Whitehall Pharmacy LLC, Sanctions Order, ED Arkansas

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Sept. 3, 2025 Get Citation Alerts Download PDF Add Note

Whitehall Pharmacy LLC

United States Bankruptcy Court, E.D. Arkansas

• Citations: None known
• Docket Number: 4:25-bk-12406

• Precedential Status: Unknown Status

• Opinion

• Authorities (3)

• Cited By (0)

• Summaries (0)

• Similar Cases (5.3K)

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Trial Court Document

IN THE UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF ARKANSAS
CENTRAL DIVISION

IN RE: WHITEHALL PHARMACY LLC, DEBTOR CASE NO.: 4:25-bk-12406
CHAPTER 11
ORDER REGARDING SANCTIONS
Before the court is its Order to Appear and Show Cause Why Sanctions Should Not Issue
(“OSC”) entered on August 18, 2025, at ECF No. 89 directing Charles D. Davidson, Sr.
(“Davidson”), Deven Harvison (“Harvison”), and the Davidson Law Firm (collectively,
“Counsel”) to appear and show cause why this court should not find one or more violations of Rule
9011 and Local Rule 2090-21 with sanctions as provided therein. Counsel, on August 28, 2025,
filed their Response to Order to Show Cause Why Sanctions Should Not Issue (“Response”) at ECF
No. 98. By agreement, Counsel rested on their Response. Thereafter, the court took the matter
under advisement. For the reasons stated herein, the OSC is withdrawn and dismissed; no sanctions
are imposed. This order concludes this matter and shall be transmitted to the Arkansas Office of
Professional Conduct to supplement Counsel’s election to self-report; this transmission is not
intended as an independent referral.
I. BACKGROUND

The debtor, Whitehall Pharmacy LLC (“Whitehall”), filed a Chapter 11 case on July 21,
2025, represented by Davidson and Harvison, both attorneys at the Davidson Law Firm. The
commencement of a Chapter 11 case is often attended by several motions seeking first day orders
from the court; these typically concern ongoing operations, such as utilities and use of cash
collateral. Whitehall adhered to this pattern.

1 Federal Rule of Bankruptcy Procedure 9011; Local Rule 2090-2 of the United States
Bankruptcy Courts for the Eastern and Western Districts of Arkansas.
Atypically, however, Whitehall also sought permission from the court to pay pre-petition
claims of various creditors or vendors deemed critical to Whitehall’s ongoing business and
potential reorganization. Specifically, Whitehall filed its Amended Motion for Authority to Pay
Critical Vendors (“Amended Motion”) at ECF No. 24, which states in pertinent part:

COMES NOW Whitehall Pharmacy LLC, Debtor and Debtor-in-Possession (the
“Debtor”), by and through its counsel, and for its Amended Motion for Authority
to Pay Critical Vendors (the “Motion”), respectfully states as follows:
….
15. Courts in this District and others have routinely authorized the payment of
critical vendor claims under similar circumstances. See, e.g., In re Berry Good,
LLC, No. 4:20-bk-12345 (Bankr. E.D. Ark. May 2020) (authorizing payment of
perishable produce suppliers critical to debtor’s restaurant operations).
….
WHEREFORE, the Debtor respectfully requests that this Court enter an order: (1)
Authorizing, but not directing, the Debtor to pay prepetition obligations of the
Critical Vendors up to a cap of $1,904,869.56; (2) Authorizing the Debtor to
condition such payments on the continued provision of goods and services on
customary trade terms; and (3) Granting such other and further relief as is just and
proper. Absent the relief requested, Debtor will suffer immediate and irreparable
harm due to potential supply chain disruption, loss of access to pharmaceuticals,
and harm to patient care and estate value.
Respectfully Submitted,
DAVIDSON LAW FIRM

/s/ Charles Darwin Davidson, Sr.
Charles Darwin Davidson, Sr. ABN73026
-and-
Deven K. Harvison ABN2017263
724 Garland Street
Little Rock, Arkansas 72201
501-374-9977
skipd@dlf-ar.com
deven.harvison@dlf-ar.com
(Amended Motion, at 1, 4, and 6, ECF No. 24). The Berry Good case and parenthetical comprise
the only caselaw and substantive authority cited in the Amended Motion supporting the requested
relief.
The Hon. Phyllis M. Jones entered her Interim Order Authorizing the Debtor to Pay

Prepetition Claims of Critical Vendors (“Interim Order”) at ECF No. 28 granting the requested
relief on a temporary basis and setting the Amended Motion for hearing on August 14, 2025.
Thereafter, Judge Jones recused, which resulted in this court presiding at the August 14 hearing;
both Davidson and Harvison appeared on Whitehall’s behalf. By its Order entered on August 14,
2025, at ECF No. 84, the court terminated without prejudice the Interim Order and reserved the
Amended Motion for hearing by subsequent notice.
At the August 14 hearing, this court raised perceived infirmities respecting paragraph 15
of the Amended Motion; specifically, the factual allegations and legal assertions contained therein
could be misleading, false, or incorrect. Critical vendor motions are not routinely filed or granted
in the Eastern District of Arkansas. The case referenced in paragraph 15 does not exist. The case

number reflects an actual Chapter 13 bankruptcy case in the Eastern District of Arkansas; the case
name, In re Berry Good, LLC, does not. The order referenced therein does not exist or stand for
the proposition suggested. At the August 14 hearing, Counsel admitted as much and intimated that
artificial intelligence (“AI”) may have been used in generating paragraph 15.
II. RESPONSE
Accordingly, the court issued its OSC pursuant to Rule 9011 and Local Rule 2090-2. In
their Response, Counsel wisely elected four courses of action. First, while outlining their process
by way of explanation (including the use of AI), Davidson and Harvison took and accepted
ultimate responsibility for the phantom case citation and authority; they pled negligence and
systemic lapses in lieu of an intent to mislead the court or gain an adversarial advantage. Second,
Counsel self-imposed several internal safeguards. Specifically,
36. Debtor’s Counsel remains committed to maintaining the highest professional
standards of accuracy, candor, and integrity in all filings with the Court. To that
end, Debtor’s Counsel has implemented immediate safeguard[s], including, but not
limited to:
a) AI will no longer be used in the preparation of motions, pleadings, or
other documents filed with the Court;
b) Any remaining use of AI will be confined strictly to administrative tasks,
and only with attorney oversight;
c) All counsel at DLF must enroll in and attend additional CLE at a
minimum of three (3) hours regarding AI’s use in the legal industry;
d) Mandatory attorney review of all drafts prior to filing has been
reinforced;
e) Every case citation included in any filing must now be verified directly
in Westlaw or Lexis before a pleading is finalized and failure to adhere to
this policy, failure to do so will result in appropriate disciplinary action.

(Response, at 10 and 11, ECF. No. 98). Third, Counsel volunteered that it would not bill Whitehall
for any time related to the Amended Motion, OSC, or Response. Fourth, Counsel self-reported this
matter by transmitting to the Arkansas Office of Professional Conduct the OSC and their Response.
III. ANALYSIS
Bankruptcy “first day orders” are reorganization specific. After filing, the automatic stay
takes effect affording the debtor immediate refuge from their creditors while it attempts to
reorganize. Harmoniously, the Bankruptcy Code both fosters and circumscribes the debtor’s ability
to continue its operations without some court, creditor, or United States Trustee (“UST”) scrutiny.
The exigencies of the situation, however, often require that some matters, such as use of cash
collateral, must be addressed almost immediately upon filing. It is typical for the debtor to file a
variety of first day motions with limited notice to other parties. The court, recognizing the
exigencies of the circumstances,2 generally affords first day requests favorable treatment. In doing
so, the court relies on the representations contained in the motions, knows that any resulting orders
are temporary, and takes comfort that the court, creditors, and UST can suss out the authority and
facts to determine whether the relief accorded should extend beyond the initial interim. Paragraph

15 of the Amended Motion fits that rubric.
15. Courts in this District and others have routinely authorized the payment of
critical vendor claims under similar circumstances. See, e.g., In re Berry Good,
LLC, No. 4:20-bk-12345 (Bankr. E.D. Ark. May 2020) (authorizing payment of
perishable produce suppliers critical to debtor’s restaurant operations).
(Amended Motion, at 4). The Berry Good case and parenthetical comprise the only persuasive
authority cited in the Amended Motion supporting the requested relief.
Unfortunately, just about everything in paragraph 15 is incorrect. Critical vendor motions
are not routinely filed or granted in the Eastern District of Arkansas. The case referenced in
paragraph 15 does not exist. The case number reflects an actual Chapter 13 bankruptcy case in the
Eastern District of Arkansas; the case name, In re Berry Good, LLC, does not. The order referenced
therein does not exist or stand for the proposition suggested and is, as confirmed in the Response,
AI generated.
The idea behind a critical vendor motion is that the debtor seeks to favor certain vendors
by elevating and paying their pre-petition debt because their product or services are “critical.” This
treatment is inconsistent with the Bankruptcy Code and usurps the protections afforded by
disclosure, classification, acceptable discrimination, and ratable distribution contemplated by a full
plan confirmation process. There are jurisdictions both rejecting and accepting critical vendor
efforts.

2 See 11 U.S.C. § 363 (c)(3) (stating that any hearing on immediate use of cash collateral
“shall be scheduled in accordance with the needs of the debtor”).
The issue is not conclusive in the Eighth Circuit, though at least four courts within the
circuit have published opinions referencing critical vendor motions with approbation. See R. Ray
Fulmer, II v. Fifth Third Equip. Fin. Co. (In re Veg Liquidation, Inc.), 583 B.R. 203 (B.A.P. 8th
Cir. 2018); In re Wehrenberg, Inc., 260 B.R. 468 (Bankr. E.D. Mo. 2001); In re Payless Cashways,

Inc., 268 B.R. 543 (Bankr. W.D. Mo. 2001); In re O & S Trucking, Inc., No. 12-61003, 2012 WL
2803738 (Bankr. W.D. Mo. June 29, 2012); and In re BDC Grp., Inc., No. 23-00484, 2023 WL
4111476 (Bankr. N.D. Iowa June 21, 2023). But, insofar as this court can determine, critical vendor
motions and orders approving same are not routine in the Eastern or Western Districts of Arkansas.
No current judge, current law clerk, or five career law clerks past and present polled can recall one
ever being addressed or approved in these two districts.
Whether an Eastern District of Arkansas bankruptcy court should approve a critical vendor
motion is certainly subject to dispute. This court inclines toward the belief that there is statutory
and case law authority that may justify same. On that premise, argument for the relief requested is
fair; a categorical statement that it is routine in this district is not. Alone, that representation only

invites curiosity which diminishes the argument. That representation, however, coupled to a
specific but non-existent case in support, invites scrutiny and consequences.
When examined, paragraph 15 is the result of a flawed AI search that suggested an incorrect
generalization falsely supported by a specific but non-existent case. Under any scenario, a suspect
argument buttressed with a case from whole cloth violates the expressed and tacit norms governing
the practice of law as it intersects with the courts. Simply, you cannot make stuff up to convince a
court to do something.
In simpler times, that would end the inquiry with draconian consequences. The times,
however, are no longer simple; thus, the inquiry does not end here.
AI interposes additional considerations that defy easy categorization or scrutiny when
examining the traditional norms of practice and advocacy. Threshold, two fields of inquiry present
in any AI debate. The first is whether exposition artificially generated by a computer is acceptable
in what has contextually been a forum for human critical analysis, thought, and advocacy. That is

not the instance here. Rather, it is the second; that is, when AI sacrifices accuracy to satisfy the
consumer and that inaccuracy is advocated before the court.
Thus, the inquiry becomes (1) are the expressed norms violated and (2) does an artificial
component alter the discourse and impact the consequences. The answer to the first is easy. As
suggested above, the use of a phantom case clearly violates the traditional and expressed norms of
advocacy and practice before any court. It would be difficult to argue otherwise.
First, it is a violation of Rule 9011, which provides in pertinent part:
(b) Representations to the Court. By presenting to the court a petition, pleading,
written motion, or other document-whether by signing, filing, submitting, or later
advocating it-an attorney or unrepresented party certifies that, to the best of the
person’s knowledge, information, and belief formed after an inquiry reasonable
under the circumstances:
(2) the claims, defenses, and other legal contentions are warranted by
existing law or by a nonfrivolous argument to extend, modify, or reverse
existing law, or to establish new law;

Fed. R. Bankr. P. 9011.

Second, phantom case authority violates Local Rule 2090-2 of the United States
Bankruptcy Court for the Eastern and Western Districts of Arkansas. With respect to Attorney
Discipline and Disbarment, the rule provides:
The standard of professional conduct for attorneys practicing in this Court is
governed by the Arkansas Rules of Professional Conduct and Federal Rule of
Bankruptcy Procedure 9011. The Court will refer violations of the Arkansas Rules
of Professional Conduct to the Arkansas Committee on Professional Conduct for
such actions and sanctions as the Committee deems appropriate. Additionally, the
Court shall have such authority and discretion as are permitted by and under the
Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, statutory and
common law, and the express and inherent powers conferred upon them. Sanctions
may include suspension or disbarment from the practice before this Court.

As incorporated, the Arkansas Rules of Professional Conduct weigh in and provide
in pertinent part:
Rule 3.3. Candor Toward the Tribunal.
(a) A lawyer shall not knowingly:
(1) make a false statement of fact or law to a tribunal; or fail to correct a false
statement of material fact or law previously made to the tribunal by the lawyer[.]

Further,

Rule 8.4. Misconduct.
It is professional misconduct for a lawyer to:
(c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation;
(d) engage in conduct that is prejudicial to the administration of justice[.]

Non-existent authority is grounds for sanction and referral under Rule 9011, our local rules, the
court’s inherent powers, and the Arkansas Rules of Professional Conduct as incorporated.
So, the answer to the first question posed above is a resounding yes. The only acceptable
conclusion is that citing a made-up case is a false representation to the court that violates the
expressed norms of practice, is actionable, and should bear consequences. The answer, however,
to the second question—whether an artificial component alters the calculus—is more difficult.
Here, our traditional norms are challenged. In context, the traditional advocacy process
begins with black letter law in the form of statutes, codes, and regulations. Then, there are judicial
opinions and orders interpreting black letter law in the context of justiciable issues based on
discrete facts. Lawyers cite cases for their binding or persuasive authority and have done so ever
since someone started committing judicial decisions to stone, parchment, or paper. The ability to
find and cite cases has evolved over time from laborious research in courthouses, to compendiums,
indices, digests, reporters, advance sheets, key numbers, and now the internet.
The internet changed this dynamic in two ways. First, it streamlined, refined, and improved
the research process. Users could select fields, topics, and key numbers to find and locate cases.
Eventually, more specific tools, such as key words or phrases, enhanced the process. Second, and
more pertinent to the present issue, AI is creating a process where instead of just finding authority,

the computer also does the supplicant’s thinking and analysis for them. The first innovation
continues to evolve; the second is new, likewise continues to evolve, but constitutes an entirely
new dimension, rather than a continuum, in legal practice. Finding has evolved into finding and
thinking.
Travel back to research, the first changed dynamic. From stone to the internet, how lawyers
found and used case law took many forms. Some would carefully read every case they found; some
would read every page of select cases they thought pertinent; others might read the digest entry
and then read only that section of the case; others might read only the digest entry; others barely
read anything at all and cited anything that looked like it might support their position. Each was a
personal decision by the lawyer for which he or she is accountable under the traditional norms of

practice both officially—through codes of conduct and Rule 9011—and unofficially per the norms
and expectations of courts.
AI compresses this historical dynamic. The research engine is now the search and thinking
engine. AI finds case law and tells the subscriber that it supports their position. All the personalities
described above—and known oh-so-well to us all—have become one.
Except, however, AI is flawed. In its infancy—albeit one that may be in college soon—it
is immature and does not always provide accurate information or correct analysis; it may even
make things up.
A tool that potentially supplants your advocacy by doing the finding and thinking for you
is enticing.3 But in the end, it is only a tool. Despite our near total and unfortunate faith in the
internet, it does not relieve the attorney of his or her responsibility to make sure that the information
and analysis are correct.

Reliance on AI can, however, mitigate intent. Here, Counsel is responsible for their
negligence and misplaced reliance on AI, but there is no indication—and this court does not
believe—that they purposely misled the court. They did not decide to make up a case. Misplaced
reliance or negligence does not always equal intentional misrepresentation.
To be clear, the mitigation is not of their responsibility; that remains choate. A lawyer
should know the authority they are citing. Rather, misplaced reliance or negligence can mitigate
consequences to the extent the proof or self-evident facts demonstrate a lack of intent to actively
mislead the court.
This is not an abjuration of the lawyer's responsibility to the profession and to the courts.
Rather, this is a recognition that negligence or misplaced reliance on a new technology should not

be viewed through the same exacting prism as an intentional effort to mislead a court or gain an
adversarial advantage by purposely creating and citing nonexistent authority. If two things are not
the same, consequences should not be the same.
A new technology affords only a limited window where this defense is available; time will
alert the bar to AI’s limitations and how the bench and bar should respond. Adversaries and the
courts are entitled to rely on the integrity of advocacy; if AI displaces the mule, lawyers retain the
reins. Here, Counsel acknowledges their negligence in that regard. In these circumstances, grace
presents in determining consequences.

3 Enticing until it supplants you entirely.
Rule 9011, our local rules, and this court’s inherent powers afford it an array of possible
remedies and sanctions. The court, however, is satisfied that the remedial actions and safeguards
outlined in the Response are appropriate to the circumstances. No sanctions are warranted or
issued.
IV. CONCLUSION
The OSC is withdrawn and dismissed. This order concludes this matter and shall be
transmitted to the Arkansas Office of Professional Conduct to supplement Counsel’s election to
self-report; this transmission is not intended as an independent referral.
IT IS SO ORDERED.
Dated this this 3rd day of September 2025.

HONORABLE RICHARD D. TAYLOR
UNITED STATES BANKRUPTCY JUDGE

ce: Whitehall Pharmacy LLC
Charles D. Davidson, Sr.
Deven Harvison
Joseph A. DiPietro
Robert Brech

11