Bankruptcy court is said to be full of conflicts of interest.  Here, there is a possibility that Pilsbury Winthrop will be divested of its lead counsel role and made to give back $4 million in fees. 

"An alleged conflict of interest could cost Pillsbury Winthrop Shaw Pittman its role in a long-running bankruptcy case — and more than $4 million in fees.

A San Jose, Calif., bankruptcy judge has scheduled a March 19 hearing on a motion by the U.S. Trustee’s office to disqualify the firm and disgorge the fees it has racked up representing SonicBlue since the electronics maker went belly-up four years ago.

The motion claims that in a 2002 opinion letter, issued before the company went bankrupt, Pillsbury assured senior note holders that SonicBlue would repay a $75 million bond obligation in full. Last September, the bond holders — three hedge funds — threatened to sue Pillsbury unless it indemnified them.

This, trustee’s attorney Nanette Dumas wrote, underscored a conflict Pillsbury should have recognized from the beginning. The firm is "arguably ‘on the hook’ for any shortfall," because of the 2002 letter, Dumas wrote. With creditors in a bankruptcy often receiving a fraction of what they are owed, Pillsbury could be motivated to protect itself by not cutting the senior note holders’ claim. "For ever dollar the senior note holders’ claim was reduced, [Pillsbury’s] corresponding exposure would increase," Dumas wrote. "