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STATE BAR of TEXASBANKRUPTCY LAWSection NewsletterIN THIS ISSUEMessage From Your Chair.2Advanced Business Bankruptcy Course .3Review of the Section’s Annual Meetingfor 2012 .4Fifth Circuit Update: Paying To Play The QuietGame: It Pays To Be Quiet, Or Does It? .5Special Feature: Bankruptcy Bill Texas Edition .6Fees Awarded Under Pro-Snax in CaseConverted to Chapter 7.7Review of the Annual Fifth Circuit Elliott CupMoot Court Competition.8Playing the Field: Death Penalty SanctionInvoked by Bankruptcy Court .9Texas Law Schools Flourish at AnnualConrad B. Duberstein National BankruptcyMoot Court Competition.10Bankruptcy Jurisdiction – It is Not a JokingMatter – A Review of the American Collegeof Bankruptcy 5th Circuit FellowsSeminar – April 27 & 28 in San Antonio .11Review of Starting Out Right Conferencein Austin, Texas .12July 2012 — Volume 11 No. 2A MESSAGEFROM YOUROUTGOING CHAIRDear Section Members,As my term ends as chairman, maybe you arethinking of President Ford’s quote, “Our longnational nightmare is over.” I hope not!Seriously, I’ve enjoyed serving the section thisyear as chairman. It was a good year.This year confirmed what I knew all along – Texas has the best bankruptcy judges,lawyers and other insolvency professionals in the country.According to the state bar, our section is one of the largest. It also is one of themost active.This year we have sponsored Moneywise, webcasts, advanced seminars, theElliott Cup, an international seminar in China, and a webinar on valuation.Our young lawyers continue to amaze with their level of participation. Our nonlawyer members stepped up their involvement and membership numbers thisyear; they are an important part of our group.OP-ED Feature: We Need a Change to OurLocal Rules.13Next year Tom Howley of Houston will chair the section. It may take him a year toundo the damage I caused. I hope he enjoys it as much as I have.Review of the 5th Circuit Bench-BarBankruptcy Conference.14Judge Harlin DeWayne “Cooter” HaleReview of NACTT’s Annual Convention 2011 .15An Update on DAYBL Activities .16Member Publications.17Troop Movement .17Editorial Staff.18Calendar of Events .18

Bankruptcy Law Section NewsletterJuly 2012 — Volume 11 No. 2OFFICERSThomas A. Howley, ChairJones DayThe Honorable Harlin D. Hale, Immediate Past-ChairUnited States Bankruptcy CourtMichelle A. Mendez, Vice President/Chair ElectHunton & Williams, LLPLayla D. Milligan, SecretaryOffice of Chapter 13 Trustee, AustinWilliam L. “Bill” Wallander, TreasurerVinson & Elkins LLPLynn Butler, Vice President Public EducationBrown McCarrollTimothy A. Million, Vice President Communications& PublicationsMunsch, Hardt, Kopf & Harr, PCJudith Ross, Vice President BusinessBaker Botts, LLPThe Honorable Richard S. Schmidt, Vice PresidentProfessional EducationUnited States Bankruptcy CourtEduardo V. Rodriguez, Vice President Consumer DivisionMalaise Law FirmTom Rice, Vice President Law School RelationsCox SmithOmar Alaniz, Vice President MembershipBaker Botts, LLPElizabeth M. Guffy, HistorianLaw Office of Elizabeth GuffyAlbert “Bert” S. Conly, Non-Lawyer LiaisonFTI ConsultingCOUNCIL MEMBERSTERMS EXPIRE 2013Dana EhlrichLaw Office of Dana EhlrichHenry “Hank” FloresHaynes & Boone, LLPMichael G. KellyRush, Kelly, Morgan, Dennis, Corzine, Hansen, PCA MESSAGE FROMYOUR CHAIRDear Section Members,I am very honored and privileged to serve asthe 2012-2013 President of this very active section. I thought I would take this opportunity toacknowledge all of those who have served inthe capacity as President before me. It is truly aremarkable group of talented individuals. Thesection was only founded in 2003, but it is nosurprise with our past leadership that our section has grown to today’s juggernaut with over 1,500 members comprising one ofthe most active and rewarding sections within the State Bar of Texas. We owe adebt of gratitude to all of our past presidents:Robert Wilson, Lubbock, Texas, 2003-2004;Charlie Beckham, Houston, Texas, 2004-2006;Deborah Williamson, San Antonio, Texas, 2006-2007;Debbie Langehennig, Austin, Texas, 2007-2008;Berry Spears, Austin, Texas, 2008-2009;The Honorable Christopher Mott, El Paso, Texas (now presiding inAustin), 2009-2010;Byrnie Bass, Lubbock, Texas, 2010-2011; andThe Honorable Harlin Hale, Dallas, Texas, 2011-2012.Luckily, our current council is also filled with an ambitious and energetic collection of folks who are focused on the section’s best interests. We look forward toproviding great value to both consumer and business oriented practitioners overthe next year.If you have any suggestions or ideas on how to improve the section, feel free toreach out to me or anyone on the council. In the meantime, if you run into any ofour past presidents, please thank them for helping to build such a dynamic androbust section for our membership base. Enjoy the rest of your summer.TERMS EXPIRE 2014Marc SalitorOffice of United States TrusteeSincerely,Tom A. HowleyPresident, Bankruptcy Law SectionBill PayneThe Moore Law Firm, L.L.P.Beth SmithLaw Offices of Elizabeth G. SmithTERMS EXPIRE 2015Josh SearcySearcy & Searcy, PCJohn P. MelkoGardner Wynne Sewell, LLPM. Jermaine WatsonRoberts, Watson & Davis, P.C.2

Bankruptcy Law Section NewsletterJuly 2012 — Volume 11 No. 230th AnnualAdvanced Business Bankruptcy CourseCosponsored by the State Bar of Texas Bankruptcy Law SectionMCLE Credit: 11.5 hrs (including 2 hrs of ethics) which applies to the Texas Board of Legal Specialization in Bankruptcy LawHouston – Live PresentationSeptember 13–14, 2012Westin Oaks Hotel (713-960-8100)Register now and save 50! Section members save 75!If you have any questions or would like to register by phone, please call 800-204-2222, ext 1574.An outstanding faculty of highly-regarded judges and leading practitioners has been carefully selected to bring businessbankruptcy practitioners up to date on the latest case law, emerging trends and issues including: The Economy – presented by Mark Andrews, Adam Dunayer, Peter Kaufman, and William Snyder General Counsel Panel: What They Look for when Hiring Outside Counsel – presented by Charles Gibbs,Jeffrey Hasell, Thomas Kurz, Mark Mathews, and Deborah Midanek Surfing the Web and the Web Surfing You – presented by John Browning and W. Mac Schwartz Small Business Bankruptcies – presented by David Langston, Theresa Mobley, and Judy Robbins The Other Chapters: Chapter 9 and Chapter 15 – presented by Gregory Gordon and Dean Swick Plus Keynote Speakers: Paul Begala, Political Analyst and Commentator, CNN and Columnist, Newsweek andthe Daily Beast and Houston Mayor Annise ParkerYour registration includes coffee, pastries and lunch each day, Thursday evening social, convenient access to powerstripsin the meeting room, and early adjournment on Friday for easier travel. Plus, the course materials are optionally available ona USB drive (search all articles at once!).COME A DAY EARLY TO ATTEND THE ONLY PRESENTATION OFBankruptcy 101MCLE Credit: 5.75 hrs (including .5 hr of ethics) which applies to the Texas Board of Legal Specialization in Bankruptcy Law.Houston – Live PresentationSeptember 12, 2012Westin Oaks HotelRegister for these programs and you may access the streaming videos of the speeches for up to a year and the digital coursematerials for several years. You’ll find them at TexasBarCLE.com within 6-8 weeks after the live program, under Your OnlineClassroom/Free Classes from Seminars You’ve Attended. (You’ll need to log in as a registered user of the site to access this feature).3

Bankruptcy Law Section NewsletterJuly 2012 — Volume 11 No. 2REPORT FROM THE SECTION’S ANNUAL MEETING HELD INCONJUNCTION WITH THE STATE BAR OF TEXAS ANNUAL MEETINGThe State Bar’s Annual Meeting took place June 14-15 in Houston, Texas. Attendees were faced with the difficult choice ofselecting a few of numerous terrific programs to attend. Thursday’s choices included everything from “60 Apps in 60 Minutes:A Survey of the Most Useful Legal Apps for Lawyers” to the Business Law Section’s “Hiring from Competition.” For litigationattorneys, there were notable programs like, “Mediate, Arbitrate or Litigate: What would Lincoln Do?” Also featured was aluncheon in recognition of James A. Baker, III.On Thursday evening, the Bankruptcy Section hosted a happy hour at The Grove Restaurant. The event was well attended byboth bankruptcy practitioners and judges.On Friday morning, the Bankruptcy Section offered several CLE programs that provided case law updates highlights in the areasof business, advisory and consultants, and consumer bankruptcy.Eli O. Columbus (Winstead PC – Dallas) and Sean B. Davis (Winstead PC – Houston) provided an extensive overview ofrecent business bankruptcy issues including cram-down interest rate rulings, credit bid rights in plan sales, structured dismissals,third party releases, Stern v. Marshall avoidance litigation cases, and retaining causes of action under a plan.Albert S. Conly (FTI Consulting, Inc. – Dallas) and Gregory S. Milligan (Harney Management Partners – Austin) served onthe first all financial professional CLE panel at a Bankruptcy Law Section seminar and provided an update on financial advisoryand consultants’ bankruptcy issues, including the issues related to establishing post-confirmation trusts, retaining causes ofaction, communicating with creditors post-confirmation, and distributing funds.Julie A. Mann and David Aaron DeSoto(Mann Law Firm, PLLC – Houston) and KenThomas (Office of William E. Heitkamp,Chapter 13 Trustee – Houston) discussed currenttrends and recent developments in consumerbankruptcy, including the impact of the mortgage crisis on bankruptcy practice, mortgageproofs of claim, new forms and rules for themortgage industry, Espinosa, and the bindingeffect of a chapter 13 plan confirmation, andthe impacts of Stern v. Marshall, and predictionsfor the rest of 2012 and beyond.At the conclusion of the CLE programs, theBankruptcy Section held its annual meeting.The Honorable Harlin DeWayne “Cooter”Hale led the meeting and provided the membership with an update on the Section’s activitiesduring the previous year. In addition, theSection elected its new officers and councilmembers. Finally, congratulations are in orderfor the following individuals who receivedawards and accolades at the annual meeting: theHonorable John C. Akard recipient of theAward RecipientsJudge Parker, Judge Hale, Layla Milligan, Tom Rice, Mark Andrews, Judge Akard, Byrnie Bass, Jr.,Tom Howley, and Jermaine WatsonContinued on page 19.4

Bankruptcy Law Section NewsletterJuly 2012 — Volume 11 No. 2PAYING TO PLAY THE QUIET GAME: IT PAYS TO BE QUIET,OR DOES IT?By: Trinitee G. Green, Judicial Extern to the Honorable Harlin D. Hale and graduating law student at SMU Dedman School of Law([email protected])OverviewIn Waldron v. Adams & Reese, L.L.P. (In re Am. Int’l Refinery, Inc.), 11-30462, 2012 U.S. App. LEXIS 6367 (5th Cir. Mar. 29,2012), the Fifth Circuit recently affirmed a bankruptcy court’s decision to sanction counsel for failing to make certain disclosures.According to the Trustee, disgorgement of one hundred percent of attorney’s fees was required because the debtors’ counsel(“A&R”) was not disinterested. Id. at *2. Despite acknowledging that A&R’s conduct was questionable, the Fifth Circuit upheldthe bankruptcy court’s finding that no disqualifying interest was created by such conduct. Id. at *9-20. Furthermore, the FifthCircuit did not agree that the bankruptcy court had abused its discretion by limiting the sanction to disgorgement of only aportion of the attorney’s fees. Id. at *21-24.Procedural HistoryThis case is an adversary proceeding that arose in a Chapter 11 bankruptcy of the following debtors: American InternationalPetroleum Company (“AIPC”) and American International Refinery, Inc. (“AIRI”). Id. at *1. The District Court for the WesternDistrict of Louisiana affirmed the bankruptcy court’s decision, and the Fifth Circuit affirmed the district court’s judgment. Id.FactsPre-BankruptcyAmerican International Petroleum Kazakhstan (“AIPK”), a wholly owned subsidiary of AIPC, sold eighty-five percent of itsinterest in a gas concession. Id. at *2. The gas concession was known as “License 1551,” and it was, indirectly, one of AIPC’sprincipal assets. Id. In fact, AIPK received approximately 5 million in exchange for the interest sold. Id. A large amount of thosefunds were used to pay the wages and benefits of AIPC’s officers. Id. Prior to the sale of License 1551, one of AIPC’s creditors,GCA Strategic Investment Fund Limited (“GCA”), executed an agreement with AIPC in connection with the sale of License 1551.Id. at *3. Specifically, GCA agreed to release a security interest it held in AIPK’s shares, so long as certain conditions were met,in exchange for the assignment of dividends to be received. Id. The named conditions were never satisfied and the assignment ofdividends did not occur. Id. Nevertheless, the sale of License 1551 took place. Id. Sometime thereafter, but before the bankruptcypetition was filed, A&R drafted a dividend assignment agreement between GCA and AIPC. Id. The agreement was executedafter the petition was filed, but it was backdated to the date that License 1551 was sold. Id. In early 2004, AIPC engaged A&Rto assist in its restructuring, which involved negotiations of a “lock-up agreement” with GCA. Id. at *4. The lock-up agreementwas never fully executed and the final bankruptcy plan was not based on its terms. Id.Post-BankruptcyIn fall 2004, AIRI and AIPC filed for bankruptcy and A&R continued to represent them as bankruptcy counsel. Id. AIPClacked the funds to pay A&R’s retainer, so it collected funds from GCA on behalf of one of its wholly owned subsidiaries. Id. at*4-5. However, GCA wired A&R the money owed to AIPC’s subsidiary, instead of transferring it directly to AIPC or its subsidiary.Id. at *5. At the time of the bankruptcy, GCA was one of the debtors’ largest creditors. Id. at *2. Nevertheless, A&R never disclosedthe source of its retainer in any of the compensation applications it filed with the court. Id. at *5. Also, the Equity SecurityHolders Committee (EC) objected to various bankruptcy plans filed by the debtors because the plans treated GCA’s securedclaims too favorably. Id. By March 2006, the EC and GCA reached a settlement that was confirmed by the bankruptcy court.Id. It provided for payment of all secured and unsecured claims, as well as a distribution to equity holders. Id. Neither AIPCnor A&R were involved in negotiating the terms of this final settlement. Id.Continued on page 20.5

Bankruptcy Law Section NewsletterJuly 2012 — Volume 11 No. 2BANKRUPTCY BILL6

Bankruptcy Law Section NewsletterJuly 2012 — Volume 11 No. 2Fees Awarded Under Pro-Snax in CaseConverted to Chapter 7By: Julian P. Vasek, Associate with Rochelle McCullough LLP, Dallas([email protected])On April 25, Judge Lynn issued his opinion in In re Broughton Ltd. P’shp, Case No. 10-42327-DML11, 2012 Bankr. LEXIS1814 (Bankr. N.D. Tex. April 25, 2012). In Broughton, the debtor sought to employ Cotton Schmidt & Abbott (the “Firm”)as special counsel to negotiate the sale of twenty-two pieces of real property. The Court approved the employment, and the workwas primarily done by Randall Schmidt (“Schmidt”). But Schmidt’s negotiations ultimately proved fruitless. As a result, the casewas converted to a case under chapter 7. When the Firm applied to the Court for compensation, the United States Trustee(“UST”) objected under Andrews & Kurth, L.L.P. v. Family Snacks, Inc. (In re Pro-Snax Distribs., Inc.), 157 F.3d 414 (5th Cir.1998).The Court first noted that Pro-Snax is viewed as requiring a retrospective analysis of the services provided and whether theyconfirmed an “identifiable, tangible, and material benefit to the estate,” but that courts interpreting Pro-Snax “have adopteddiffering views of what type of retrospective analysis should be employed and have disagreed whether a prospective analysis maybe considered in determining whether Pro-Snax is satisfied.” Broughton, 2012 Bankr. LEXIS 1814 at *7-10, n.5 (citing andsummarizing several cases demonstrating the differing views).Early in the opinion, the Court held that “‘the services [of the firm] were necessary to the administration of, or beneficialat the time at which the service was rendered toward the completion of [the bankruptcy case].’” Broughton, 2012 Bankr. LEXIS1814 at *10-11 (quoting, with alterations, 11 U.S.C. § 330(a)(3)(c)). Having determined that Schmidt and the Firm met theprospective requirement set by the Code, the Court turned to the retrospective analysis mandated by Pro-Snax. But consideringthat “[r]equiring an after-the-fact evaluation . . . has been generally rejected by courts of other circuits,” id. at *16, the Courtsought to perform its retrospective analysis in a way that minimized the difference in outcome between circuits. Id.In order to achieve this goal, the Court looked to two possible sources for direction. First, the Court discussed In re Melp, Ltd.,179 B.R. 636 (E.D. Mo. 1995), which was the only case the Fifth Circuit cited when it held in Pro-Snax that a professional’swork must provide an identifiable, tangible, and material benefit to the estate. Second, the Court looked to Judge Jane Boyle’sdecision in Kaye v. Hughes & Luce, LLP (In re Gadzooks, Inc.), No. 3:06-CV-01863-B, 2007 U.S. Dist. LEXIS 50929 (N.D. Tex.July 13, 2007).The Melp court identified three factors to consider when determining whether a lawyer had provided an identifiable, tangible,and material benefit to the estate: (1) whether the debtor’s attorney’s actions duplicated the duties of the trustee or the trustee’scounsel under 11 U.S.C. § 1106; (2) whether the services have in fact, obstructed or impeded administration of the estate; and(3) whether the debtor’s attorney’s actions are consistent with the debtor’s duties under 11 U.S.C. § 521. Broughton, 2012 Bankr.LEXIS 1814 at *25.With respect to the first factor, the Court concluded that the relevant question is not whether the attorney’s work duplicatedwork a later-appointed trustee’s counsel might hypothetically do. The question is “whether the actual work performed by adebtor’s counsel duplicated work done or about to be done by the trustee or the trustee’s counsel.” Id. at *27. The Court foundthat the trustee did not do the same work as the Firm. The Court also found that the Firm's work did not obstruct or impedethe administration of the estate.With respect to the second Melp factor, the Court concluded the Firm’s work did not obstruct or impede the administration of the estate, and that the Firm's efforts were directed by the estate representative. Id. at *28.With respect to the third Melp factor, the Court concluded that the reference to the debtor’s duties under section 521 “doesnot constitute a limit on that for which a professional working for a debtor in possession may be compensated.” Id. at *29.Instead, courts need only determine that the efforts of the professional are not inconsistent with section 521. Id. The Firm’swork was found to be consistent with section 521.Continued on page 21.7

Bankruptcy Law Section NewsletterJuly 2012 — Volume 11 No. 2Review of the Annual Fifth Circuit ElliottCup Moot Court CompetitionBy: Thomas Rice, Cox Smith Matthews, Inc., ([email protected])First Place from Baylor School of LawMorgan Harkins (Baylor University),Thomas Rice (Cox Smith San Antonio, TX),and Hunter Oliver (Baylor University)On February 24th and 25th, the Annual Fifth Circuit Elliott Cup Moot CourtCompetition sponsored by the Texas State Bar Bankruptcy Section – and namedin Honor of the Honorable Joseph Elliott, former Chief Bankruptcy Judge for theWestern District of Texas – was held at the Fifth Circuit Court of Appeals in NewOrleans, Louisiana. Seventeen law school teams representing nine law schoolsfrom around the Fifth Circuit attended the Elliott Cup. The team of Ms. MorganHarkins and Mr. Hunter Oliver from the Baylor Law School was the winningteam for this year’s Elliott Cup competition, with coaches Ms. Kathy Serr and Mr.William Drabble. The Best Oral Advocate was awarded to Betsey Turley from theMississippi College School of Law.In addition to the awards typically presented at the Elliott Cup, the Federal BarAssociation Bankruptcy Section agreed to present the winning law school with acash award of 2,500. The award was presented to Baylor Law School by AshleyL. Belleau from the law firm of Montgomery Barnett, LLP.Second Place Team from Mississippi College of LawMackin Johnson (Mississippi College), Betsey Turley(Mississippi College), Thomas Rice (Cox Smith San Antonio)and Brad Shaw (Mississippi College)Third Place Teams from SMUScott Dickerson (SMU Dedman School of Law),Amber Chambers (SMU Dedman School of Law),John Sokatch (SMU Dedman School of Law),Thomas Rice (Cox Smith San Antonio, Texas), TimSpringer (SMU Dedman School of Law), MaxAntony (SMU Dedman School of Law), and BlairGreen (SMU Dedman School of Law)The Elliott Cup serves as a run-up to the Annual National DubersteinBankruptcy Moot Court Competition held at St. John’s School of Law in NewYork in March. Elliott Cup teams have historically posted excellent results at thenational competition and this year was no different, as the team of Mr. BrianCumings and Mr. Eric Werlinger from the University of Texas School of Law wasthe winning team for this year’s Duberstein Bankruptcy Moot CourtCompetition, with coaches Ms. Debbie Langehennig, Chapter 13 Trustee andMr. Jay Ong of Munsch Hardt Kopf & Harr, P.C. The Best Oral AdvocateHonor was awarded to Mr. Hunter Oliver from the Baylor Law School. For eachof the past four years, the Best Oral Advocate Award from the DubersteinBankruptcy Moot Court Competition has gone to an Elliott Cup competitor.Additionally, in each of those years, three out of the four Outstanding OralAdvocate awards have been given to students that competed in the Elliott Cup.Many thanks to the numerous judges and attorneys involved in this year’s eventsfor the benefit of aspiring young bankruptcy lawyers.Baylor Law School Special AwardsHunter Oliver (Baylor University), Morgan Harkins(Baylor University), Matthew Greenberg (BaylorUniversity), and Ashley Belleau (MontgomeryBarnett New Orleans, LA)First Place Oral Advocate Betsey Turley8Liz Boydston (Fulbright & Jaworski Dallas,Texas), Scott Dickerson (SMU Dedman Schoolof Law), John Sokatch (SMU Dedman Schoolof Law), Max Antony (SMU Dedman Schoolof Law), Amber Chambers (SMU DedmanSchool of Law), Tim Springer (SMU DedmanSchool of Law), Blair Green (SMU DedmanSchool of Law), and Omar Alaniz (Baker BottsDallas, Texas)

Bankruptcy Law Section NewsletterJuly 2012 — Volume 11 No. 2Playing the Field: Death Penalty SanctionInvoked by Bankruptcy CourtBy: Travis James Cox, Judicial Extern to the Honorable Harlin D. Hale and second-year law student at the Baylor Sheila & WalterUmphrey Law Center (Travis [email protected])IntroductionIn a rare imposition of a death penalty sanction, a Dallas bankruptcy court ended a five-year adversary proceeding basedupon the serious and improper actions of the creditor and its counsel, when it was revealed to the court that the creditor waspaying the same firm to represent both sides (the company as creditor and the bankruptcy trustee). Accordingly, the court dismissedthe action with prejudice. The Cadle Co. v. Brunswick Homes L.L.C. (In re Moore), 2012 WL 1415513 (Bankr. N.D. Tex. 2012),available at 7-240.pdf.BackgroundIn 2005, The Cadle Company (“Cadle”) purchased claims and judgments against James Moore (“Moore”). A Dallas lawfirm (the “Law Firm”) handled prepetition collection efforts on behalf of Cadle, culminating in a veil piercing action filed in2005 (the “VP Action”). A year later, Moore filed chapter 7 bankruptcy. In light of the bankruptcy proceeding, the VP Actionwas assigned to the chapter 7 trustee (the “Trustee”). Realizing he would need assistance to pursue the VP Action, the Trusteeengaged the Law Firm on a contingency basis, with an acknowledgement that the Law Firm could request an administrativeexpense claim for expenses and fees at the conclusion of the veil piercing action. The prepetition fees incurred by the Law Firmwere to be handled by Cadle filing a proof of claim in the chapter 7 case. In accordance with Bankruptcy Rule 2014, the Trusteefiled an application (the “Application”) with the bankruptcy court in August of 2006 seeking authority to employ the Law Firmas special litigation counsel.However, three days after filing the Application, the Law Firm, on behalf of Cadle, filed an objection to Moore’s dischargeunder section 11 U.S.C. § 727 (the “Discharge Adversary”). At an October hearing on the Application, the Law Firm failed todisclose its representation of Cadle in the Discharge Adversary to the bankruptcy court. This was the first of several failures todisclose by the Law Firm.By letter dated November 6, 2006 (the “2006 Agreement”), Cadle agreed to pay the Law Firm’s fees related to the prosecutionof the VP Action, as well as fees related to representing Cadle in the bankruptcy case and the Discharge Adversary. If successfulin the VP Action, the Law Firm would request its contingency fee as an administrative expense of the bankruptcy estate, andupon payment reimburse Cadle for fees and expenses Cadle actually paid to the Law Firm in connection with the VP Action.Of particular importance is the fact that the 2006 Agreement was not disclosed to the court until August of 2011.In 2007, during the trial of the Discharge Adversary, the Law Firm filed a motion to withdraw as special counsel. The LawFirm sought to withdraw because Cadle, contrary to the 2006 Agreement, refused to fund the Law Firm’s expenses related tothe VP Action. This was the first time the Court learned of the existence of the 2006 Agreement. However, the 2006 Agreementwas not produced to the Court until August of 2011. The motion to withdraw was ultimately denied. However, the court notedthat the failure to disclose the 2006 Agreement and the “bad smell” of the situation because Cadle would have obtained whatit wanted, denial of discharge, while not fulfilling its alleged obligations under the 2006 Agreement. Accordingly, the courtinvited the Law Firm to return with evidence of the 2006 Agreement and evidence that the court was made aware of andapproved the 2006 Agreement. In fact, the Court suggested that if such evidence was produced that it might require Cadle tofund the litigation. However, neither Cadle nor the Law Firm provided the 2006 Agreement to the court in 2007.In January 2008, the Trustee settled VP Action for 37,500. Shortly thereafter, Cadle, with a new attorney, filed an objectionto the settlement, stating they would pay 50,000 for the claims. At an evidentiary hearing on the objection, it came to lightfor the first time that Cadle was paying the Law Firm’s legal fees for prosecuting the VP Action. However, the testimony wasnot clear as to what Cadle had or had not been paying the Law Firm for prosecuting the VP Action. Ultimately, the bankruptcycourt overruled the objection,9Continued on page 22.

Bankruptcy Law Section NewsletterJuly 2012 — Volume 11 No. 2Texas Law Schools Flourish at Annual Conrad B. DubersteinNational Bankruptcy Moot Court CompetitionBy: Jay Ong, Munsch Hardt Kopf & Harr, P.C., ([email protected])Students from Texas law schools continuedtheir run of great success at the 20thAnnual Conrad B. Duberstein NationalBankruptcy Moot Court Competition,held at St. John’s University in Queens,New York, March 9–12, 2012. TheUniversity of Texas, Baylor University,University of Houston, St. Mary’sUniversity, Texas Southern University,Southern Methodist University, and TexasTech law schools attended the competition, featuring a field of fifty-four teamsfrom law schools across the country.The University of Texas School of Law andUniversity of Houston Law Center eachadvanced two teams to the elimination(Octofinals) rounds of competition,while one team from each of Texas TechSchool of Law and SMU School of Lawalso advanced to the Octofinals. Both UTteams, as well as the Texas Tech team andone of the UH teams, also advanced tothe Quarterfinals round. Ultimately, UTwon First Place at the competition andgarnered an additional OutstandingAdvocate recognition (B. Cumings). UHreceived Outstanding Brief recognition,while Baylor won the Best Advocate award(H. Oliver), as well as also receiving anadditional Outstanding Advocate recognition (M. Harkins).Professor Jay L. Westbrook, Debbie Langehennig, Chapter 13 Trustee, Zachary Popovich,Eric Werlinger, Brian Cumings, Gabriel Markoff, and Jay OngThe annual Duberstein Competitioninvolves a substantial commitment fromstudents, who undertake fact pattern analysis and brief writing beginning in December. Students from these Texas law schoolsalso attended the Elliot Cup regional competition held this year in New Orleans, Louisiana, at the Federal District Court andFifth Circuit Court of Appeals.This ye

Thomas (Office of William E. Heitkamp, Chapter 13 Trustee - Houston) discussed current trends and recent developments in consumer bankruptcy, including the impact of the mort-gage crisis on bankruptcy practice, mortgage proofs of claim, new forms and rules for the mortgage industry, Espinosa, and the binding