
USCA1 Opinion

	




                            UNITED STATES COURT OF APPEALS                                FOR THE FIRST CIRCUIT                                                                                      ____________________          No. 93-1971                                   BERNARD P. ROME,                                      Appellant,                                          v.                               JOSEPH BRAUNSTEIN, ETC.,                                      Appellee.                                                                                      ____________________                     APPEAL FROM THE UNITED STATES DISTRICT COURT                          FOR THE DISTRICT OF MASSACHUSETTS                       [Hon. Rya W. Zobel, U.S. District Judge]                                           ___________________                                                                                      ____________________                                        Before                                Selya, Circuit Judge,                                       _____________                            Bownes, Senior Circuit Judge,                                    ____________________                               and Cyr, Circuit Judge.                                        _____________                                                                                      ____________________               Bernard P. Rome, with whom Rome, George & Klein was on brief               _______________            ____________________          for appellant.               Isaac H. Peres, with  whom Riemer & Braunstein was  on brief               ______________             ___________________          for appellee.                                                                                      ____________________                                    March 22, 1994                                                                                      ____________________                    CYR, Circuit Judge.   Bernard P. Rome, Esquire, appeals                    CYR, Circuit Judge.                         _____________          from  a  district court  order  entered  on intermediate  appeal,          affirming  a  bankruptcy court  ruling  under  Bankruptcy Code             328(c) disallowing Rome's application for fees as court-appointed          counsel to  chapter 7  debtor Chestnut Hill  Mortgage Corporation          (CHM)  due to  disqualifying conflicts  of interest.   Finding no          error, we affirm.                                          I                                          I                                      BACKGROUND                                      BACKGROUND                                      __________                    As its longtime corporate clerk and counsel, Rome filed          a chapter 11 petition in behalf of CHM in November 1989, followed          by  an  application for  Rome's  appointment  as counsel  to  the          chapter  11  debtor in  possession  pursuant  to Bankruptcy  Code            1107(a), 11 U.S.C.   1107(a); see  also id.   327(a), 11 U.S.C.                                          ___  ____ ___             327(a).  Thereafter, as  counsel to the  debtor in possession,          Rome filed three abortive chapter 11 reorganization plans propos-          ing a 20% dividend  to general creditors.  Various  CHM creditors          successfully resisted  these initiatives, however, on  the ground          that the plans would  unfairly advantage certain CHM  insiders             including its president and sole shareholder, Arnold Leavitt, and          Leavitt's family  and friends    by  providing priority repayment          of their prepetition "loans" to  CHM.  In August 1990,  after all          three plans failed to win creditor approval, the bankruptcy court          acceded to creditor demands  for the appointment of a  chapter 11          trustee, appellee  Joseph Braunstein, and to  Braunstein's reten-                                          2          tion  of Riemer and Braunstein (R &  B) as counsel to the chapter          11 trustee.                    Meanwhile, three months before Braunstein's appointment          as  the CHM chapter 11 trustee, an involuntary chapter 7 petition          had been filed against Arnold Leavitt.  Shortly thereafter, while          still serving as counsel to CHM  in its chapter 11 case, and with          bankruptcy court authorization, Rome began to serve as counsel to          Arnold Leavitt  in  the involuntary  chapter  7 proceeding.    As          chapter 11  trustee, appellee Braunstein began  negotiations with          Rome,  by then  also  representing one  Sandra Dickerman,  Arnold          Leavitt's secretary at  CHM, in her ultimately  successful bid to          purchase property belonging  to the  CHM chapter 11  estate.   In          March  1991,  less than  two  months after  the  bankruptcy court          approved the Dickerman acquisitions from CHM, the  CHM chapter 11          proceedings  were  converted  to  chapter 7  and  Braunstein  was          appointed the CHM chapter 7 trustee.                    Late  in 1991, Braunstein, R & B, and Rome filed appli-          cations  for compensation  and  reimbursement of  expenses.   The          Braunstein application, as chapter 11 and chapter 7 trustee,  and          the R & D application as counsel to the chapter 11 and  chapter 7          trustee,  approximated $81,000  in  fees.   The Rome  request, as          counsel  to CHM qua debtor  and chapter 11  debtor in possession,                          ___          approximated  $62,000.   The  applications  were  opposed by  CHM          creditors; additionally, Braunstein, as  the CHM chapter 7 trust-          ee, opposed the Rome application.                                            3                    At the  hearing held on these  fee applications, Braun-          stein represented to the bankruptcy court that he intended to set          aside  certain  prepetition transfers  of  CHM  assets as  either          preferential or  fraudulent.  Creditors represented  to the court          that  Arnold Leavitt had "looted"  CHM prior to  Rome's filing of          the  CHM  chapter  11 petition,  by  transferring  CHM  assets to          Leavitt  family members, and that  Rome, in an  effort to further          Leavitt's  interests at  the expense  of  CHM and  its creditors,          repeatedly  "obstructed" creditor  efforts  to investigate  CHM's          financial  condition  and to  promote  its  reorganization.   The          bankruptcy  court ultimately allowed the Braunstein and R & B fee          applications  in full.  On  the other hand,  the court disallowed          the Rome  application  entirely,  on two  grounds:    (1)  Rome's          contentious tenure as counsel to  the debtor in possession  "pro-          duced virtually  no benefit to creditors  and loan participants";          and (2) Rome's concurrent  representation of CHM and  Leavitt, as          well as  CHM and  Dickerman, was "patently  inappropriate."   The          district court affirmed.                                          II                                          II                                      DISCUSSION                                      DISCUSSION                                      __________                    The  Bankruptcy  Code  imposes   particularly  rigorous          conflict-of-interest  restraints upon  the employment  of profes-          sional persons in a bankruptcy case.                    Except as otherwise provided in this section,                    the  trustee, with the  court's approval, may                                  ____ ___  _______ ________                    employ  one  or more  attorneys, accountants,                                          4                    appraisers, auctioneers, or other profession-                    al 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.          Bankruptcy Code    327(a), 11  U.S.C.   327(a)  (emphasis added).          See Fed. R. Bankr. P. 2014; In re Cropper Co.,  35 B.R. 625, 629-          ___                         _________________          30 (Bankr.  M.D. Ga. 1983)  (noting "strict standards"  unique to          bankruptcy);  see also  Bankruptcy  Code    1107(a), 11  U.S.C.                          ___ ____          1107(a) (   327(a) applicable  to counsel representing  debtor in          possession);  In re  Roberts, 46  B.R. 815,  822 (Bankr.  D. Utah                        ______________          1985).   Moreover, as the bankruptcy court is invested with ample          power  to  deter  inappropriate  influences  upon  the  undivided          loyalty of court-appointed professionals throughout their tenure,                                                   __________ _____ ______          the  need for  professional self-scrutiny  and avoidance  of con-          flicts of interest does not end upon appointment.  The court "may                                                                        ___          deny  allowance of compensation . . . if, at any time during such                                                    __ ___ ____          .  .  . employment  . . .  , such  professional person  is  not a          disinterested person, or represents  or holds an interest adverse                                   __________              ________ _______          to the interest of the estate . . . ."  Bankruptcy Code   328(c),          11  U.S.C.    328(c)  (emphasis  added).   Thus,  section  328(c)          authorizes  a  "penalty" for  failing  to  avoid a  disqualifying          conflict of  interest.  See S. Rep. No. 989, 95th Cong., 2d Sess.                                  ___          39 (1978).                                           5                    Although  the  Code  idiom "interest  adverse"  is  not          defined,1 the  companion requirement    that  appointees be "dis-          interested"     is  defined,  see Bankruptcy  Code   101(14),  11                                        ___          U.S.C.   101(14), as  including, inter  alia, one who  is "not  a                                           _____  ____          creditor, an  equity shareholder, or an  insider," nor presently,                                                             ___          or  "within two  years  before [bankruptcy],  a[n] . . .  officer                                                                    _______          . . .of the debtor,"  and does not  have "an interest  materially                                ___                    ________  __________          adverse to the interest of  the estate or of any class  of credi-          _______          tors or equity security holders" for "any reason."  Id. (emphasis                                                              ___          added);  see In  re Martin,  817 F.2d  175, 179 (1st  Cir. 1987).                   ___ _____________          These statutory requirements    disinterestedness and no interest          adverse to the estate     serve the important policy  of ensuring          that all  professionals  appointed  pursuant  to  section  327(a)          tender undivided loyalty and  provide untainted advice and assis-          tance in furtherance of their fiduciary responsibilities.2                                         ____________________               1However,  an  "adverse  interest"  has  been  described  in          pragmatic terms as the "possess[ion] or assert[ion] [of] mutually          exclusive  claims to  the same  economic interest,  thus creating          either an actual or potential dispute between rival claimants  as          to which . . . of them the  disputed right or title to the inter-          est in question attaches  under valid and applicable law;  or (2)          [the possession  of] a  predisposition or interest  under circum-          stances that render such a bias in favor of or against one of the          entities."  In re Roberts, 46 B.R. at 826-27.                      _____________               2Rome  argues  on appeal  that  he  not only  disclosed  his          position as the clerk  of CHM but could reasonably  have believed          that such a ministerial  position would not make him  a corporate          "insider"  within the  meaning of  Bankruptcy Code    101(31), 11          U.S.C.    101(31).   We  express no  view  on these  claims,  and          confine our holding to Rome's impermissible representation of two          other clients (Leavitt and Dickerman) with "interests adverse" to          the CHM estate which he was responsible for representing by court          appointment.                                           6                    In the exercise of  its own ongoing affirmative respon-          sibility to "root out  impermissible conflicts of interest" under          Bankruptcy Code     327(a) and 328(c), the  bankruptcy court must          determine whether  any  competing interest  of a  court-appointed          professional  "created  either  a  meaningful  incentive  to  act          contrary  to  the best  interests of  the  estate and  its sundry          creditors    an  incentive sufficient to  place those parties  at          more  than acceptable  risk     or  the reasonable  perception of          ____  ____ __________  ____             __________  __________          one."   Martin, 817 F.2d  at 180 (emphasis  added).  The  test is                  ______          neither subjective, nor  significantly influenced  by the  court-          appointed  professional's "protestations of  good faith," as Rome          would  have  it, see,  e.g., supra  note  2, but  contemplates an                           ___   ____  _____          objective screening  for even  the  "appearance of  impropriety."          Id.  at 180-81, 182.  Finally, if its fact-specific inquiry leads          ___          the bankruptcy  court to conclude that  an impermissible conflict          of interest looms or exists, available sanctions include disqual-          ification and  the denial or  disgorgement of all  fees.   Id. at                                                                     ___          182-83.  See Bankruptcy  Code   328(c), 11 U.S.C.   328(c).   We,                   ___          like the district court, will then review the bankruptcy  court's          factual  findings for clear error  and its conclusions  of law de                                                                         __          novo.  In re La Roche, 969 F.2d 1299, 1301 (1st Cir. 1992).           ____   ______________                    The  bankruptcy court  determined that  Rome improperly          represented  two undisclosed  "interest[s]  adverse"  to the  CHM          chapter  11 estate      Arnold Leavitt  and  Sandra Dickerman              resulting  in  actual  conflicts  of  interest warranting  Rome's          retroactive  disqualification and forfeiture  of all compensation          ___________                                          7          from  the chapter 11 estate.   Rome raises  three principal chal-          lenges to the bankruptcy court ruling.            A.  The Duty of Disclosure          A.  The Duty of Disclosure              ______________________                      First, Rome argues that  retroactive disqualification          is inequitable in these circumstances, since the bankruptcy court          and the  trustee tacitly  endorsed his representation  of Leavitt          and  Dickerman, pendente lite, or,  at the very  least, voiced no                          ________ ____          objection until the filing of his application for compensation in          December  1991.  Given the relevant findings in this case, howev-          er, we  are not  swayed by  Rome's resort  to general  notions of          equity.                    Although the  bankruptcy court has an  affirmative duty          to  exercise  vigilance in  avoiding  impermissible  conflicts of          interest on the part of court-appointed professionals, see, e.g.,                                                                 ___  ____          In re  Anver Corp., 44 B.R. 615, 617 (Bankr. D. Mass. 1984) (once          __________________          alerted to  potential conflict of  interest on part  of appointed          counsel,  the bankruptcy court must  raise the issue, sua sponte,                                                                ___ ______          in order to safeguard  its institutional integrity), normally the          professional, especially  counsel, possesses ready access  to, if          not full   awareness of,  the facts material  to any existing  or          potential  competing  interest  which  might  conflict  with  the          interests court-appointed counsel must represent, or those  which          might generate an unacceptable appearance or risk of conflict.                    As  with other prophylactic  ethical rules constraining          attorney conduct, sections 327(a) and 328(c) cannot achieve their          purpose unless  court-appointed counsel police themselves  in the                                          8          first instance, especially in  circumstances such as these, where          the nominal applicant (CHM) for Rome's appointment is a corporate          debtor  in possession who can  only act through  its officers and          agents     here  Leavitt,  Rome, and  Dickerman     and  may  not                                                                   ___  ___          command the appointee's primary  loyalty.  See In re  Roberts, 46          _______ ___ ___________ _______  _______   ___ ______________          B.R.  at 837-39,  846  (duty of  disclosure  and disallowance  of          compensation under    327(a) and 328(c)  are designed to "prevent          'the dishonest  practitioner from  [engaging in]  fraudulent con-          duct,  and  to  preclude  the honest  practitioner  from  putting          himself in a  position where he may be required to choose between          conflicting  duties'")  (citation omitted).    Thus,  as soon  as          counsel acquires even  constructive knowledge reasonably suggest-          ing  an actual or potential  conflict, see id.  at 839 (fiduciary                                                 ___ ___          duty of disclosure arises  as soon as counsel becomes  "aware" of          facts), a bankruptcy court ruling should be obtained.  See, e.g.,                                                                 ___  ____          In  re Martin, 817 F.2d at 182 ("There  must be at a minimum full          _____________                                   __ _ _______          and  timely disclosure of  the details of  any given arrangement.                                         _______          Armed with  knowledge of all  the relevant facts,  the bankruptcy                      _________    ___          court  must  determine, case  by  case, whether  [a  conflict ex-                                  ____  __  ____          ists].") (emphasis  added); see also  In re Huddleston,  120 B.R.                                      ___ ____  ________________          399, 400-01 (Bankr.  E.D. Tex. 1990) ("The case law is clear that          the burden of disclosure is upon 'the person making the statement          [of  qualification for  employment]  to come  forward with  facts          pertinent to  eligibility and to make candid and complete disclo-          sure.'  . . .  '[T]his decision  should not  be left  to counsel,          whose  judgment may be clouded  by the benefits  of the potential                                          9          employment.'") (citations omitted); In  re O'Connor, 52 B.R. 892,                                              _______________          894 (Bankr. W.D. Okla. 1985)  (counsel, who disputed existence of          disqualifying  conflict, requested  court's "instructions  on how          [to] proceed").3                     Absent the spontaneous, timely and  complete disclosure          required  by section 327(a) and Fed. R. Bankr. P. 2014(a), court-          appointed counsel  proceed at their own  risk.  See,  e.g., In re                                     __ _____ ___  ____   ___   ____  _____          Roger J. Au & Son, Inc., 71 B.R. 238, 242 (Bankr. N.D. Ohio 1986)          _______________________          (failure  to disclose  facts material  to potential  conflict may          provide  totally independent  ground  for denial  of fees,  quite                   _______ ___________          apart from the actual  representation of competing interests); In                                                                         __          re Thompson, 54 B.R. 311, 317 (Bankr. N.D. Ohio 1985) (same);  In          ___________                                                    __          re Whitman, 51 B.R. 502, 507 (Bankr. D. Mass. 1985) (same); In re          __________                                                  _____          Guy  Apple Masonry Contractors, Inc., 45 B.R. 160, 163 (Bankr. D.          ____________________________________          Ariz. 1984) (same); see  also In re Kendavis Indus.  Int'l, Inc.,                              ___  ____ __________________________________          91 B.R. 742, 748-49 (Bankr. N.D. Tex. 1988) (summarizing legisla-          tive history  of    327(a) and 330,  noting congressional concern                                        ____________________               3Of course, disclosure of facts suggesting a conflict is not          invariably followed by disqualification.  In special circumstanc-          es, for  example, the  bankruptcy court  could determine,  in the          sound exercise  of its discretion, that  any potential impairment          of its  institutional integrity, or  risk of  divided loyalty  by          counsel,  was  substantially outweighed  by  the  benefits to  be          derived  from  counsel's  continued  representation  of  multiple          entities  or  the   impracticability  of  disentangling  multiple          interests "without  unreasonable delay and expense."  In re Hoff-                                                                ___________          man, 53 B.R. 564, 566 (Bankr. W.D. Ark.  1985).  See In re O'Con-          ___                                              ___ ____________          nor, 52  B.R. at 895 (noting countervailing interest in "curtail-          ___          ment of administrative expenses"  where potential for conflict is          dormant  or remote).  In  no event, however,  may counsel presume                                                                    _______          dispensation from the full disclosure required by   327(a) or the          sanctions  authorized under   328(c).  See also Fed. R. Bankr. P.                                                 ___ ____          2014(a).                                          10          that in earlier corporate  reorganization proceedings "the finan-          cial well-being of investors and the public [had been] sacrificed          to  the  [corporate]  insiders'  desire for  protection  and  for          profit").   Thus,  Rome's failure  to make  full  and spontaneous          disclosure of the financial  transactions among CHM, Leavitt, and          Leavitt's  family  members  shortly  before Rome  filed  the  CHM          chapter 11 petition,  see infra note  5 (and accompanying  text);                                ___ _____          see also Fed. R. Bankr. P.  2014(a), and to obtain explicit court          ___ ____          authorization to represent  Dickerman, provided sufficient ground          for  the  discretionary  denial  of  compensation  under  section          328(c).           B.   The Risk Posed by Competing Interests          B.   The Risk Posed by Competing Interests               _____________________________________                    Second, in a bid to  vindicate his failure to disclose,          Rome  claims there  was no potential  conflict of  interest since          Leavitt's and Dickerman's interests were never "adverse" to those          of the chapter 11 estate.                1.  The Leavitt Interests               1.  The Leavitt Interests                   _____________________                    Rome  argues that  section  327(a) does  not absolutely          prohibit concurrent  representation  of  a  corporate  debtor  in          possession  and its  sole shareholder,  absent  evidence affirma-          tively  demonstrating  an "actual"      as  distinguished from  a          "potential"    conflict of interest.  Moreover,  there could have          been  no "actual"  conflict, he  suggests, because:   (1) between          December 1989 and May  1990, Rome did not represent  Leavitt; (2)          between May  1990, when  the involuntary chapter  7 petition  was                                          11          filed  against  Leavitt, and  August  1990,  when Braunstein  was          appointed the CHM  chapter 11  trustee, it was  not Rome but  the          chapter  7 trustee who represented the  Leavitt chapter 7 estate;          and (3) none of the transfers from CHM to Leavitt  prior to CHM's          chapter 11  petition have yet been  proven improper, preferential          or fraudulent.  These arguments are specious.                    The fact that Rome did not  represent Leavitt until May          1990 is  immaterial, since section 328(c)  expressly empowers the          bankruptcy  court  to  disallow compensation  if  court-appointed          counsel, "at any  time," is either  not a "disinterested"  person          "or  represents or holds an  interest adverse to  the interest of          the  estate  with respect  to the  matter  on which  [counsel] is          employed."  Bankruptcy Code   328(c), 11 U.S.C.   328(c).  Rome's          post-May 1990 representation of chapter 7 debtor Leavitt, against          whom the  CHM chapter 11  estate    also  represented by Rome              held claims for the avoidance of alleged preferential and fraudu-          lent  transfers, created  a  clear conflict  of interest  without                                                                    _______          regard  to whether the Leavitt chapter 7 estate itself was repre-          ______  __ _______ ___ _______ _______ _ ______ ______ ___ ______          sented  by a  trustee  in bankruptcy.    After all,  Rome  sought          ______  __ _  _______  __ __________          compensation for services rendered to  the CHM chapter 11 estate,                                             __  ___ ___ _______ __ ______          not to Leavitt, the chapter 7 debtor.  Cf. In re Hoffman, 53 B.R.                                                 ___ _____________          564, 565 (Bankr.  W.D. Ark.  1985) (  327(a)  is inapplicable  to          appointment or compensation of counsel to chapter 7 debtor).  Yet          Rome's  representation of  Leavitt in  the involuntary  chapter 7          proceeding plainly  undermined  confidence in  Rome's ability  to          provide  impartial  advice to  the  CHM  estate  relating to  the                                          12          prospects  for recovering  the alleged  prepetition transfers  to          Leavitt and Leavitt family members.                    As concerns  Rome's third contention     that no trans-          fers  from CHM to Leavitt prior to CHM's chapter 11 petition have          yet  been proven improper,  preferential or fraudulent     we are                    ______          bound by  the bankruptcy court's factual  findings unless clearly          erroneous.   See In re La Roche, 969 F.2d  at 1301; In re Martin,                       ___ ______________                     ____________          817 F.2d at 182-83 (noting that "[t]he bankruptcy judge is on the          front line, in the  best position to gauge the  ongoing interplay          of  [  327(a)] factors  and to make  the delicate  judgment calls          which such a  decision entails");  In re Huddleston,  120 B.R  at                                             ________________          402-03  (favoring  case-by-case  analysis).    And  since section          327(a) is designed  to limit even  appearances of impropriety  to          the extent reasonably practicable, doubt as to whether a particu-          lar  set of  facts  gives rise  to  a disqualifying  conflict  of          interest normally  should be  resolved in favor  of disqualifica-          tion.  Cf. In re  Freedom Solar Ctr., Inc., 776 F.2d  14, 17 (1st                 ___ _______________________________          Cir. 1985).4                    Even if we were  to set to one side  Rome's unexplained          failure  at the outset to  apprise the bankruptcy  court of facts          that might generate an  appearance of impropriety, the bankruptcy               _____          court's section 328(c)  ruling is well  supported by the  record.                                        ____________________               4Although In re Freedom Solar involved an application of the                         ___________________          Maine Bar Rules in a bankruptcy proceeding, we cite to it throug-          hout  this  opinion  in  contexts legitimately  informed  by  its          closely analogous discussion.  See, e.g., In re Kendavis, 91 B.R.                                         ___  ____  ______________          at 752 ("The Bankruptcy Code provisions dealing with conflicts of          interest  find their counterparts in the ABA Code of Professional          Responsibility."); In re Roberts, 46 B.R. at 829-37 (same).                             _____________                                          13          As the bankruptcy court  was informed at  the hearing on the  fee          applications, see supra  at p. 4, CHM  creditors had commissioned                        ___ _____          the Peterson  Report, a  pre-chapter 11 investigation  into CHM's          financial condition,  which  disclosed that  Arnold  Leavitt  had          caused  large  prepetition transfers  from  the  CHM treasury  to          himself  and immediate  family members.5   In addition,  Rome had          shown considerable intransigence to efforts by Peterson to obtain          access  to  certain CHM  records,  even  informing Peterson  that          access  must  await "litigation"  and  "discovery."   See  In  re                                                                ___  ______          Martin, 817 F.2d at 182 (noting relevance of "adverse"  interests          ______          which  threaten  "to hinder  or to  delay  the effectuation  of a          [reorganization]  plan"); cf. In re Freedom Solar, 776 F.2d at 16                                    ___ ___________________          (noting  shareholder interest  "in delaying  the turnover  of the          assets [in order] to use his possession of  them as a negotiating          chip,  while the  debtor's interest  was in cooperating  with the          trustee  to achieve  the  swiftest resolution  possible"); In  re                                                                     ______          Kendavis,  91  B.R. at  750-51  (describing  counsel's resort  to          ________          dilatory "scorched earth" tactics in behalf of insiders "adverse"          to  debtor).    Coupled  with the  preferential  "insider"  terms          proposed in  the three CHM  chapter 11 reorganization  plans Rome          presented to  CHM creditors, his continued participation promoted                                        ____________________               5Appellee Braunstein, the CHM chapter 7 trustee, represented          to the bankruptcy court that he had objected to Leavitt's chapter          7 discharge, and was preparing to initiate an adversary  proceed-          ing  against Leavitt's  wife  and son  to  recover an  automobile          allegedly  transferred to Leavitt by CHM a few months before Rome          filed the  chapter 11  petition  in behalf  of CHM.    Cf. In  re                                                                 ___ ______          Freedom  Solar, 776 F.2d at 17  (potential adverse interest looms          ______________          where shareholder of corporate debtor may have received preferen-          tial transfer).                                          14          the  readily foreseeable  perception  that he  was attempting  to          insulate Leavitt's personal and family financial interests at the          expense of the CHM chapter 11  estate and its creditors.  See id.                                                                    ___ ___          at 750 (internal corporate communication suggested that attorneys          improperly represented family controlling debtor corporation, and          not their client of record    the debtor); In re Hoffman, 53 B.R.                                                     _____________          at 565 (first loyalty of corporate debtor's counsel must lie with          corporation, not with its individual officers).               2.  The Dickerman Interests               2.  The Dickerman Interests                   _______________________                    Rome argues, in a similar vein, that after Braunstein's          appointment  as  the  CHM  chapter  11 trustee  in  August  1990,          Braunstein  alone represented CHM's interests.  Thus, as a matter                                                                __ _ ______          of  law, there  could  have been  no  disqualifying "conflict  of          __  ___          interest" in Rome's concurrent representation of Dickerman in her          successful purchase of CHM's assets.  Moreover, even as a factual          matter,  he argues,  there  could have  been  no actual  conflict          because Dickerman was the only bidder and the sale benefited both                                    ____          buyer and seller.                    As with  other arguments insistently advanced  by Rome,          this one presupposes that there can  be no disqualifying conflict          absent proof of actual loss or injury.  On the contrary, simulta-                          ______ ____ __ ______          neous  representation of  the buyer  and the  seller in  the same          transaction  is a prototypical disqualifying conflict of interest          even if it is not  invariably disqualifying in all circumstances.          See  In re Tidewater Memorial  Hosp., Inc., 110  B.R. 221, 228-29          ___  _____________________________________          (Bankr. E.D. Va. 1989)  ("[D]ouble representation [in acquisition                                          15          of  debtor's assets] can  be allowed, if  at all, only  under the          strictest adherence  to the  statute and  regulations," including          full  disclosure.).  Even if Dickerman was the highest bidder for                __________          these  CHM assets, or even the only one, Rome's longtime position          as corporate  clerk  and counsel  to  CHM, both  prepetition  and          postpetition, presumably  afforded him  unique  access to  inside          information  concerning  the  nature  and value  of  its  assets,          information that Rome could have used (or been tempted to use) to          enable  his other  client     Dickerman      to submit  a  better          calibrated bid than  arm's-length bidders could venture,  thereby          potentially  chilling  bidding at  the  expense  of CHM  and  its          creditors.  Cf. In  re Freedom Solar,  776 F.2d at 16  (corporate                      ___ ____________________          debtor's shareholder had legitimate  interest in buying assets at          lowest  possible  price; debtor  in  selling  at highest  price).          Furthermore,  counsel  to a  chapter  11  debtor owes  continuing                                                    ______          loyalty  to the  debtor  throughout the  chapter 11  proceedings;                           ______          appointment  of  a chapter  11  trustee  does  not end  counsel's          obligation to  the debtor  entity.   See id. at  18 (noting  that                             ______  ______    ___ ___          "[f]ederal law imposes enduring duties on the debtor . . .  [and]          [i]n these  situations, the debtor needs  real representation and          advice";  ethical rules  are designed  "to avoid  the possibility          that  [the attorney] will succumb  to temptation and give tainted          advice").  In our considered view, therefore, Rome's unauthorized          representation of Dickerman  generated a palpable appearance  and          risk  of divided loyalties,  see In re Thompson,  54 B.R. at 316,                                       ___ ______________                                          16          placing  the CHM  estate at  "more than  acceptable risk,"  In re                                                                      _____          Martin, 817 F.2d at 180.          ______          C.   Severity of Sanction          C.   Severity of Sanction               ____________________                    Finally,  Rome argues,  even  if  the bankruptcy  court          supportably  determined that  he represented  "adverse" interests          that should have  been disclosed  ab initio, the  most it  should                                            __ ______          have done is reduce  his compensation since there is  no evidence          that  any conflict  of interest,  however suspect  in appearance,          actually harmed the chapter  11 estate or its creditors,  and the          ________          trustee concedes  that Rome  provided "valuable services"  to the          estate.6                    An attorney retained pursuant to section 327(a) assumes          a fiduciary responsibility to refrain from rendering any unautho-          rized service in furtherance of an interest adverse to the client          he serves by court appointment.   See In re Kendavis, 91  B.R. at                                            ___ ______________          753 (citing Wolf  v. Weinstein, 372  U.S. 633,  641 (1963)).   "A                      ____     _________          fiduciary  . . . may  not perfect  his claim  to  compensation by          insisting that, although he  had conflicting interests, he served          his  several masters equally well or that his primary loyalty was          not weakened  by the pull of  his secondary one."   Woods v. City                                                              _____    ____          Nat'l  Bank & Trust Co., 312 U.S. 262, 269 (1941); In re Roger J.          _______________________                            ______________                                        ____________________               6We need not address Rome's argument that it was inequitable          to  allow the Braunstein and R &  B fee applications in full, yet          disallow Rome's application in full.  Rome informed the bankrupt-          cy  court that he was  "not opposed" to the  Braunstein and R & B          fee    applications.   Hence,  the reasonableness  of  the former          ruling is an  issue which has been waived.   See Mark Bell Furni-                                                       ___ ________________          ture  Warehouse, Inc. v. D.M. Reid Assocs., Ltd. (In re Mark Bell          _____________________    _______________________  _______________          Furniture Warehouse, Inc.), 992 F.2d 7, 9 (1st Cir. 1993).          _________________________                                          17          Au,  71 B.R.  at 241.   Especially where  there has  been a clear          __          failure to  make timely and  spontaneous disclosure of  all facts          material  to a  disqualifying conflict  of interest,  counsel ap-          pointed pursuant to section 327(a) can lay no claim of right to a                                                        _____ __ _____ __ _          lesser sanction than the bankruptcy court is authorized to impose          ______ ________          pursuant to section 328(c).                     Like  other  courts  which have  considered  the issue,          however, we  adopt  no  per  se  or  brightline  rule  invariably                                  ___  __          requiring  denial  of  all compensation  under  section  328(c).7          _________          Nevertheless, based on its  familiarity with the CHM proceedings,          the bankruptcy court in  this case acted well within  its discre-          tion  in  finding that  Rome's  services  "produced virtually  no          benefit."   See,  e.g.,  Bankruptcy Code    330(a)(1), 11  U.S.C.                      ___   ____            330(a)(1)  (compensation may  be  based on  assessment of  "the          value  of such services"); In re Kendavis, 91 B.R. at 762 (reduc-                                     ______________          ing fees by 50% for conflict of interest, but citing "exceptional          circumstances"); In  re  Whitman, 51  B.R.  at 506  (noting  that                           _______________          "results  obtained" are  relevant  consideration).   Furthermore,          where  court-appointed counsel  has  served under  an undisclosed                                        ____________________               7See, e.g., In  re Kendavis,  91 B.R. at  762 (general  rule                ___  ____  _______________          favors  total  denial of  compensation,  but  equities may  allow          lesser sanction as facts warrant); In re Roger J. Au,  71 B.R. at                                             _________________          242-43  (since   328(c)  says  "may deny,"  the bankruptcy  court          retains discretion to depart from  general rule of total  denial,          where equities  demand); In re GHR  Energy Corp., 60  B.R. 52, 68                                   _______________________          (Bankr.  S.D. Tex.  1985) (penalty  for   327(a) conflict  may be          adjusted to reflect gravity of breach); In re Roberts, 46 B.R. at                                                  _____________          846-48,  850  (same, noting  that  bankruptcy court  is  court of          equity).  But cf. In re Chou-Chen Chems., Inc., 31 B.R. 842, 850-                    ___ ___ ____________________________          51 (Bankr. W.D. Ky. 1983) (favoring denial of all compensation if          conflict exists, regardless of benefit from services rendered).                                          18          disqualifying conflict  of interest, the bankruptcy  court cannot          always assess with precision the effect the conflict may have had          either on the  results achieved  or the results  that might  have          been  achieved by following "the road not taken."  See Woods, 312                                                             ___ _____          U.S.  at 269 ("[T]he incidence of a particular conflict of inter-          est  can seldom  be measured  with any  degree of  certainty [and          [t]he bankruptcy  court need not speculate as to [] the result of          the conflict . . . ."); In re Tidewater, 110 B.R. at 229 (denying                                  _______________          compensation  even though  there  was "[n]o  doubt  the law  firm          performed  valuable services in the  chapter 11 case").8   Yet as          an appellate  court, we are  poorly positioned to  second-guess a          bankruptcy  court's judgment  call  in these  circumstances,  and          neither we nor the  district court have been shown any reason for          doing so in the present case.                    The district court judgment is affirmed.                     The district court judgment is affirmed.                    _______________________________________                                        ____________________               8For example, the bankruptcy court observed that Rome's role          as counsel to  CHM, qua debtor in  possession, generated vigorous                              ___          opposition to all three reorganization plans, as well as unusual-          ly  intense antagonism  from CHM's  general  creditors (including          Rome's longtime  law partner).  The  clear implication, unverifi-          able  in hindsight,  is that  CHM's reorganization  prospects may          have  been better  but  for Rome's  insistence  on serving  three          clients simultaneously in these proceedings.  In  re Kendavis, 91                                                        _______________          B.R. at  748 ("[E]thical violations or conflicts  of interest may          lessen the value  of services.   If an  attorney holds an  undis-          closed adverse interest, a court is empowered to deny all compen-          sation.")  (citation  omitted); In  re  Whitman, 51  B.R.  at 507                                          _______________          (same).   Retrospective damage assessments are  made all the more          difficult where  counsel has labored  under several  simultaneous          conflicts of interest.                                          19
