Delaware US Bankruptcy Judge Karen Owens denied DLA Piper's retention as 327(e) special counsel to Hudson 1701/1706 based on the firm's prior representation of the debtor's equity owner and lender, Parkview Financial.

Bob Gayda of Seward & Kissel, counsel to the UCC, noted that while the UCC does not object to DLA's retention as regulatory and real estate counsel, it objects to the broader scope outlined in the proposed order. That scope included retrospective approval of work on the DIP loan and certain real estate litigation matters. Malcolm Bates, representing the US Trustee, also raised concerns about the scope of DLA's representation.

After oral argument and questions about the relationship between the debtors, their equity owner and DIP lender Parkview, and DLA Piper's role as Parkview's counsel leading up to the November bankruptcy filing, the court determined that DLA's representation of the debtors on DIP financing, litigation involving Parkview, and transactional matters is not in the best interests of the estate.

The court "so ordered" the record denying DLA Piper's retention, noting that she would consider a consensual order with a narrower scope if the parties could come to agreement.

The Chapter 11 docket can be found here.