Local Rule RULE 2014-1: Applications for Employment of Professionals.

RULE 2014-1. Applications for Employment of Professionals.

(a) Applications for Employment. All applications to approve the employment of professionals by a trustee, debtor in possession, or committee shall conform with Mont. LBF 1.

(b) Service of Application.

(1) Copies of the application for approval of employment, the verified statement, and any accompanying documents shall be served on the United States Trustee.

(2) In non-chapter 11 cases, service shall also be made upon the debtor and debtor's counsel. If the application is filed by a party other than the trustee, service shall also be made upon the trustee and the trustee's counsel.

(3) In a chapter 11 case, service shall be made upon members of any creditors' committee and the committee's attorneys. In the event no committee has been appointed, service shall be made on the 20 largest unsecured creditors. If the application is made by a party other than the debtor, service shall be made on the debtor and the debtor's attorney.

(4) Proof of the service required herein shall be filed with the application.

(c) No Retroactive Approval of Applications. Unless otherwise stated, an Order granting an application to employ a professional will be effective as of the date of filing of the application. Requests for nunc pro tunc or retroactive approval to a date prior to the filing date of the application will not be granted absent a showing of extraordinary circumstances.

(d) Real Estate Agents. If a debtor or trustee seeks to employ a real estate agent, the filer shall either file a fully executed listing agreement with the employment application or file a fully executed listing agreement within seven days after the Court approves the real estate agent's employment.

(e) Applications Requiring Additional Notice. Subject to subsection (g), at least 14 days' notice of an application to employ a professional person under 11 U.S.C. § 327 must be given to the parties identified in subsection (b) if any of the following circumstances or conditions are present:

(1) The professional files an application for retention that identifies a potential conflict may exist. In such cases, the application and notice must state sufficient facts for parties in interest to determine whether a conflict of interest exists, including whether the professional represented the debtor prepetition;

(2) The professional's retainer or other fees have been, or will be, paid by a third-party payor. In such cases, the application must include a verified statement of the debtor disclosing all transfers by the debtor to the entity providing the retainer and any other circumstances that may create a conflict of interest between the debtor and the payor. The payor must retain independent counsel or provide a written acknowledgement that the debtor's attorney's duty of loyalty is owed solely to the debtor, and not to the payor;

(3) The professional represents multiple debtors in related or jointly administered cases;

(4) A trustee seeks to employ his or her own firm. In such cases, the application must explain why such employment is in the best interests of the estate.

(5) The professional proposes to be paid under non-traditional compensation arrangements. Traditional compensation arrangements would include, for example, a flat fee agreement or contingency fee agreement or hourly fee agreement;

(6) The professional asserts a lien on the debtor's property;

(7) The debtor owes the professional payment for services rendered prepetition, in which case the notice must state the amount of fees owed and whether the professional has received any preferential payments under 11 U.S.C. § 547(b); or

(8) The Court orders notice for any other reason.

(f) Applications that will be Routinely Granted or Denied, with the Right to Request a Hearing. If notice of an application to employ a professional person is not required by subsection (e), and subject to subsection (g), the Court may enter an order approving the employment on an ex parte basis. Any party in interest may object to entry of the order, request a hearing, and schedule a hearing to reconsider the issuance of any such order within fourteen days of the order's date.

(g) Immediate and Irreparable Harm Under Fed. R. Bankr. P. 6003(a). Nothing in this Local Rule modifies the Fed. R. Bankr. P. 6003(a) prohibition on the issuance of an order granting an employment application during the time specified in Rule 6003(a) absent a determination that relief is necessary to avoid immediate and irreparable harm. If a professional requests entry of an order approving an application prior to the time specified in Fed. R. Bankr. P. 6003(a), the application must set forth a sufficient factual basis to establish immediate and irreparable harm will occur if not granted earlier approval.

Related Authority: 11 U.S.C. §§ 326, 327, 329, 330, and 504 Fed. R. Bankr. P. 2014, 2016, and 6003 Comments: The phrase "nunc pro tunc" in (a)(1) is a Latin phrase that means "now for then" and is intended to describe a request to the court to take an action that applies retroactively to correct an earlier filing.

No requirement exists under the Fed. R. Bankr. P. or the Bankruptcy Code for debtor's attorney to seek approval of employment in a Chapter 7 or 13 case. However, if such attorney seeks compensation as an administrative expense under § 330(a), Mont. LBR 2016-1 applies. Lamie v. U.S. Trustee, 540 U.S. 526 (2004) held § 330(a)(1) does not allow compensation to debtors' attorneys from the estate in a Chapter 7 case unless trustee employs them under § 327 with Court approval. Section 329 of the Code applies to debtor's attorney under any chapter of the Code regardless of whether attorney applies for compensation under Fed. R. Bankr. P. 2016.

It should be noted that Fed. R. Bankr. P. 6003 now provides that the Court shall not, within 21 days after the filing of a petition, issue an order granting an application under Fed. R. Bankr. P. 2014, except to the extent that relief is necessary to avoid immediate and irreparable harm. The Court can make the order approving the application retroactively to the date of its filing.