Frascella Enterprises, Inc.

1 The UST indicated that there were discussions with Obermayer about the appointment of
an examiner. As will be apparent as I outline the issues that troubled the UST and precipitated the
Objection, refusal to employ Obermayer, while a start, does not address the question of whether this
debtor, acting through its principals, can fulfill the role of a debtor-in-possession.
UNITED S TATES B ANKRUPTCY COURT
FOR T HE E ASTERN DISTRICT O F PENNSYLVANIA
In re 	: 	Chapter 11
:
FRASCELLA ENTERPRISES, INC., 	: 	Bankruptcy No. 06-10322DWS
dba Cash Today, 	:
:
Debtor. 	:
OPINION
BY: 	DIANE WEISS SIGMUND, Chief Bankruptcy Judge
Before 	the 	Court 	is 	the 	Application 	of 	the 	Debtor 	to 	Employ 	Obermayer
Rebmann Maxwell & Hippel LLP (“Obermayer”) as Counsel (the “Application”) and the
objection (the “Objection”) of Creditor Richmond Financial, Inc. (“Richmond”) thereto.
The 	Objection 	is 	supported 	by 	Lawrence 	Turner, 	Linda 	Davis 	and 	Demryi 	Hill
(the “Consumer Class Plaintiffs”). 	Richmond and the Consumer Class Plaintiffs are the
unsecured creditors whose asserted claims dominate this case. The United States trustee
(the “UST”) also participated in this contested matter and while taking no position on the
Application, was troubled by Obermayer’s disclosure failures as more fully discussed
below.1
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2 The gravaman of the Richmond Litigation is that Larry and David, doing business as Broad
and Vine Check Cashing, Inc. (“Broad and Vine”), secured credit for their check cashing business
from Richmond and that when the indebtedness reached approximately $700,000, Larry and David
announced that Broad and Vine was defunct and had been replaced by The Debtor. 	A lease
agreement between The Debtor and Theresa for the space previously occupied by Broad and Vine
(continued...)
-2-
BACKGROUND
On January 30, 2006 Frascella Enterprises, Inc. (the “Debtor”) filed a petition under
Chapter 11 of the Bankruptcy Code. The Debtor’s Schedules and Statement of Affairs as
well as the Application were filed contemporaneously therewith. 	The Application was
supported by the Affidavit of Edmund George, Esquire (“George”) that can only be described
as bare bones. Doc. No. 5. As to Obermayer’s relationship with the Debtor, George simply
states that the firm has represented the Debtor prior to the institution of these proceedings,
and it is not a creditor of the debtor. 	Perhaps in anticipation that this revelation may be
insufficient, he then states, “Obermayer will supplement this affidavit if and when necessary
to disclose any further pertinent relationships that require disclosure.” Id. ¶ 6. On this basis,
George declared his belief that Obermayer was eligible for employment under § 327 and the
applicable Bankruptcy Rules.
Richmond quickly filed the Objection on February 1, 2006 contending otherwise, and
a hearing was scheduled for March 6, 2006. In support of its opposition to Obermayer’s
retention, the Objection avers that Obermayer is present counsel for the Debtor, Larry
Frascella (“Larry”), David W. Frascella, Jr. (“David” and with Larry, the “Frascella
Brothers”) and Theresa Frascella (“Theresa”) who is the Debtor’s landlord, in certain
litigation (the “Richmond Litigation”) commenced by Richmond,2 and that Larry and
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(...continued)
was produced. 	The lease is not disclosed in The Debtor’s Schedule G (Schedule of Executory
Contracts) although the Vendor List appended to the Statement of Affairs as SOFA 3b shows
monthly payments to Theresa of $7,680 on November 1, December 1 and December 30. While
Richmond avers that Theresa is also a creditor based on the lease, she is not listed as such on
Schedule E.
3 Both pieces of litigation have been removed to this Court by the Debtor, and the Consumer
Class Litigation is the object of motions by each side for relief. The Consumer Class Litigation
seeks redress for certain allegedly usurious short term loans made to the consumers by the Frascella
Brothers through the Debtor and other entities they own and control.
-3-
David’s legal bills in the Richmond Litigation have been paid by the Debtor. 	Larry and
David each own a 50% interest in the Debtor. 	In addition to the alleged conflict arising
from representation in the Richmond Litigation, Richmond complains of Obermayer’s
representation of the Debtor, David and Larry in connection with litigation commenced by
the Consumer Class Plaintiffs (the “Consumer Class Litigation.”) 3 The Objection further
avers that Obermayer received payments prior to the filing of the case that were preferential.
In response to the Objection, George filed an Amended Affidavit (the “Am. Aff.”)
on February 27th, apparently concluding that given the Objection, the time for disclosure
had been reached. It seeks to address the points raised by Richmond and nothing further.
As to the prior representation of the Debtor, George acknowledges that the firm represented
the Debtor in the Richmond Litigation. 	However, while stating that it filed preliminary
objections on behalf of all of the defendants, i.e., the Debtor, Larry, David and Theresa,
George explains its work was limited to a challenge to the legal sufficiency of the complaint.
He avers that it was “expressly understood and agreed that if the litigation progressed beyond
this challenge, that some or all of the Individual Defendants might obtain separate counsel
and that Obermayer would continue its representation of the Debtor.” He further states that
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4 George also belatedly discloses work his firm is currently doing for other creditors of the
estate, none of which relate to this bankruptcy case.
-4-
“Obermayer has not asserted any factual or legal positions for Theresa Frascella, who has
been represented generally by other counsel,” a curious statement in light of the filing made
on her behalf. Exhibit R-2. Am. Aff. ¶ 6. A similar statement is conspicuously not made
about David and Larry. George likewise acknowledges representation of the Debtor in the
Consumer Class Litigation against the Debtor, Larry and David. Notably the Richmond and
Consumer Class Litigation were removed to this court in their entireties. No one has entered
an appearance for the Individual Defendants, and Obermayer is objecting to a motion to
sever the Individual Defendants from the removed action and remand to the state court.
Adv. No. 06-0101. (Doc. No. 11). 4
On the fee issue, George provides a spreadsheet of the prepetition payments
Obermayer received “in the ordinary course of business pursuant to agreed terms of billing,”
concluding that they were either on a retainer basis and not a preference, or payments in
the ordinary course of business and insulated from avoidance as preferential payments.
Am Aff. ¶ 10. Again George assures that “Obermayer will supplement further if and when
necessary” etc. Id. ¶ 11.
On March 3, 2006 Richmond filed a Reply Memorandum attaching an affidavit
of Daniel S. Bernstein, 3d, Esq., its counsel in the Richmond Litigation. 	(Doc. No. 43.)
That affidavit avers that Obermayer filed document requests and interrogatories on behalf
of all the defendants, not just the Debtor. Copies of the pleadings attached to the affidavit
substantiate Obermayer’s representation of all the parties. The Bernstein Affidavit also avers
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-5-
that Obermayer drafted a confidentiality order for all defendants and represented that it
would produce documents on behalf of all defendants.
A hearing was held in this contested matter on March 6, 2006. 	George provided
testimony in support of the Application. On direct examination, he explained the payments
his firm had received on the eve of bankruptcy which as noted above, were outlined in an
attachment to his Amended Affidavit. 	A January 30, 2006 payment of two invoices
totaling $7,854.40 was described as “in the ordinary course” for legal services rendered to
the Debtor during the period November 1 through November 30 and November 14, 2005
through November 18, 2005. 	While George stated his belief that the payment was not
preferential, he stated that the firm would willingly disgorge it if the UST believed otherwise.
Two wire transfers of $50,000 each were also received on January 30, 2006 to pay
January 30, 2006 invoices of $68,937.35, $5,425.20, $269.31 and $868.50 with the balance
of $24,499.64 to be held as a retainer. George was not questioned on the nature of the legal
services rendered so as to generate all these invoices on January 30 but stated with
uncharacteristic clarity given his vague responses to related questions, that all of the services
were provided to the Debtor and not other entities owned by the Debtor’s principals Larry
and David Frascella. George was specifically asked the source of one of the $50,000 wire
transfers which was identified only as “From 3d Party.” 	He responded that “sitting here
today, I don’t know but it is not Larry and David Frascella.” He agreed to inquire further.
George was also examined about Obermayer’s clients. He insisted that the Debtor
was the firm’s sole client, that it did not represent Theresa Frascella or David and Larry,
although his testimony was less equivocal with respect to Theresa. He acknowledged and
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-6-
then sought to justify the firm’s actions in entering an appearance and filing preliminary
objections and initial discovery on behalf of all parties in the Consumer Class Litigation and
in the Richmond Litigation as a reflection of their “community of interest.” He stated that
Theresa had her own attorney and David and Larry were advised that Obermayer could
not represent them and that they were presently talking to a separate attorney. His testimony
suggested that their discussions with the separate attorney were stimulated by the Objection
to the Application. 	George was asked about the removal of the two adversary cases and
acknowledged that Obermayer removed all claims, not merely claims against the Debtor.
Again he attributed that step to the “community of interest” among all the defendants.
He was asked about the firm’s position on the Motion to Sever and Remand filed by the
Consumer Class with respect to its claims against the non-debtors. 	He asserted no
knowledge of that motion which had been filed February 27, 2006 in the adversary case in
which he was listed as lead counsel. He did give assurances that Obermayer would not be
taking any position in that matter on behalf of Larry and David whom are not represented
by Obermayer. 	On March 14, 2006, Obermayer filed a 9-page brief with six exhibits
opposing the motion to sever and remand to state court the claims against David and Larry.
The pleading was filed on behalf of the Debtor and not Larry and David. Indeed no counsel
has appeared in either the main bankruptcy case or the two pending adversary cases on behalf
of Larry and David.
George was also questioned about the ownership of certain entities allegedly
related to the Debtor. He stated that he did not know who were the principals of Frascella
Enterprises of Delaware (“Frascella Delaware”), JDL Services (“JDL”) or Ambassador
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5 In June 2005 a FCC ruling put County Bank, which made the loans in which the Debtor
participated, out of the short -term lending business. The Debtor allegedly bought the loan portfolio
and then transferred it to Ambassador which would carry on the payday lending business formerly
operated by the Debtor. 	It is not clear whether the $120,000 payment to County Bank is the
consideration for the buy out of the loans nor does George inform what liabilities of $2.02 million
Ambassador assumed relating to the payday loan portfolio. 	Is he talking about the liability for
payment of the investor notes?
-7-
Financial Services (“Ambassador”). However, he contradicted his own testimony by later
acknowledging that JDL was owned by Larry and David. It was also elicited that George
had filed an expedited motion for authority to make prepetition payroll to 14 employees,
including Larry and David. 	When objections were filed, the request as to them was
withdrawn. They have now agreed not to take compensation from the Debtor. Rather their
salaries are being paid by JDL.
Finally on questioning by the UST, George agreed to make certain inquiries to
supplement the record. 	A Supplemental Disclosure in Support of the Application was
filed on March 15, 2006. 	Doc. No. 50. 	In this document, George revealed that the
unidentified source of the $50,000 wire transfer was Larry and David who as Ambassador’s
shareholders used that corporation’s funds to supplement the payments made by the Debtor
to pay Obermayer’s invoices and provide a retainer. After being prompted by Richmond’s
objection, George also disclosed the transfer of the Debtor’s short term loan portfolio in the
face amount of $1.2 million to Ambassador in consideration of the payment to County Bank
of $120,000 and the assumption of liabilities relating to the portfolio. 5 He also revealed that
Obermayer entered into an engagement letter in 2005 with the Debtor and Ambassador
related to legislation on payday lending. 	George did not know who Obermayer is
representing in the Consumer Class Litigation and notwithstanding an agreement to find out,
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6 Notably Larry and David have never appeared at any of the hearings or the § 341 held
in this matter. Given the deficiency in the knowledge of their delegate, the UST kept the record
of the § 341 meeting open for their testimony pending resolution of this contested matter.
-8-
has not disclosed who his colleague Mr. Sams is acting for in discussions with Consumer
Class Plaintiffs’ counsel in that case.
Before a further scheduled hearing was held on March 20, 2006 Richmond filed a
Supplemental Memorandum in Support of its Objection setting forth facts it gleaned at the
§ 341 meeting to further corroborate its view that the Application must be denied.
The evidentiary basis of these contentions was made part of the record on March 20.
Testifying for the Debtor at the § 341 meeting was its “chief financial officer” Chance
Minor (“Minor”). Exhibit R-1. Both Larry and David were out of the state on business.6
Minor, who is not an employee of the Debtor but of JDL, was the signatory on the Debtor’s
Schedules and Statement of Affairs. 	JDL was described as a management firm that
provides services to the Debtor and is now the source of Larry and David’s compensation.
Minor disclosed that Frascella Delaware, a Delaware payday lender, is a wholly owned
subsidiary of the Debtor. 	Although an operating company, no value was ascribed to its
shares on the Debtor’s Schedules. Since the Debtor’s monthly receipts of $35,000 do not
cover its expenses of $65,000, Frascella Delaware funds the shortfalls. Id. at 9.
Minor also explained the Debtor’s interaction with Ambassador, the affiliated
New Mexico payday lender. 	The family and friends of Larry and David had invested in
the Debtor. 	On December 15, 2005 shortly before the bankruptcy filing, payments of
principal and/or interest were made on account of these investor notes. Thereafter the notes
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7 See p. 7 supra.
8 Jeffrey Batoff appears as the senior attorney in the litigation pleadings and has affixed his
name to the Response to the Motion to Sever above that of George.
9 Obermayer responds that these are unpaid positions which do not involve day-to-day input
into WBA’s operations and as such, did not warrant disclosure in this bankruptcy case.
-9-
were moved to Ambassador because according to Minor, the Debtor could no longer service
them. As noted above, it is not clear whether the assignment of the loan portfolio which
the Debtor had recently purchased from County Bank was the quid pro quo for the transfer. 7
Ambassador also provides funds to the Debtor and has its registered office in the same
building owned and occupied by the Debtor in Langhorne, Pennsylvania. 	Exhibit R-5
and R-6. 	Richmond also notes that Jeffrey Batoff, Esquire, the Obermayer partner who
appears to be in charge of the Debtor’s legal affairs, 8 and Nicholas Poduslenko, another
partner, are on the advisory board of William Batoff Associates (“WBA”) whose clients are
the Debtor, Ambassador and Frascella Delaware. Exhibit R-3 and R-4. 9
As Richmond had only provided its Supplemental Memorandum and attached exhibits
the morning of the hearing, I allowed George ten days to supplement the record. In a letter
dated March 31, 2006, he advises me that no further factual submissions will be made.
Accordingly, the matter is ripe for decision.
DISCUSSION
I.
Section 327(a) of the Bankruptcy Code authorizes the Debtor as debtor-in-possession
to employ attorneys that “do not hold or represent an interest adverse to the estate, and
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that are disinterested.” 	A disinterested person is, inter alia, not a creditor. 	11 U.S.C.
§ 101(14)(A). 	A creditor is an entity that has a claim against the debtor that arose
pre-petition. 	Id. § 101(10)(A). 	Section 327(a) is implemented by Federal Rule of
Bankruptcy Procedure 2014 which proscribes the contents and procedure for an application
seeking an order approving the retention of counsel.
Of particular relevance to this contested matter is Rule 2014's requirement to state
“to the best of the applicant’s knowledge, all of the person’s connections with the debtor,
creditors, any other party in interest....” Fed.R.Bankr.P. 2014(a). Of such importance are
these disclosures that they must be contained in a verified statement of the person to be
employed. Id. Only by being able to assess the connections an attorney has to the debtor,
creditors and any other party in interest is the court (and the United States trustee) able to
determine whether the attorney holds an adverse interest or is not disinterested. In re Leslie
Fay Companies, Inc., 175 B.R. 525, 533 (Bankr. S.D.N.Y. 1994). 	As correctly noted by
Richmond, the duty of disclosure is therefore not discretionary. In re EWC, 138 B.R. 276,
280 (Bankr. W.D. Ok. 1992). 	Nor does it leave to the attorney a judgment as to what
connections are sufficiently material as to require disclosure. Id. (professionals cannot pick
and choose which connections are irrelevant or trivial). Finally the failure of an attorney to
properly discharge his disclosure duties to the court provides an independent ground for
disqualification. 	In re 22 Acquisition Corp., 2004 WL 870813, at *8 (E.D. Pa. May 13,
2003); In re eToys, Inc., 331 B.R. 176, 196-97 (Bankr. D. Del. 2005).
In this case, Obermayer appears to have lost sight of these fundamental principles.
The initial George affidavit in support of the Application reveals only that Obermayer
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10 I am unpersuaded by George’s reliance on this statement in his later affidavit to suggest
he was mindful of his duty to disclose. Nor am I persuaded that the fact that the Application had to
be filed at the inception of the case resulted in this lack of disclosure. I have found that Obermayer
was actively representing the Debtor and the Frascella Brothers in the two litigations that are at the
heart of this case and which appear to have been the moving force for its filing. This information
was known to the firm, if not George. George’s testimony at the initial hearing was vague, elusive
and even contradictory at one point. 	Even if others at the firm failed to inform him of all the
relevant facts, he signed the Affidavit on behalf of Obermayer and he had the duty to make
reasonable inquiries which, analyzing the facts in the best light, he did not do.
-11-
“has represented the Debtor prior to the institution of these Proceedings.” 	Affidavit ¶ 5.
His promise to supplement his affidavit “if and when necessary to disclose further pertinent
relationships that require disclosure” does nothing to ameliorate the breach of the duty of
disclosure which became apparent when the further disclosures were wrested from the firm. 10
Their content was known to Obermayer when the case was filed and were only made
“necessary” because of the actions of third parties who extracted the information out of the
firm by pressing objections to the Application. 	In the Amended Affidavit, George now
appears to understand he has to disclose Obermayer’s connections to the case.
In the Amended Affidavit George actually tells us in what manner Obermayer
represented the Debtor prepetition and reveals for the first time that it also represented Larry,
David and Theresa Frascella although “not substantively” but rather as “me too” defendants
in the Richmond Litigation. 	Am. Aff. ¶ 6. 	While he acknowledges that the firm has
represented the Debtor in the Class Action, he is silent about any advice or representation of
the Frascella Brothers in that case. The Amended Affidavit discloses other connections to
creditors of the Debtor and presents its response to the charge that the firm represented
Theresa Frascella, who it “believes” to be the Debtor’s landlord. Regrettably this untimely
disclosure is still not a complete one.
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11 This allocation conveniently circumvents the preference statute since there is no transfer
from the debtor but one from a third party.
-12-
In response to the allegation that Obermayer’s prepetition receipt of payments were
preferential, George attaches a spread sheet that discloses the payments the firm received in
the 90 day preference period, including two in the amount of $50,000 each on the date the
petition was filed: one was cryptically noted to be “From 3 rd Party.” It took further objection
and inquiry for Obermayer to feel it was “necessary” to reveal in a Supplemental Disclosure
that the source of the retainer was Larry and David drawing upon the funds of another one
of their entities, Ambassador. 	Exhibit D-1 ¶ 2. 	See Neben & Starett, Inc. v. Chartwell
Financial Corp., 63 F.3d 877, 880 and n.5 (9th Cir. 1995) (failure to disclose that debtor’s
principal, not debtor, paid the retainer out of his personal account was a violation of Rule
2014 even though there was insufficient proof that a conflict existed). Although money is
fungible, George states that the check Larry and David wrote on Ambassador’s account
was applied to unpaid prepetition time11 whereas the check Larry and David wrote on
the Debtor’s account paid certain “ordinary course” legal bills with the balance of $24,499.64
held as a retainer. Exhibit D-1 ¶ 2.
The Supplemental Disclosure also reveals for the first time a sale of the Debtor’s
short-term loan portfolio valued at $1.2 million to Ambassador. 	Id. ¶ 3. 	Notably this
transaction which represented the cessation of one of the Debtor’s two lines of business was
not disclosed in the Statement of Affairs. It only came to light, as did the other disclosures
in this third effort by George to fulfill his duty of disclosure, in response to Richmond’s
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12 George only now states that in 2005 Obermayer entered into an engagement letter with
the Debtor and Ambassador related to legislation on payday lending. Exactly what the scope of that
engagement was and how it was related to the sale transaction which was prompted by Pennsylvania
legislation which restricted payday lending is not addressed.
-13-
objection. Since George contends that the reason for this Chapter 11 case is to restructure
the Debtor in light of the termination of the payday lending business, it is hard to understand
why this significant transaction would not have been disclosed. When questioned about the
matter by the Court, George had no explanation. While it is true that this information would
not have been required in furtherance of the Application unless Obermayer had handled the
sale transaction (its involvement is still not acknowledged or refuted), 12 the failure to disclose
the loan portfolio sale does shed light on Obermayer’s fitness for the role it seeks in this case.
This and other breaches of its disclosure duty indicate that Obermayer is not prepared to be
candid with the Court, and will not insist that the Debtor, speaking through the Frascella
Brothers who have many potential conflicts in this case, exercise its fiduciary duty under the
Bankruptcy Code.
In short, the staged disclosures made in direct response to creditor pressure evidences
a deliberate choice by Obermayer to reveal as little information as possible. Disclosure must
not only be full, it must be timely. Even after three tries, George’s disclosures still obfuscate
the facts. Had the creditors been less persistent and less knowledgeable about the affairs of
the Debtor and the Frascella Brothers, I am convinced that the information in the second
and third disclosure documents might have never come to light. 	This is apparent from
the Debtor’s request that I authorize Obermayer’s appointment based on the bare bones and
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conclusory initial affidavit that supported the Motion. 	This record supports denial of the
Application without regard to the actual and potential conflicts between the Debtor,
its principals, and their related entities and the payments made to Obermayer on the eve
of the filing.
II.
While I have concluded that Obermayer’s abdication of its duty of disclosure is an
independent basis to deny the Application, I also find that the facts as ultimately disclosed
reveal potential and/or actual conflicts of interest which further support my ruling.
While averring that the firm neither represented nor intends to represent the Frascella
Brothers in this case and the related litigation removed here, the evidence is to the contrary.
George’s statement that Obermayer did not “substantively” represent the non-debtors in
filing pleadings on their behalf is nonsense. The firm filed pleadings and took discovery;
thus it represented the parties on whose behalf these actions were taken. This is proof that
Obermayer has represented these non-debtors. Actions for the benefit of the non-debtors
continue even though Obermayer does the affix those clients’ names to its pleading.
The Consumer Class Plaintiffs have filed a Motion to Sever and Remand the Class Action
Litigation which is directed solely at the non-debtor defendants. 	George testified that
Obermayer would not be taking a position in this matter for Larry and David. Yet no counsel
appear to oppose the Remand Motion on behalf of Larry and David. Rather that task is left
to Obermayer “on behalf of the Debtor.” Nor have counsel appeared for Larry and David
in the Richmond Litigation, and George’s testimony about his firm’s advice to them to get
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other counsel appears to be a reaction to the Objection rather than any clear statement of its
inability to represent them made at the inception of this case.
It also appears that Obermayer’s handling of this Chapter 11 case is intended to
insulate Larry and David, neither of whom appeared for the Debtor at the § 341 meeting and
neither of whom verified any documents in this case. While both claimed to be out of town
on the date of the § 341 meeting, sufficient notice was provided so that at least one of
them could have been available for this important event in the life of a Chapter 11 case.
Having sought relief from this Court, it behooves the Debtor to present its officer with
knowledge of the case to testify under oath. 	Rather the Debtor’s spokesperson has been
Chance Minor who is not even an employee of the Debtor but of JDL, another Frascella
entity that performs management services for the Frascella entities. His testimony was so
incomplete due to his lack of knowledge of the Debtor’s affairs that the § 341 meeting could
not be completed. Exhibit R-1.
While Obermayer suggests that its actions on behalf of the Debtor and its principals
are in furtherance of a “community of interest,” I believe the potential conflict they hold
is more harmful to the Debtor than any economy flowing from this common interest.
Thus, while it may be true that all parties have a common interest in defeating the claims
made by Richmond and the Class Plaintiffs, the culpability of the Debtor and Larry and
David could be different. Common counsel exercising no independent judgment on behalf
of the Debtor would not be able to pursue that distinction. 	This is especially the case
when the allegation is that the Frascella Brothers are using various corporations to harm
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the Debtor’s creditors. One small example brings that conclusion into focus. Obermayer,
on behalf of the Debtor, requested that it be allowed to pay its employees pre-petition wages.
Included in that request was Larry and David’s paychecks. When there was opposition to
this payment as a preference being made to insiders, the request was withdrawn. The two
owners are now being paid by JDL, another of their entities. Query, if it is appropriate and
permissible for JDL to pay the Frascella Brothers, why did counsel request payment to them
under the “necessity doctrine?”
A larger example of the problem which results when counsel’s loyalty and obligation
is divided is the transfer of the loan portfolio from the Debtor to Ambassador, another related
entity. While George recites facts that would have one believe this transfer to be for fair
consideration, the Frascella Brothers have an interest in retaining the benefit of that
transaction for their related company while the Debtor’s creditors are questioning it as
draining the estate of a valuable asset. Moreover, to finance the Debtor’s business, certain
investor notes had been created and sold to friends and family of the Frascella Brothers.
Prior to the sale of the portfolio and on the eve of the bankruptcy, substantial payments were
apparently made to these noteholders. 	The Debtor’s interest in avoiding these transfers,
if preferential, conflicts with the Frascella Brothers’ wish to have their family and friends
paid by the corporation.
The Objection presents other problems with Obermayer’s role in this case. 	I do not
think it is necessary to prolong this discussion by addressing each point. Suffice it to say that
the conflicts inherent in the legal undertakings by Obermayer on behalf of the Debtor and the
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In re Frascella Enterprises, Inc. - Bankruptcy No. 06-10322DWS
13 Richmond also contends that Obermayer received a preference and is therefore not
disinterested since the avoidance of the prepetition payment of legal fees would make the firm a
creditor. Obermayer disputes that any of the payments it received prepetition of its outstanding legal
bills will qualify as preferences. Its backup position is that if the UST concludes there has been a
preference, it will pay the money back. In In re Pillowtex, 304 F.3d 246, 253 (3d Cir. 2002), the
Third Circuit Court of Appeals rejected a similar pragmatic response to the allegation that the receipt
of a preference rendered the professional not disinterested. In that case, the parties recognized that
if a preference was established, the money would have to be returned to the debtor, leaving the
professional once again a creditor. The law firm agreed to waive the resulting claim if that should
occur. The Court found that the bankruptcy court could not avoid the clear mandate of the statute
by approving retention conditional on a later determination of the preference case. 	Based on
Pillowtex, I would have to make a determination of whether Obermayer received a preference before
approving its retention. Since I have concluded that its employment for the Debtor is otherwise not
permissible under § 327, I need not reach that issue at this time.
-17-
Frascella Brothers bolsters my conclusion that the Application should be denied. 13 An Order
consistent with this Opinion shall be issued.
DIANE WEISS SIGMUND
Chief U.S. Bankruptcy Judge
Dated: April 12, 2006
Case 06-10322-mdc Doc 61 Filed 04/12/06 Entered 04/13/06 12:48:27 Desc Main
Document Page 17 of 19

UNITED S TATES B ANKRUPTCY COURT
FOR T HE E ASTERN DISTRICT O F PENNSYLVANIA
In re 	: 	Chapter 11
:
FRASCELLA ENTERPRISES, INC., 	: 	Bankruptcy No. 06-10322DWS
dba Cash Today, 	:
:
Debtor. 	:
ORDER
AND NOW, this 12th day of April 2006, upon consideration of the Application of
the 	Debtor 	to 	Employ 	Obermayer 	Rebmann 	Maxwell 	& 	Hippel 	LLP 	as 	Counsel
(the “Application”) and the objection (the “Objection”) of Creditor Richmond Financial, Inc.,
after notice and hearing and for the reasons stated in the accompanying Opinion;
It is hereby ORDERED that the Application is DENIED.
DIANE WEISS SIGMUND
Chief U.S. Bankruptcy Judge
Case 06-10322-mdc Doc 61 Filed 04/12/06 Entered 04/13/06 12:48:27 Desc Main
Document Page 18 of 19

-2-
Copies to:
Edmond M. George, Esquire
OBERMAYER REBMANN MAXELL
& HIPPEL LLP
1900 One Penn Center
1617 J.F.K. Boulevard
Philadelphia, PA 19103
Jonathan J. Bart, Esquire
SILVERMAN BERNHIEM & VOGEL
Two Penn Center Plaza
Suite 910
Philadelphia, PA 19102
Gary David Bressler, Esquire
ADELMAN LAVIN GOLD AND LEVIN
Four Penn Center - Suite 900
Philadelphia, PA 19103-2808
Dave P. Adams, Esquire
Office of the U.S. Trustee
833 Chestnut Street
Suite 500
Philadelphia, PA 19107
Case 06-10322-mdc Doc 61 Filed 04/12/06 Entered 04/13/06 12:48:27 Desc Main
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