Weinstein, Eisen & Weiss v. Katzman (In re Lincoln Hospital Medical Center, Inc.)

MEMORANDUM ***

Weinstein, Eisen & Weiss LLP (“WEW”) appeals the district court’s affir-mance of an order of the bankruptcy court rejecting an application filed by Lincoln Hospital Medical Center, Inc. (“Lincoln”) for authority to employ WEW as its Chapter 11 bankruptcy counsel.

In November 2002, when Lincoln filed for bankruptcy and applied for authority to employ WEW as its counsel, the president and one-third owner of Lincoln was John J. Carvelli. Lincoln’s treasurer and chief financial officer was Bryan Weiss. At the same time as Lincoln sought to employ WEW, WEW represented another Chapter 11 debtor, California Psychiatric Management Services (“CPMS”). Carvelli and Weiss had been on CPMS’s post-petition management committee until July 2002. In August 2002, CPMS’s committee of unsecured creditors sued Carvelli and Weiss, alleging that Carvelli and Weiss stole $1.5 million from CPMS’s estate. A stipulated order entered in CPMS’s bankruptcy, signed on CPMS’s behalf by its counsel, David R. Weinstein of WEW, obliged CPMS to assist the CPMS creditors committee in prosecuting any potential litigation. In the CPMS creditors committee’s suit against Carvelli and Weiss, Weinstein was…