Jeffery Watson Potter and Associated Case in US District Court

1The objection also takes the position argued by Mr. Friedlander throughout this
proceeding that because the Debtor’s assets were transferred to the Legal Defense and
Maintenance Trust of California (“California Trust”) before the filing of the bankruptcy petition,
and because the adversary proceeding which sought to recover the assets from the California
Trust was voluntarily dismissed by the Debtor before the filing of an answer, there are few, if
any, assets of the bankruptcy estate. 	From this position, Mr. Friedlander asserts that the
employment of Law Office of George “Dave” Giddens, P.C. is premature, since there has been
no determination that the transfer of the assets to the California Trust is voidable.
UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re: JEFFERY W. POTTER, 	No. 7-05-14071 MS
Debtor.
ORDER GRANTING APPLICATION BY TRUSTEE TO APPROVE
EMPLOYMENT OF GENERAL COUNSEL, LAW OFFICE OF
GEORGE “DAVE” GIDDENS, P.C. PURSUANT TO § 327
THIS MATTER is before the Court on the Application by Trustee to Approve
Employment of General Counsel, Law Office of George “Dave” Giddens, P.C. Pursuant to § 327
(“Application to Employ”)(Docket # 413). Creditor Martin S. Friedlander objected to the
Application to Employ (See Docket #418), asserting that employment of general counsel by the
Trustee will unnecessarily deplete estate assets.1 Mr. Friedlander also objects to the inclusion of
the proposed indemnification provision as part of the terms of employment.
The Application to Employ was filed on June 22, 2007, and since that time, Mr. Giddens
has filed certain documents on behalf of the Chapter 7 Trustee even though the Application to
Employ has yet to be approved. At the final hearing on the Application to Employ, Mr.
Friedlander argued that in the event the Court approves the employment of the Law Office of
George “Dave” Giddens, P.C., such approval should not be effective retroactively to the date of
the filing of the Application to Employ. 	Upon review of the Application to Employ, the Court
Case 05-14071-trc7 Doc 529 Filed 10/01/07 Entered 10/01/07 17:14:03 Page 1 of 5

2
finds that the Application to Employ should be approved. 	In reaching this determination the
Court FINDS:
1. 	Employment of professionals by a chapter 7 trustee is governed by 11 U.S.C. §
327(a), which provides, in relevant part:
Except as otherwise provided in this section, the trustee, with the court’s approval, may
employ one or more attorneys, accountants, appraisers, auctioneers, or other professional
persons, that do not hold or represent an interest adverse to the estate, and that are
disinterested persons, to represent or assist the trustee in carrying out the trustee’s duties
under this title.
11 U.S.C. § 327(a).
2. 	The Law Office of George “Dave” Giddens, P.C. is disinterested. See Affidavit of
George “Dave” Giddens, Proposed Counsel (Docket # 416). 	Mr. Friedlander does not contest
the disinterestedness of The Law Office of George “Dave” Giddens, P.C.
3. 	In accordance with 11 U.S.C. § 328(a), the Chapter 7 Trustee, may, with court
approval, “employ . . . a professional person under section 327 . . . of this title . . . on any
reasonable terms and conditions of employment . . . ” 	11 U.S.C. § 328(a).
4. A copy of the engagement letter is attached to the Application to Employ as Exhibit 1.
It includes an indemnification provision, which provides:
Reimbursement and Indemnity of Defense Attorney Fees and Costs. The estate
shall reimburse, indemnify, and hold the Firm harmless from and against all
attorney fees and costs (whether for work performed by the Firm, to be
compensated as set forth in paragraph 3, or incurred by the Firm to a third party
law firm) incurred in defending against any actions brought against the Firm by
any third party in connection with the Firm’s performance of its work set forth
above, including appeals, if the Firm is the substantially prevailing party in such
action(s).
Application to Employ, Exhibit 1, ¶ 5.
5. 	The Court previously approved the employment of Jacobvitz, Thuma & Walker, P.C.
Case 05-14071-trc7 Doc 529 Filed 10/01/07 Entered 10/01/07 17:14:03 Page 2 of 5

3
by the Chapter 7 Trustee as special counsel in connection with this bankruptcy proceeding. (See
Docket # 350). The terms of that employment include an indemnification provision that is
nearly identical to the provision proposed here. (See Docket #284, Exhibit A).
5. Indemnification provisions included as a condition of employment of a professional
by a trustee are not per se prohibited. See In re Gillet Holdings, Inc., 137 B.R. 452, 458
(Bankr.D.Colo. 1991)(refusing to hold that indemnity provisions contained in the terms of
debtor-in-possession’s proposed employment of investment bankers are per se “either
unacceptable or unnecessary” but concluding that the indemnification provision at issue was
unacceptable); In re Metricom, Inc., 275 B.R. 364, 371 (Bankr.N.D.Cal. 2002) (noting “that
there is no statutory or binding bankruptcy case law basis upon which to establish a per se rule
against such [indemnification] protections for professionals in bankruptcy cases” but agreeing, as
a general proposition, that indemnity provisions are inconsistent with fundamental bankruptcy
policy); In re Joan and David Halpern, Inc., 248 B.R. 43, 45 (Bankr.S.D.N.Y. 2000), aff’d,
2000 WL 1800690 (S.D.N.Y. 2000) (noting that “[t]he Bankruptcy Code does not expressly
permit or forbid an agreement to indemnify the investment banker.”). 	But, whether an
indemnification provision is “reasonable” within the meaning of 11 U.S.C. § 328 depends upon
the given circumstances present in a case and such determination must be made on a case-by-
case basis. Metricom, 275 B.R. at 371. See also, In re Thermadyne Holdings, Corp., 283 B.R.
749, 756 (8th Cir. BAP 2002) (court must be persuaded that the terms and conditions of
employment, including any indemnification provision, are reasonable under the circumstances
and in the best interests of the estate, and such determination can only be determined on a case
by case basis)(citation omitted).
Case 05-14071-trc7 Doc 529 Filed 10/01/07 Entered 10/01/07 17:14:03 Page 3 of 5

4
6. The trustee seeking to employ a professional under 11 U.S.C. § 328 bears the burden
of showing that the provisions of the proposed employment are reasonable. See Gillett Holdings,
137 B.R. at 455 (noting that “‘[t]he burden of proof to establish that proposed terms and
conditions of employment are reasonable is on the moving party. The Court must be persuaded
that the terms and conditions are in the interest of the estate.’”)(quoting In re C & P Auto
Transport, Inc., 94 B.R. 682, 686 (Bankr.E.D.Cal.1988)(remaining citation omitted)).
6. In this instance, the indemnification provision is limited in that it only applies to
proceedings brought by third parties, and only if The Law Firm of George “Dave” Giddens, P.C.
is the substantially prevailing party in any such litigation brought by third parties. Given the
history of this proceeding, including the approval of the employment application of Jacobvitz,
Thuma, and Walker, P.C. with a similar provision, the Court finds that the proposed terms of
employment for The Law Firm of George “Dave” Giddens, P.C. are not unreasonable and are in
the best interest of the estate. However, to the extent the indemnification provision, because it is
contractual, does not make clear that all fees incurred in defending a third party action remain
subject to review and approval by the Court in accordance with the reasonableness standards
contained in 11 U.S.C. § 330, the provision should be modified, to include the following
language:
All fees and costs of The Law Office of George “Dave” Giddens, P.C. charged for
services rendered on behalf of the Chapter 7 Trustee in connection with the bankruptcy
proceeding and/or related adversary proceedings, including any fees and/or costs that
might fall within the indemnification provision, and are subject to all the restrictions of
11 U.S.C. § 330.
7. 	The Application to Employ requests that the “employment be retroactive to the date
of the filing of this Application.” Application to Employ, ¶ 11 (Docket # 413). 	It is not
Case 05-14071-trc7 Doc 529 Filed 10/01/07 Entered 10/01/07 17:14:03 Page 4 of 5

5
inappropriate to approve the employment effective as of the date of the filing of the Application
to Employ. See In re Bartmann, 320 B.R. 725, 735 n.8 (Bankr.N.D.Okla. 2004) (noting that,
“[g]enerally, approval of employment of professionals is granted as of the date the application
was filed, rather than the date the professional first rendered services to the debtor . . .”)(citation
omitted).
WHEREFORE, IT IS HEREBY ORDERED, that the Application to Employ is
GRANTED, effective as of June 22, 2007, subject to the inclusion of the language clarifying that
all fees and thereunder, including any fees and/or costs that may fall within the indemnification
provision, are subject to all the restrictions of 11 U.S.C. § 330.
_________________________________________
MARK B. McFEELEY
United States Bankruptcy Judge
COPY TO:
Jeffery Watson Potter 	Martin S. Friedlander
4815 E. Carefree Hwy #108-504 	10350 Wilshire Blvd Ste 603
Cave Creek, AZ 85331 	Los Angeles, CA 90024-4717
Office of the United States Trustee 	Yvette J. Gonzales
PO Box 608 	Chapter 7 Trustee
Albuquerque, NM 87103-0608 	PO Box 1037
Placitas, NM 87043-1037
George D Giddens, Jr
Counsel for Chapter 7 Trustee
10400 Academy Rd NE Ste 350
Albuquerque, NM 87111-1229
Case 05-14071-trc7 Doc 529 Filed 10/01/07 Entered 10/01/07 17:14:03 Page 5 of 5