“Bankruptcy Judges Aren’t ‘Clubby’—Ethical Networking Is Key” —

• “The resignation of former US Bankruptcy Judge David Jones and scrutiny of a popular two-judge panel in Houston has prompted questions over whether bankruptcy judges should attend social events with bankruptcy practitioners.”
• “There is an unwritten rule about attendance by judges at social events. Small talk such as the weather, a recent Supreme Court decision, your golf game, or your favorite sports team are permissible… Any attorney worth their salt knows this rule and doesn’t want to alienate a judge by breaking it.”
• “Because bankruptcy law is highly specialized, the bankruptcy bar is a relatively small group. Practitioners tend to deal with the same people on a regular basis. If you have been practicing long enough, you probably know everyone in the bankruptcy bar. Bankruptcy judges often are former bankruptcy practitioners. All this can contribute to a public impression of ”clubbiness.'”
• “Attendance by bankruptcy judges at social events may be viewed as supporting a mission of the host organization. Their attendance also may be a ‘draw’ for practitioners to attend such events.”
• “This creates a potential dilemma for members of the judiciary about which events to attend, especially since socializing with practitioners at events is impossible to avoid. But does it—or should it—create an appearance to the public of impropriety or a lack of impartiality?”
• “The commentary to Canon 4 acknowledges that ‘a complete separation of a judge from extrajudicial activities is neither possible nor wise; a judge should not become isolated from the society in which the judge lives.'”
• “The code of conduct specifically says judges may attend fundraising events of law-related and other organizations. The problem is with judges’ behavior at such events—socializing with practitioners—and the public’s perception of that behavior. Judges and practitioners know the rules, and social interaction shouldn’t be interpreted as anything other than that.”

“Prepetition Waivers Sway Invitae Judge On Kirkland Hire” —

• “A New Jersey bankruptcy judge approved the retention of Kirkland & Ellis LLP as bankruptcy counsel for debtor Invitae Corp. Tuesday, the same day he approved a $239 million sale of its assets to Labcorp.”
• “During a hearing in Trenton, U.S. Bankruptcy Judge Michael B. Kaplan said a prepetition waiver signed by Kirkland client Deerfield Management Co. — the largest secured creditor in Invitae’s Chapter 11 case — swayed him to overrule the objections to Kirkland’s retention as the debtor’s bankruptcy counsel.”
• “But Judge Kaplan said the prebankruptcy relationship between Kirkland and Deerfield did not create a situation where there is a conflict in Kirkland representing Invitae in its restructuring.”
• “‘The existence of the expansive prepetition advance waivers as well as language in the retainer agreement are significant for this court,’ Judge Kaplan said of Deerfield’s agreement not to assert a conflict. ‘You cannot waive yourself, or your firm, out of meeting the requirements of Section 327 as a whole. But the waivers can, if done appropriately and tactfully, address some of the issues the court must decide if there is a level of adversity warranting a finding of potential actual conflict.'”
• “Kirkland and Invitae argued in court filings and at Tuesday’s hearing that a debtor’s choice of counsel should be given deference, and that disqualification should only be applied in extreme cases. Here, Kirkland represented Deerfield in fund formation matters unrelated to restructuring and the total amount billed by Kirkland over the life of its representations is about $2.4 million. That amount represented about 0.03% of the firm’s annual revenue, according to Kirkland attorney Mark McKane.”
• “Deerfield’s waiver of conflicts allowing Kirkland to work for Invitae in the Chapter 11 case are also an important factor in considering the retention applications, he said. ‘There is no actual conflict here,’ McKane argued. ‘We have valid, enforceable waivers that delineate whether it’s an actual conflict or a potential conflict.'”
• “Committee attorney Christopher M. Shore of White & Case LLP argued that Kirkland’s relationship with Deerfield creates a conflict in a critical facet of the case, namely a 2023 debt exchange transaction through which Deerfield obtained 78% of Invitae’s secured debt. Kirkland failed to disclose the prepetition work for Deerfield to the debtor and should be relegated to a more minor role in the Chapter 11 case, he said.”