Opinion ID: 1435190
Heading Depth: 2
Heading Rank: 1

Heading: The Removal of Schwartz as Special Counsel

Text: We first consider the Bankruptcy Court's decision granting Geltzer's motion to remove Schwartz as special personal injury counsel. A bankruptcy trustee's ability to hire professionals is governed by section 327(a) of the Bankruptcy Code, which permits the trustee to employ an attorney to assist in his duties with the court's approval, so long as the attorney to be hired do[es] not hold or represent an interest adverse to the estate, and [is a] disinterested person[]. 11 U.S.C. § 327(a). Under this provision, a trustee's choice of special counsel is subject to the evaluation and approval of the bankruptcy court. See Pryor v. Ready & Pontisakos (In re Vouzianas), 259 F.3d 103, 107-08 (2d Cir.2001). In exercising its approval function, however, the bankruptcy court should interfere with the trustee's choice of counsel `[o]nly in the rarest cases,' such as when the proposed attorney has a conflict of interest, or when it is clear that `the best interest of the estate' would not be served by the trustee's choice. Id. at 108 (quoting In re Mandell, 69 F.2d 830, 831 (2d Cir.1934)). Courts give the trustee such deference in choosing special counsel because of the `highly confidential' relationship between the special counsel-attorney and the trustee-client. Id. (quoting Mandell, 69 F.2d at 831). Importantly, the special counsel represents the trustee, not the debtor. See id. Thus, section 327(a) does not give a bankruptcy court authority to reject a trustee's choice of counsel solely because of an objection by the debtor. Rather, the debtor's objection is relevant only to a bankruptcy court's consideration of the best interest of the estate, or of whether the chosen special counsel is conflicted. Applying these principles here, we find no error in the Bankruptcy Court's determination that there were no circumstances that would give it reason to interfere with Geltzer's decision to remove Schwartz as special personal injury counsel. There was no indication or allegation that the attorney with whom Geltzer chose to replace Schwartz was conflicted or unqualified to litigate the personal injury action, and ample evidence supported the Bankruptcy Court's conclusion that the best interest of the estate would not be served by requiring Geltzer to continue to be represented by Schwartz, including, inter alia, Schwartz's delay in amending the state court caption and his transferring the personal injury file to Ginsberg without court or trustee approval. Indeed, the only factor weighing in favor of rejecting Geltzer's motion was Smith's preference to have Schwartz and Ginsberg prosecute the personal injury action. But that preference alone is insufficient to turn this into one of the rarest cases in which interference with the trustee's choice could be justified. Pryor, 259 F.3d at 108. [2]