JOAN N. FEENEY, Bankruptcy Judge.
The matter before the Court is the "Motion to Remove Lynch, Brewer, Hoffman & Fink, LLP, Special Corporate and Litigation Counsel to Genesys Research Institute" (the "Motion") filed by Christine E. Briggs, Ph.D. ("Dr. Briggs"). The Motion has generated considerable controversy and precipitated the filing of numerous affidavits and exhibits, including multiple affidavits executed and filed by John P. Dennis, an attorney with the law firm of Lynch, Brewer, Hoffman & Fink, LLP ("LBH & F"), whose employment this Court authorized on August 31, 2015 pursuant to the "Amended Application of Debtor for Authority to Retain Lynch, Brewer, Hoffman & Fink, LLP as Special Corporate and Litigation Counsel."
In response to the filing of the Motion, various parties filed papers in support of, or in opposition to, the Motion, including the following papers: (1) the Opposition filed by by LBH & F on behalf of Genesys Research Institute, Inc. ("GRI" or the "Debtor"); 2) the Affidavit of John P. Dennis, an attorney with LBH & F ("Attorney Dennis") in support of the Debtor's Opposition and on behalf of LBH & F, together with 12 exhibits; and 3) Additional Documents Pertaining to the Motion filed by Dr. Briggs. These papers focused in part on a confrontation involving Dr. Lynn Hlatky's administrative assistant.
The Court heard the Motion on October 13, 2015 and directed Attorney Dennis to file a supplemental affidavit. Two days later, on October 15, 2015, with the assent of the Debtor, the Court granted the Motion of the U.S. trustee to appoint a Chapter 11 Trustee. Thereafter, various parties filed additional documents relating to the Motion, including 1) a Statement filed by the United States of America, on behalf of the Department of Energy (the "DOE"), together with an exhibit, in which the DOE noted that the "Debtor was the recipient of a DOE grant agreement ("Grant") captioned "Multi-Scale Systems Biology of Low-Dose Carcinogenesis Risk" and that "[f]rom 2009 to 2014, DOE paid nearly $6 million to the Debtor and its predecessors for costs claimed in furtherance of the project undertaken pursuant to the Grant" and referenced applicable regulations and policies; 2) the Supplemental Affidavit of Attorney Dennis to which he attached additional affidavits and exhibits; 3) Dr. Briggs's Response to the Supplemental Affidavit; and 4) the Statement of Interested Party Philip J. Hahnfeldt ("Dr. Hahnfeldt"), in support of the Motion. These papers focused in large part on whether the Debtor's use of grant funds complied with applicable laws and regulations.
On October 20, 2015, the Court again heard the Motion and directed the Massachusetts Attorney General and the Chapter 11 Trustee to file responses to the Motion by October 28, 2015, and November 13, 2015, respectively. The Court directed the Attorney General to state her position as to whether prepetition fees paid to LBH & F were paid in accordance with federal and state laws and regulations. In addition, the Court directed the Chapter 11 Trustee to state his position with respect to (1) any adverse interest of LBH & F, and whether the estate has any actual or potential claims against LBH & F; and (2) the necessity of continued employment of LBH & F in light of the appointment of the trustee.
Following the hearing, the parties filed additional documents. The DOE filed a Supplemental Statement on Federal Funding Issues in which it stated that "if the Debtor had no source of revenue other than federal grants, then the only way it could have spent any money on organizaton costs is by using federal funds, which it cannot do." The Attorney General of the Commonwealth of Massachusets, Maura Healey, filed a Response, together with an exhibit. AttorneyDennis filed an Affidavit with respect to the DOE's Supplemental Statement. In addition, the Chapter 11 Trustee filed a Statement, and Dr. Hahnfeldt filed a Supplemental Statement in which he challenged the veracity of Attorney Dennis's statements in his affidavits.
The Attorney General cogently set forth the disagrements among the interested parties. She observed:
The Attorney General concluded that "[d]etermining whether GRI's claims for federal grant funds included unallowable legal fees would require analysis of both the GRI claims and supporting material, and of the legal bills themselves, which are potentially protected by privilege."
The Court, at this time, need not undertake the analysis outlined by the Attorney General, an analysis that would undoubtedly require discovery and an evidentiary hearing, would most likely arise either in the context of an adversary proceeding against LBH & F or an objection to a proof of claim filed by the DOE or another entity that awarded research grants subject to federal regulations to the Debtor. The Chapter 11 Trustee has obviated the need to resolve the serious concerns raised by Dr. Briggs and Dr. Hahnfeldt. In his Statement, the Chapter 11 Trustee, citing
The Trustee also observed that he is considering the contintued retention of LBH & F foronly two matters. The first is a pending MCAD matter, which, according to the Chapter 11 Trustee, is not subject to the automatic stay. The MCAD action was brought by Ms. Cassedra Enayo, a former employee of the Debtor. The Trustee stated that the matter has been fully presented to the MCAD and that MCAD has taken under advisement the issue of whether Ms. Enayo has established a prima facie case against the Debtor. The Trustee further represented that LBH & F's services would only be required if the MCAD were to find probable cause or Ms. Enayo were to decide to pursue her claim in the Superior Court. The Chapter 11 Trustee added, however, that LBH & F's representation of the Debtor involves no cost the Debtor or the estate because LBH & F is being compensated directly by the Debtor's insurer at the reduced rate of $185 per hour.
The only other matter in which the Trustee stated that he may need the services of LBH & F is "to provide information and assistance in obtaining reimbursement from the Debtor's D&O insurer for legal fees incurred by the Debtor and paid to Lynch Brewer which are covered by the Debtor's D&O policy."
In view of the Trustee's position that conversion of the case to Chapter 7 is warranted and that there is limited need for LBH & F's services, the Court concludes that allowance of the Motion is warranted at this time. The Court, therefore, shall enter an order granting the Motion, without prejudice to the Chapter 11 Trustee seeking authority to employ LBH & F for the limited purposes outlined in his Statement and to the filing by LBH & F of an application for compensation for services incurred prior to the date of this order. The Court will consider allowance of further employment of LBH & F by the Chapter 11 Trustee or approval of an application for compensation by LBH & F only after notice and a hearing.