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Multiple Debtor Representation
The complex structure of modern corporate entities presents unique challenges when it comes time for a Chapter 11 filing. In addition to facing the fundamental questions of whether Chapter 11 is the right course, when it should be filed, and what the ultimate reorganization strategy should be, management and its counsel must grapple with how to manage a multiple debtor filing. For example, which entities should file? How should the filings be timed? How can the separate interests and obligations of each entity be respected and yet be coordinated in such a way as to make reorganization of the overall enterprise manageable from a practical standpoint? The widely accepted approach is to implement an essentially simultaneous filing on behalf of most or all of the entities in the corporate family. In the interest of efficiency and cost control, a single set of debtors' counsel most often represents all the filing entities, with each of the individual cases jointly administered under a common umbrella.
The Adelphia Dilemma
Both the efficiencies and complexities of multiple debtor representation by a single law firm are illustrated in a recent decision by the Bankruptcy Court for the Southern District of New York in the Adelphia Communications cases. In one of the more spectacular corporate crises in recent years, Adelphia, the large communications and entertainment conglomerate beset by financial distress and scandal, plunged into Chapter 11 with petitions filed by the corporate parent and 230 related entities, all of which were represented by a single law firm in joint administration of all of the cases. After working the cases for over 3 years, debtors' counsel became the target of a motion to disqualify by a creditor group, based primarily on the inter-debtor disputes among certain of the debtor entities. In In re Adelphia Communications Corp., 336 B.R. 610 (Bankr. S.D.N.Y. 2006) the court considered the inescapable conflicts between the interests of various debtors (and their creditors) and came up with a practical solution to the problem.
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