S.S. Retail Stores Corp. v. Ekstrom (In re S.S. Retail Stores Corp.)

OVERVIEW

After filing for Chapter 11 bankruptcy reorganization, S.S. Retail Corporation (“the Debtor”) filed an application with the bankruptcy court to employ the law firm of Gibson, Dunn & Crutcher LLP (“Gibson, Dunn”) as its counsel. The United States Trustee (“UST”) objected, arguing Gibson, Dunn was not a “disinterested person” because one of its partners had served as an assistant secretary of the Debtor up until two weeks before the Debtor filed its petition in bankruptcy. The bankruptcy court held that any disqualification of the partner for lack of disinterestedness should not be imputed to Gibson, Dunn and approved Gibson, Dunn as the Debtor’s counsel. The UST appealed to the district court. The district court dismissed the appeal, holding that the relief the UST sought was disgorgement of the fees and costs paid to Gibson, Dunn, and it would be inequitable to grant that relief. This appeal followed.

We have jurisdiction pursuant to 28 U.S.C. § 158 (d), and we affirm. We conclude that the district court did not err by holding that it would be inequitable to require Gibson, Dunn to disgorge the fees and costs awarded by the bankruptcy court and thus we do not decide…