that “White & Case and Ms. Boelter complied to the letter with the applicable ethical rule.” J.A. 23.

So it did not abuse its discretion by refusing to disqualify White

& Case.

* * *

For these reasons, we will affir m the Bankruptcy

Court’s order.

6 In response to interrogatories, White & Case said that “partners at White & Case are not compensated based on specific case outcomes or earnings.” J.A. 796. So neither Boelter nor Lauria will receive any compensation based on the firm’s representation of the Trust. Although the local rules do not incorporate the Model Rules’ comments, one comment persuasively say s that Model Rule 1.10 “does not prohibit the screened lawyer from receiving a salary or partnership share established by prior independent agreem ent, but that lawyer may not receive compensation directly related to the matter in which the lawyer is disqualified.” Model Rules of Pro. Conduct

r. 1.10, cmt 8.