William Clay Mitchell and Linda Beth Lightfoot

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re
WILLIAM MITCHELL and
LINDA LIGHTFOOT, No. 07-11408
Debtor(s).
______________________________________/
Memorandum on Motion to Employ Broker
_________________
The trustee in this Chapter 7 case, Timothy Hoffman, has applied to hire Keegan & Coppin Co.,
Inc., as his real estate broker to market estate commercial real property. The U.S. Trustee objects, arguing
that the broker is disqualified from acting for the bankruptcy estate because one of its principals, James
Keegan, owns stock in the parent company of the bank which holds the first deed of trust on the property and
also sits on the board of directors of that company. This connection was duly disclosed in the application.
Section 327(a) of the Bankruptcy Code provides that the trustee may employ a professional person
so long as the professional is disinterested and does not hold or represent an interest adverse to the estate.
The term “disinterested person” is defined in § 101(14) of the Code as a person who has an interest
materially adverse to the bankruptcy estate. The U.S. Trustee argues that because Keegan has the interests
of the parent company of the bank in mind Keegan & Coppin will have divided loyalties. The court finds this
argument very weak because it presumes that the bank will have some sort of reason not to want Hoffman to
find a favorable sale and that this hypothetical conflict would be significant enough to have an impact on the
Entered on Docket
January 18, 2008
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 07-11408 Doc# 48 Filed: 01/18/08 Entered: 01/18/08 13:51:19 Page 1 of 3

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value of stock of the bank’s parent corporation. The bank’s lien is only about $600,000, so it is difficult to
see how this is possible. Keegan & Coppin certainly has no interest materially adverse to the bankruptcy
estate. Nor does the court find any genuine risk that Keegan & Coppin’s ability and desire to maximize a
benefit to the bankruptcy estate will be impaired.
Having determined that Keegan & Coppin is disinterested as that term is defined in the Code, the
court must also find that it does not hold or represent an interest adverse to the estate without regard to
materiality. However, this requirement of § 327(a) is not properly applied vicariously; automatic
disqualification is only required where the professional itself has an adverse interest. In re S.S. Retail Stores
Corporation, 211 B.R. 699, 702-04 (9th Cir. BAP 1997); In re Keravision, Inc., 273 B.R. 614, 616
(N.D.Cal. 2002). In this case, Keegan & Coppin does not have an adverse interest, nor does its principal
James Keegan, nor does the corporation upon whose board Keegan sits. Only the bank itself has an adverse
interest, and that is very slight. Keegan & Coppin is three relations removed from any adverse interest, and is
accordingly not automatically disqualified pursuant to § 327(a).
That is not to say that Keegan & Coppin’s distant relation to the bank is irrelevant. The court’s
responsibility is to exercise informed discretion in ruling upon an application for employment. To that end the
court must consider whether there is a real need for the services, whether the person proposed for
employment is competent to perform the services, and any other fact relevant to whether the proposed
employment is appropriate. In re Crest Mirror and Door Co., Inc., 57 B.R. 830, 831-32
(9th Cir. BAP 1986). In another case there might be reason to question the appropriateness of employment
even where the relation to an unemployable entity was several times removed. In this case, however, the
court does not find that circumstances warrant disqualification. Not only is the relationship far removed, but
the bank’s supposed adverse motivations are very vague and entirely hypothetical.
Even where employment of a professional is permitted, the court will sometimes seek to dissuade a
trustee from employment where a question has been raised as to the professional’s eligibility. In this case,
however, Hoffman’s reasons for wanting to employ Keegan & Coppin notwithstanding the U.S. Trustee’s
objection appear sound. Keegan & Coppin appears to be the best broker to successfully market the
Case: 07-11408 Doc# 48 Filed: 01/18/08 Entered: 01/18/08 13:51:19 Page 2 of 3

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commercial property Hoffman wishes to sell. The benefits to the estate outweigh the detriment of having to
litigate Keegan & Coppin’s eligibility.
For the foregoing reasons, the objection of the U.S. Trustee will be overruled and the employment of
Keegan & Coppin approved. Counsel for Hoffman shall submit an appropriate form of order.
Dated: January 18, 2008
SAlan Jaroslovsky
U.S. Bankruptcy Judge
Case: 07-11408 Doc# 48 Filed: 01/18/08 Entered: 01/18/08 13:51:19 Page 3 of 3