Fletcher v. Davis (In re Fletcher International, Ltd.)

536 B.R. 551, 2015 WL 5305979
CourtDistrict Court, S.D. New York
DecidedSeptember 9, 2015
DocketNo. 14-cv-6070 (RJS)
StatusPublished
Cited by18 cases

This text of 536 B.R. 551 (Fletcher v. Davis (In re Fletcher International, Ltd.)) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Fletcher v. Davis (In re Fletcher International, Ltd.), 536 B.R. 551, 2015 WL 5305979 (S.D.N.Y. 2015).

Opinion

OPINION AND ORDER

RICHARD J. SULLIVAN, District Judge.

Alphonse Fletcher, Jr. (“Appellant”), proceeding pro se, appeals the June 24, 2014 Order of the Honorable Robert E. Gerber, Bankruptcy Judge, denying Appellant’s motion to (1) vacate the appointment of the Chapter 11 Trustee and various advisors; and (2) disgorge their fees and expenses. (Doc. No. 578 (“Disgorgement Order”).)1 For the reasons set forth below, the Disgorgement Order is affirmed.

I. Background

Appellant ran a family of investment funds, including Fletcher International, Ltd. (“FILB”), which, on June 29, 2012, filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of New York. (Doc. No. 1.) For the first three months, the bankruptcy progressed with FILB as debtor-in-possession. On September 5, 2012, upon the applications of FILB and the United States Trustee for Region 2 (the “United States Trustee”), the Bankruptcy Court held a hearing concerning the appointment of a Chapter 11 Trustee pursuant to 11 U.S.C. § 1104(a)(2). (Doc. No. 99.) On September 25, 2012, the United States Trustee filed an application for the Bankruptcy Court to approve its appointment of Richard J. Davis, Esq. (“Davis”) as Chapter 11 Trustee for FILB. (Doc. No. 112.) The application included a disclosure statement, wherein Davis declared “disinterestedness,” as defined by 11 U.S.C. § 101(14), and listed past and current connections. (Id.) No one objected, and on September 28, 2012, the Bankruptcy Court approved Davis’s appointment as the Chapter 11 Trustee (the “Trustee”). (Doc. No. 115.)

A Chapter 11 Trustee may employ disinterested professionals who do not hold or represent interests adverse to the estate. 11 U.S.C. §§ 327(a), 101(14)(a),(c). To ensure compliance with these requirements, all professionals must submit retention applications that disclose all connections with “the debtors, creditors, any other parties] in interest, [and] their respective attorneys.” Fed. R. Bankr. P. 2014(a). These Rule 2014(a) disclosures are intended to allow the Bankruptcy Court to make an informed decision about potential conflicts of interest. In October 2012, pursuant to 11 U.S.C. § 327(a), the Trustee filed applications for authorization to employ Luskin Stem & Eisler LLP (“Luskin”) as his counsel and Goldin Associates LLC (“Gol-din”) as his special- consultants. (Doc. Nos. 120, 124.) Both Luskin and Goldin made extensive lists of their connections, both past and present, and checked them against a list of interested parties, submitted by Appellant on behalf of FILB. (Id.) Furthermore, Luskin and Goldin made explicit reference to Section 101(14) and affirmed, under penalty of perjury pursuant to 28 U.S.C. § 1746, that they were disinterested parties. (Doc. Nos. 120, 124.) Once again, no creditor or other interested party filed objections to either application (Doc. No. 146), and, on November 12, 2012, the Bankruptcy Court granted both applications (Doc. Nos. 153, 154). Between November 2012 and March 2014, the Trustee, Luskin, and Goldin (together, the “Fiduciaries”) each applied for and received inter[555]*555im fees on at least three occasions — again without objection. (See, e.g., Doc. Nos. 172, 233, 308, 309, 359, 360.)

On November 25, 2013, the Trustee filed his Report and Disclosure Statement, which he amended on January 24, 2014, summarizing his findings regarding FILB and Appellant. (See Doc. Nos. 327, 393.) In particular, the Trustee’s report found that Appellant had defrauded both creditors and investors — a finding that the Bankruptcy Court later confirmed. (See, e.g., Doc. Nos. 393, 490 ¶¶ 79-83.) More specifically, the Trustee’s report found that Appellant had misused investor money, invested outside of the fund’s stated investment strategy, and systematically overvalued assets. (Doc. No. 393.) Accordingly, the Trustee proposed a liquidation plan whereby Appellant’s claim would be deeply subordinated behind the approximately $120 million in allowed unsecured claims, with little chance of recovery. (Doc. Nos. 393, 490 ¶¶ 79-83.)

On March 19, 2014, nearly a year-and-a-half after the Fiduciaries were appointed, months after the Trustee’s report was filed, and just hours before the Bankruptcy Court was to hold a hearing to discuss the Trustee’s liquidation plan, Appellant— for the first time — raised concerns about the Fiduciaries in a letter to the Bankruptcy Court. (Doc. No. 481(a).)2 In the March 19, 2014 letter, Appellant: (1) alleged that the Fiduciaries had inadequately disclosed their connections when they were retained in 2012; (2) suggested that there were possible conflicts of interest involving the Fiduciaries, in violation of both Title 11 of the United States Code and the Federal Rules of Bankruptcy Procedure; (3) requested a hearing to resolve the issue; and (4) requested a stay of further proceedings until the conflict issue was resolved, (See id.) Since the March 19, 2014 letter was submitted long after the Fiduciaries had been appointed, and approximately one hour prior to the liquidation hearing, the Bankruptcy Court rejected Appellant’s letter. (See Disgorgement Order ¶¶ 1-2 (citing Mar. 19, 2014 Tr. at 6:15-7:20).) Nevertheless, the Bankruptcy Court permitted and encouraged Appellant to file proper motion papers, elaborating on and providing support for his claims. (See id. ¶¶ 2-3 (citing Mar. 19, 2014 Tr. at 6:15-7:20).)

On March 21, 2014, just one week before the Trustee’s liquidation plan was to be confirmed (see Doc. No. 490), Appellant filed a motion to compel, which essentially rehashed the March 19, 2014 letter and requested that the Court (1) stay future actions, including confirmation of the Trustee’s plan, and (2) compel the Fiduciaries to disclose potential conflicts of interest. (Doc. No. 481(b).) Five days later, the Bankruptcy Court denied Appellant’s request for a stay and directed Appellant to file, in anticipation of an April 2, 2014 status conference, a “simple table listing ... three columns: person or entity, what the alleged failure is, and what the remedy desired is.” (Doc. No. 486 at 25:1-5.) On April 1, 2014, Appellant filed a table with the Bankruptcy Court that included six columns, did not list any desired remedies, and contained an additional thirteen pages of written descriptions of the alleged conflicts. (Doc. No. 493.) Moreover, the table discussed parties who were not estate Fiduciaries. (Id.) At the April 2, 2014 status conference, the Bankruptcy Court rejected this table as deficient and directed Appellant to prepare a brief clarifying his allegations and the relief sought. (Doc. [556]*556No. 503 at 31-32, 39.) The Bankruptcy Court gave Appellant a month to submit this brief, which Appellant agreed would be enough time. (Id.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
536 B.R. 551, 2015 WL 5305979, Counsel Stack Legal Research, https://law.counselstack.com/opinion/fletcher-v-davis-in-re-fletcher-international-ltd-nysd-2015.