The opinion
PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
No. 21-2496
____________
In re: MAXUS ENERGY CORPORATION, Debtor
THE MAXUS LIQUIDATING TRUST
v.
YPF S.A.; YPF INTERNATIONAL S.A.; YPF HOLDINGS,
INC.; CLH HOLDINGS, INC.; REPSOL S.A.; REPSOL
EXPLORACION, S.A.; REPSOL USA HOLDINGS, CORP.;
REPSOL E&P USA. INC.; REPSOL OFFSHORE E&P
USA, INC.; REPSOL E&P T&T LIMITED; REPSOL
SERVICES COMPANY; JESSICA C. LAURIA, formerly
Jessica C. Boelter
YPF S.A.; YPF International S.A.; YPF Holdings, Inc.;
CLH Holdings, Inc.,
Appellants
____________
On Appeal from the United States Bankruptcy Court
for the District of Delaware
(No. 18-BK-50489)
Bankruptcy Judge: Honorable Christopher S. Sontchi
____________
Argued: May 3, 2022
Before: GREENAWAY, JR., PORTER, and PHIPPS,
Circuit Judges.
(Filed: September 9, 2022)
____________
Victor L. Hou [ARGUED]
Ari D. MacKinnon
Jeffrey A. Rosenthal
Cleary Gottlieb Steen & Hamilton
One Liberty Plaza
New York, NY 10006
Adam G. Landis
Matthew B. McGuire
Landis Rath & Cobb
919 Market Street
Suite 1800, P.O. Box 2087
Wilmington, DE 19801
Counsel for Appellants CLH Holdings Inc., YPF
Holdings Inc., YPF International S.A., and YPF S.A.
Rosemary J. Piergiovanni
Farnan
919 North Market Street
12th Floor
Wilmington, DE 19801
2
Catherine E. Stetson [ARGUED]
Johannah C. Walker
Hogan Lovells US
555 Thirteenth Street, N.W.
Columbia Square
Washington, DC 20004
Counsel for Appellee Maxus Liquidating Trust
____________
OPINION OF THE COURT
____________
PORTER, Circuit Judge.
Jessica Lauria, née Boelter (“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. The American Bar Association’s
Model Rules of Professional Conduct (“Model Rules”),
incorporated by the Bankruptcy Court’s local rules, imputes
Boelter’s conflict to her new firm unless she, among other
things, “is timely screened from any participation in the matter
and is apportioned no part of the fee therefrom.” Model Rules
of Pro. Conduct r. 1.10(a)(2) (Am. Bar Ass’n, 2020). The new
firm, White & Case LLP, timely screened Boelter. But
Boelter’s former client moved to disqualify White & Case,
arguing that a screen was not enough. The Bankruptcy Court
denied the motion, holding White & Case’s screen was
sufficient to prevent Boelter’s conflict from being imputed to
the entire firm. Because the Model Rules state that a timely
3
screen, together with certain other requirements, prevents
conflict imputation, we will affirm the Bankruptcy Court.1
I
This case stems from the Chapter 11 bankruptcy of
Maxus Energy Corporation (“Maxus”). In 2018, Maxus
Liquidating Trust (“Trust”) sued Maxus’s parents, YPF S.A.,
YPF International S.A., YPF Holdings, Inc., and CLH
Holdings, Inc. (collectively, “YPF”), asserting fraudulent
conveyance and alter ego claims.
White & Case represented the Trust from the start.
Sidley Austin LLP represents YPF. Cleary Gottlieb Steen &
Hamilton LLP represents YPF on issues related to the Motion
to Disqualify and this appeal.
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
1
As other courts have done, the Bankruptcy Court
incorporated an external set of disqualification standards, in
this case the Model Rules. See Bankr. D. Del. R. 9010-1(f); cf.,
e.g., United States v. Miller, 624 F.2d 1198, 1200 (3d Cir.
1980). Without a challenge to that incorporation, our analysis
proceeds under those rules. Although a court may still use its
inherent authority to disqualify counsel or a firm for reasons
beyond those in the incorporated rules, we are satisfied that in
these circumstances the Model Rules suffice and no need exists
to invoke inherent authority to address additional
considerations.
4
several meetings, and was considered by YPF executives as
“an integral part” of its legal team. J.A. 54. She billed a total
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. When she did so, White & Case followed
the Model Rules. From the start, 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.2 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
2
White & Case used both an inclusionary and an exclusionary
screen. The inclusionary screen prohibits all attorneys and staff
from involvement in the YPF representation if not assigned to
it. Those excluded attorneys and staff cannot access records or
other information related to the representation. The
exclusionary screen prevents Boelter, specifically, from
involvement in the YPF representation in any way.
5
statement of the firm’s and of Boelter’s compliance with the
Model Rules. White & Case also stated that review may be
available before a tribunal. The firm agreed to respond
promptly to any written inquiries or objections about the
screening procedures. In fact, it provided additional
information to YPF attorneys in their later discussions. Boelter
says she never breached the screen.
YPF never thought any screen could be good enough.
So 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. This Court authorized YPF’s
appeal.
II
We have jurisdiction to hear certified, direct appeals
“from final judgments, orders, and decrees,” as well as certain
“interlocutory orders and decrees,” from bankruptcy courts. 28
U.S.C. §§ 158(a), 158(d)(2)(A). As relevant here, our
jurisdiction over a non-final bankruptcy court order has two
prerequisites: The bankruptcy court must certify that its order
“involves a question of law as to which there is no controlling
decision of the court of appeals for the circuit or of the Supreme
6
Court of the United States,” and the court of appeals must
“authorize[] the direct appeal.” Id. § 158(d)(2)(A).3
The Bankruptcy Court certified two of the six issues
YPF requested. And we granted permission to appeal on those
two issues plus one other. But it does not matter which issues
the Bankruptcy Court certified or we authorized. That is
because we will “treat certified questions under 28 U.S.C.
§ 158(d)(2)(A) essentially as we treat certified questions from
district courts under 28 U.S.C. § 1292(b).” In re Franchise
Servs. of N. Am., Inc., 891 F.3d 198, 206 (5th Cir. 2018). We
will do so because “appellate jurisdiction applies to the order
certified to the court of appeals, and is not tied to the particular
question formulated by the district court.” Yamaha Motor
Corp. v. Calhoun, 516 U.S. 199, 205 (1996). Here, too, section
158(d)(2)(A) requires the lower court to certify a “judgment,
order, or decree,” not a specific issue, for appeal. Because all
of the requirements of section 158(d)(2)(A) are met here, we
have jurisdiction to review the entire order subject to this
appeal.
III
The Bankruptcy Court for the District of Delaware
incorporated the Model Rules in its local rules governing
professional conduct. See Int’l Bus. Mach. v. Levin, 579 F.2d
271, 279 n.2 (3d Cir. 1978) (“[T]he conduct of practitioners
3
The Bankruptcy Court could also certify that “the judgment,
order, or decree involves a question of law requiring resolution
of conflicting decisions” or that “an immediate appeal from the
judgment, order, or decree may materially advance the
progress of the case or proceeding in which the appeal is
taken.” 28 U.S.C. § 158(d)(2)(A)(ii)–(iii).
7
before the federal courts must be governed by the rules of those
courts.”); see also Law v. Siegel, 571 U.S. 415, 420–21 (2014)
(noting a bankruptcy court’s inherent power to sanction).4 We
review the Bankruptcy Court’s interpretation of the Model
Rules as a question of law subject to de novo review. United
States v. Miller, 624 F.2d 1198, 1201 (3d. Cir. 1980). We
review the Bankruptcy Court’s denial of disqualification as a
sanction for abuse of discretion. Id. An abuse of discretion
requires “a clearly erroneous finding of fact, an erroneous legal
conclusion, or an improper application of law to fact.” In re
Prosser, 777 F.3d 154, 161 (3d Cir. 2015). In short, an abuse
of discretion occurs “where no reasonable person would adopt”
the lower court’s view. United States v. Foster, 891 F.3d 93,
107 n.11 (3d Cir. 2018).
4
The Bankruptcy Court’s local rules state:
Subject to such modifications as may be required
or permitted by federal statute, court rule or
decision, all attorneys admitted or authorized to
practice before this Court, including attorneys
admitted on motion or otherwise, shall also be
governed by the Model Rules of Professional
Conduct of the American Bar Association, as
may be amended from time to time.
Bankr. D. Del. R. 9010-1(f). The Bankruptcy Court’s local
rules incorporated neither the Model Rule’s commentary nor
the American Bar Association’s Formal Opinions interpreting
the Model Rules, so both are nonbinding though we consider
their persuasive value.
8
A
To begin, Model Rule 1.9 prohibits a lawyer who has
formerly represented a client in a matter from “represent[ing]
another person in the same or a substantially related matter in
which that person’s interests are materially adverse to the
interests of the former client.” Model Rules of Pro. Conduct r.
1.9. Both parties agree that Model Rule 1.9 prohibits Boelter
from participating in White & Case’s representation of the
Trust, and both parties agree that she did not try to do so.
Model Rule 1.10(a), though, states that no lawyer at a
firm “shall knowingly represent a client when any one of them
practicing alone would be prohibited from doing so by Rules
1.7 or 1.9, unless”:
(i) the disqualified lawyer is timely screened
from any participation in the matter and is
apportioned no part of the fee therefrom; (ii)
written notice is promptly given to any affected
former client to enable the former client to
ascertain compliance with the provisions of this
Rule . . . ; a statement of the firm’s and of the
screened lawyer’s compliance with these Rules;
a statement that review may be available before
a tribunal; and an agreement by the firm to
respond promptly to any written inquiries or
objections by the former client about the
screening procedures; and (iii) certifications of
compliance with these Rules and with the
screening procedures are provided to the former
client by the screened lawyer and by a partner of
the firm, at reasonable intervals upon the former
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client’s written request and upon termination of
the screening procedures.
Model Rules of Pro. Conduct r. 1.10(a)(2). The word “unless”
signals a condition subsequent, so meeting the conditions of
what follows relieves the preceding duty. Here, if a firm
adheres to the conditions subsequent by screening the
disqualified attorney, allocating to him no part of the fee from
the conflicted representation, and following the other
procedures in Model Rule 1.10(a)(2), the disqualified
attorney’s conflict cannot be imputed to the entire firm.
The Bankruptcy Court suggested an “exceptional
circumstances” exception to Model Rule 1.10(a)(2). White &
Case agreed with this approach. The Bankruptcy Court also
analyzed the case under a multifactored test from an
unpublished district court opinion. See Enzo Life Scis., Inc. v.
Adipogen Corp., No. 1:11-CV-00088-RGA, 2013 WL
6138791, at *3–4 (D. Del. Nov. 20, 2013).5 YPF thought this
multifactored test should be the rule. Both those approaches
ignore the ordinary meaning of Model Rule 1.10(a)(2), which
does not create an “exceptional circumstances” standard or
incorporate a multifactored test with no basis in the rule’s text.
5
The test originated in a Pennsylvania Supreme Court
dissenting opinion written before the Model Rules allowed
screening to prevent conflict imputation, and it cites a different
persuasive authority for each prong of the test. See Maritrans
GP Inc. v. Pepper, Hamilton & Scheetz, 602 A.2d 1277, 1289
(Pa. 1992) (Nix, C.J., dissenting).
10
Whether a firm’s conflict-of-interest procedures qualify
as a “screen” under Model Rule 1.0(k) is a different question.
Model Rule 1.0(k) defines a screen as “the isolation of a lawyer
from any participation in a matter through the timely
imposition of procedures within a firm that are reasonably
adequate under the circumstances to protect information that
the isolated lawyer is obligated to protect under these Rules or
other law.” Model Rules of Pro. Conduct r. 1.0(k). Courts must
determine, based on the facts of each case, whether a firm’s
conflict-of-interest procedures qualify as an effective screen.
Of course, disqualification remains an option if individual
lawyers disregard the limitations imposed by an otherwise
adequate screen.
YPF also argues that White & Case failed to adhere to
Model Rule 1.10(a)(2)(i) because it did not ensure that Lauria,
too, “is apportioned no part of the fee therefrom.” But the rule
directs that only the “disqualified lawyer” must be
“apportioned no part of the fee” from the matter at issue. Model
Rules of Pro. Conduct r. 1.10(a)(2)(i). Here, that means
Boelter, not her spouse, must not receive proceeds of fees
arising from the conflicted representation. The Bankruptcy
Court correctly reached the same conclusion.
B
The Bankruptcy Court did not abuse its discretion when
it held that White & Case complied with Model Rule
1.10(a)(2), and thus is not disqualified from representing the
Trust. The Bankruptcy Court found that “White & Case
implemented a thorough, robust ethical screen between Ms.
Boelter and the YPF adversary proceeding and all related
issues immediately upon Ms. Boelter joining the firm.” J.A. 22.
Indeed, YPF does not dispute that White & Case’s conflict-of-
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interest procedures are a screen. Boelter will not receive any
part of the fees from White & Case’s representation of YPF.6
The Bankruptcy Court, moreover, found that White & Case
gave YPF “prompt and exhaustive notice of the screening
procedures, as well as repeated statements that White & Case
and Ms. Boelter would comply with the screening procedures.”
J.A. 22. And White & Case said it would respond promptly to
any inquiries from YPF about the screen, including inviting
YPF to provide input. White & Case further stated that review
may be available before a tribunal. The Bankruptcy Court thus
reasonably concluded that “White & Case and Ms. Boelter
complied to the letter with the applicable ethical rule.” J.A. 23.
So it did not abuse its discretion by refusing to disqualify White
& Case.
* * *
For these reasons, we will affirm the Bankruptcy
Court’s order.
6
In response to interrogatories, White & Case said that
“partners at White & Case are not compensated based on
specific case outcomes or earnings.” J.A. 796. So neither
Boelter nor Lauria will receive any compensation based on the
firm’s representation of the Trust. Although the local rules do
not incorporate the Model Rules’ comments, one comment
persuasively says that Model Rule 1.10 “does not prohibit the
screened lawyer from receiving a salary or partnership share
established by prior independent agreement, but that lawyer
may not receive compensation directly related to the matter in
which the lawyer is disqualified.” Model Rules of Pro. Conduct
r. 1.10, cmt 8.
12