## Facts

- First NLC Financial Services, LLC (NLC), a business involved in mortgage origination and sales, filed a voluntary Chapter 11 petition and continued operating as a debtor in possession.
- Federal Rule of Bankruptcy Procedure 6003 (Rule 6003) limits a bankruptcy court’s ability to grant certain relief within the first 20 days after the petition date unless the movant shows that relief is necessary to avoid “immediate and irreparable injury.”
- Before the 20-day period expired, NLC asked the bankruptcy court to approve, on an interim basis, NLC’s employment of Berger Singerman, P.A. as its bankruptcy counsel.
- The United States trustee opposed interim approval, arguing Rule 6003 barred the requested relief absent a sufficient showing of immediate and irreparable injury.
- NLC offered testimony from Thomas Allison, its financial consultant and chief restructuring officer.
- Allison testified that a debtor in possession must act immediately after filing to comply with bankruptcy requirements, address urgent issues that arise at the outset of the case, and communicate with parties in interest and the court.
- Allison further testified that debtors in possession do not operate without counsel in the days following a Chapter 11 filing, and that denying interim counsel would harm NLC’s ability to reorganize.

## Issues

1. Does Rule 6003 bar a bankruptcy court from approving a Chapter 11 debtor’s application to employ counsel within the first 20 days after filing unless the debtor shows that denial would cause immediate and irreparable injury?
2. Did NLC present evidence showing immediate and irreparable injury sufficient to justify interim approval of counsel’s employment during Rule 6003’s 20-day period?

## Decision

- The court treated Rule 6003 as allowing relief within the first 20 days when the movant shows the relief is needed to prevent immediate and irreparable injury.
- The court found that NLC’s evidence supported the conclusion that proceeding without approved bankruptcy counsel in the early stage of the case would cause immediate and irreparable injury to NLC and its estate.
- The court granted NLC interim authorization to employ Berger Singerman, P.A. during the Rule 6003 period.
- The court characterized the authorization as interim and left final review of the employment and compensation issues for later proceedings, when parties in interest could raise objections.

## Legal Principles

- Rule 6003 imposes a heightened standard for certain early case relief: within 20 days after a Chapter 11 petition, the court may grant such relief only to the extent necessary to avoid immediate and irreparable injury.
- The party seeking relief during the 20-day period bears the burden to prove immediate and irreparable injury.
- A debtor in possession may satisfy Rule 6003’s standard where the record shows that delaying approval of counsel would materially impair the debtor’s ability to meet immediate bankruptcy obligations and manage early case demands.
- Interim approval of professional employment can be granted to address early case needs while reserving fuller review of eligibility, disclosures, and compensation at a later stage.

## Conclusion

The bankruptcy court approved NLC’s interim request to employ Berger Singerman, P.A. within Rule 6003’s initial 20-day period because NLC showed that denial of counsel at the outset of the Chapter 11 case would cause immediate and irreparable injury, while preserving later opportunities for review and objection.


In re First NLC Financial Services, LLC, 2008 Bankr. LEXIS 1466 (2008)