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United States Department of Justice Office of the United States Trustee 1100 Commerce Street, Room 976 Dallas, TX 75242 (214) 767-8967 IN THE UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS DALLAS DIVISION In re: Republic Brands of Texas, Inc. Debtor-in-Possession

Case No. 13-36434-BJH-11 Chapter 11

Objection to Application to Employ Special Counsel (Dkt. #29) The United States Trustee for Region 6 files this his Objection to the Debtors Application to Employ Special Counsel (Dkt. #29), and respectfully represents the following: Summary The Debtor seeks to hire David Seeberger as special counsel to file an adversary against individuals who received transfers of stock right before the bankruptcy and who may have damaged the Debtor. Mr. Seeberger is an officer, shareholder, and creditor and has already filed a Complaint in this case on behalf of the Debtor (Adv. 14-3021) although the Court has not authorized the Debtor to employ him. The Debtor should not be permitted to hire the proposed counsel because he holds interests that are adverse to the Debtor. Case Background 1. Republic Brands of Texas, Inc. filed a voluntary chapter 11 petition on December 16, 2013. There is no committee in this case and the Debtor remains in possession. 2. The Debtor had no business operations when it filed chapter 11. Its Nevada business license expired October 31, 2013. (Nevada business license #NV20001460380) 3. The Debtor has the same tax identification number as a predecessor, 75-2845635, Stealth Industry, Inc., that filed a bankruptcy case (03-3736HDH-7). Page 1 of 5

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4. The last two tax returns provided to the United States Trustee (2011 and 2012) show about $800,000 was paid to management during those years, while combined income was less than $36,000 for those two years. 5. The Dallas Observer reported that the Debtors principal, Jerry Grisaffi, intends to use the Debtor to distributed products made from THC-free cannabis. (Observer article 2/27/14, 4:21 PM) 6. Although the Court has not authorized the proposed attorney to represent the Debtor in any matter, he filed a Complaint for the Debtor on February 28, 2014. (Dkt. #30) 7. The proposed attorneys office address is the only address the Debtor uses. The Post Office has returned the mail addressed to the Debtor from the United States Trustee. Argument 8. Employing the proposed attorney as special counsel is not in the best interest of the estate. The proposed attorney is an interest holder who may be a proper target of the actions the Debtor intends to bring against others. The proposed attorney also may have received the same type of stock transfer he seeks to revoke from others. 9. Section 327(e) of the Bankruptcy Code provides: (e) The trustee, with the courts approval, may employ, for a specified special purpose, other than to represent the trustee in conducting the case, an attorney that has represented the debtor, if it is in the best interests of the estate, and if such attorney does not represent or hold any interest adverse to the debtor or to the estate with respect to the matter on which such attorney is to be employed. 11 U.S.C. 327(e). 10. Section 327(e) does not require that an attorney be disinterested, but imposes the standard that the proposed attorney not represent or hold any interest adverse to the debtor or to the Page 2 of 5

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estate with respect to the matter on which such attorney is to be employed. 11 U.S.C. 327(e). It is clear that Mr. Seeberger is not disinterested because he is a shareholder and officer of the Debtor. 11. This Court has broad discretion in determining whether to grant approval of an employment application. In re Bigler, L.P., 422 B.R. 638, 643 (Bankr. S.D. Tex. 2010) citing In re Prudhomme 43 F.3d 1000, 1003 (5th Cir. 1995). Rules governing professional conduct are often viewed as even more necessary and applicable in bankruptcy cases than in other contexts. Thus the importance of adherence to the ethical rules, as well as disclosure, initial and continuing, cannot be overemphasized."). Century Indem. Co. v. Congoleum Corp. (In re Congoleum Corp.), 426 F.3d 675, 686 (3d Cir. 2005). Under the Bankruptcy Code, interests of the Debtor are intertwined with the interest of the estate which includes the interest of creditors. Simultaneous representation of a Chapter 11 Debtor and the Debtors principals gives rise to at least a potential conflict of interest. In re Argus Group 1700, Inc., 199 B.R. 525, 531 (Bankr. E.D. Pa. 1996) (denying employment). This is so even in the context of section 327(e) and in litigation where principals and the Debtor may share the same goal of repudiating the claims of another because principals and the Debtor may not share the same interests. 12. Here, the potential for a conflict of interest between the estate and Mr. Seeberger prohibits his employment. The proposed attorney may be a correct target of the action the estate should bring. Mr. Seeberger has an impermissible conflict of interest. As such, the same attorney cannot possibly represent the estate, even under the more flexible 327(e) standard. Although the interests of Seeberger and the Debtor may be presently aligned, it is impossible to evaluate if that will continue throughout the course of the case. Moreover, these conflicts cannot be waived by agreement, even if all parties fully understand the potential for a conflict of interest.

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13. Section 327(e) limits the representation for an attorney that has represented the debtor for a specified special purpose, other than to represent the trustee in conducting the case. 11 U.S.C. 327(e) (2010). The reference to conducting the case in section 327(e) includes those matters that form a part of the administration of the case under the Code. See Collier on Bankruptcy at 327.04[9][c] (16th Ed. revd 2013). 14. Counsel who cannot meet the disinterestedness standard of 327(a) should not be able to bypass this requirement through employment as special counsel. In re Tidewater Memorial Hosp., Inc., 110 B.R. 221, 228 (Bankr. E.D. Va. 1989); see also Century Indem. Co. v. Congoleum Corp. (In re Congoleum Corp.), 426 F.3d 675, 693-93 (3d Cir. 2005) (denying retention of special insurance litigation counsel when counsel helped draft prepackaged plan). 15. It is not alleged that the proposed attorney has previously represented the Debtor, therefore he is not qualified to represent the Debtor under 327(e) Relief Requested 16. The United States Trustee asks the Court to deny the Debtors motion to employ David Seeberger as special counsel because he does not qualify under 11 U.S.C. 327(e) in that he has not represented the Debtor, his employment is not in the best interest of the estate, and he may be a target of the special litigation. The United States Trustee asks for any further relief to which he may be justly entitled. March 11, 2014 William T. Neary United States Trustee /s/ Mary Frances Durham United States Department of Justice Office of the United States Trustee 1100 Commerce Street, Room 976 Dallas, TX 75242 (214) 767-8967 maryfrances.durham@usdoj.gov

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Certificate of Service I hereby certify that I mailed a copy of this Objection by first class, United States mail to the following on March 11, 2014: Edward B. Davis Bell, Davis & Pitt, P.A. 227 West Trade Street Suite 2160 Charlotte, NC 28202 Republic of Texas Brands, Inc. 3030 LBJ Freeway., Suite 700 Dallas, TX 75234-7763 Butson Enterprises PO Box 150986 Arlington, TX 76015-6986 Cypress Communications 3565 Piedmont Rd NE BLDG 4-600 Atlanta GA 30305-8204 Empire Capital LLC 17821 Spinnakers Reach Drive Cornelius, NC 28031-7595 Global Road Runner 808 Office Park Cr., Suite 500 Lewisville, TX 75057-3156 Gordon and Ress Embarcadero Center West 275 Battery St. Suite 2000 San Francisco, CA 94111-3367 John Miller 2334 Aberdeen Bend Carrollton, TX 75007-2027 K. Suzanne Ricketts PO Box 860294 Plano, TX 75086-0294 Kenneth Dougherty 10812 Fallstone Suite 400 Houston, TX 77099-3457 Leverage PR 702 Ivey Court Round Rock, TX 78681-4058 Mark Ussery 3563 Ainsworth Dr. Dallas, TX 75229-5151 Matthew Nicoletti 17821 Spinnakers Reach Dr. Cornelius, NC 28031-7595 Michael Welch 10626 Cox Lane Dallas, TX 75229-5211 Millers Smokehouse 705 W. Young St. Llano, TX 78643-1116 Mitchel Pisik 903 Carriage Way Southlake, TX 76092-1710 Nelson E. & Denise Lynn Merkle 1723 5th St. Fort Worth, TX 76110-6408 ONS Partners dba Ockleshaw, Noakes & Stares 5500 Preston Road, Suite 390 Dallas, TX 75205-2676 Rod Meadows 207 Jasmine Lane Longwood, FL 32779-4908 Sam Martinez Photography 1317 Conant Dallas, TX 75207-6005 Signature Stock Transfer 2632 Coachlight Court Plano, TX 75093-3850 State of Indiana Office of the Atty General 302 W. Washington St. IGCS 5th Floor Indianapolis, IN 46204-4701 Secretary of State, Nevada State Capitol Building 101 North Carson Street, Suite 3 Carson City, NV 89701-3714 Steve Perkins 200 Creekway Bend Southlake, TX 76092-9422 and by ECF to: Laurie Spindler Huffman Laurie.Spindler@publicans.com, Dallas.bankruptcy@ publicans.com; evelyn.palmer@lgbs.com Eric A. Liepins eric@ealpc.com, martha@ealpc.com J. Seth Moore smoore@andersontobin.com, lgraves@andersontobin.com David Max Seeberger dseeberger@sbcglobal.net /s/ Mary Frances Durham Mary Frances Durham Page 5 of 5