In Re Maxus Energy Corporation

49 F.4th 223 (3rd Cir. 2022)

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Nature of the Case

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Facts

This case stems from the Chapter 11 bankruptcy of Maxus Energy Corporation. In 2018, Maxus Liquidating Trust sued Maxus's parents, YPF S.A., YPF International S.A., YPF Holdings, Inc., and CLH Holdings, Inc. (YPF), asserting fraudulent conveyance and alter ego claims. White & Case represented the Trust from the start. Sidley Austin LLP represents YPF. Gottlieb Steen & Hamilton LLP represents YPF on issues related to the Motion to Disqualify and this appeal. Boelter moved from a law firm representing one party in a bankruptcy dispute to the firm representing the opposing party. Boelter's then fiancé also worked for the new firm. Boelter was a partner in Sidley's restructuring group. She participated in Sidley's initial pitch to represent YPF. She helped negotiate the engagement letter, worked with others on certain motions, was admitted pro hac vice in the proceeding, was copied on email correspondence with YPF, attended several meetings, and was considered by YPF executives as 'an integral part' of its legal team. She billed a total of 300 hours to the YPF representation, mostly early on. Thomas Lauria (Lauria) is a partner in White & Case's restructuring group. Lauria did not record any time related to the case. He was listed as counsel for one of Maxus's creditors during the Chapter 11 proceedings, but he never entered an appearance. Boelter started dating Lauria in 2017 before she pitched Sidley to YPF. In late 2018 Boelter and Lauria's relationship became exclusive, and they lived together starting in 2019. Sidley knew of the relationship, but it is unclear from the record whether YPF knew. While engaged to marry Lauria, Boelter moved to his firm, White & Case. White & Case followed the Model Rules. Boelter went through a standard conflict-screening process. White & Case implemented an ethical wall, which both parties agree qualifies as a screen, beginning on Boelter's first day; obtained her acknowledgment that she would comply with it; and periodically certified her compliance. White & Case did not give any portion of its fee from the YPF adversary proceeding to Boelter. White & Case gave YPF written notice of Boelter's employment the day she began with the firm. The letter explained the nature of White & Case's screen and included a statement of the firm's and Boelter's compliance with the Model Rules. YPF never thought any screen could be good enough. It moved to disqualify White & Case from representing the Trust. The Bankruptcy Court denied the motion after applying a multifactored test, holding that exceptional circumstances did not exist to impute Boelter's conflict to the entire firm despite a screen. YPF then moved for direct appeal, which the Bankruptcy Court granted. The Bankruptcy Court certified two of the six issues YPF requested. This Court authorized YPF's appeal.