In re Cambridge Analytica LLC

596 B.R. 1
CourtUnited States Bankruptcy Court, S.D. New York
DecidedJanuary 7, 2019
DocketCase No. 18-11500 (SHL) (Jointly Administered)
StatusPublished
Cited by32 cases

This text of 596 B.R. 1 (In re Cambridge Analytica LLC) is published on Counsel Stack Legal Research, covering United States Bankruptcy 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
In re Cambridge Analytica LLC, 596 B.R. 1 (N.Y. 2019).

Opinion

HONORABLE SEAN H. LANE, UNITED STATES BANKRUPTCY JUDGE

Before the Court is the Motion for Entry of Order Vacating the Order Designating Julian Wheatland as the Person Responsible to Perform the Obligations of the Debtors (the "Motion to Vacate" or "Motion") [ECF No. 94]1 filed on November 21, 2018. The Court heard argument on the Motion on December 11, 2018. For the reasons set forth below, the Court denies the Motion.

BACKGROUND

On May 17, 2018, Cambridge Analytica LLC ("Cambridge") and SCL USA Inc. ("SCL," and together with Cambridge, the "Debtors") each filed voluntary petitions for relief under Chapter 7 of the United States Bankruptcy Code. The Court subsequently entered orders directing the procedural consolidation and joint administration of the Debtors' bankruptcy cases. [See ECF No. 68]; [Case No. 18-11501, ECF No. 64]. These bankruptcy cases were filed in the wake of the well-publicized troubles of the British-based political consulting firm that did work for the presidential campaign of Donald Trump and allegedly used the data of millions of Facebook users without their knowledge, consent, or authorization.

In late August, Schulte, Roth & Zabel LLP, counsel to the Debtors, moved for entry of an order authorizing its withdrawal *3as counsel and relieving it from any further obligations in connection with these Chapter 7 Cases (the "Motion to Withdraw") [ECF No. 69]. Shortly thereafter, a limited objection to the Motion to Withdraw was filed by parties who are plaintiffs in civil actions being consolidated in a multidistrict litigation captioned as In re Facebook, Inc. Consumer Privacy User Profile Litigation , MDL No. 2843, N.D. Cal. Case No. 18-MD-02843-VC (such parties, the "Privacy Plaintiffs") regarding the allegedly improper use of Facebook information. The Privacy Plaintiffs had previously moved for an order requiring the Debtors to preserve documents relating to their lawsuits that are currently held or controlled by Debtor Cambridge. [See ECF No. 39]. In opposing the Motion to Withdraw, the Privacy Plaintiffs now argued that "[n]either this Court, the Trustee, nor parties in interest such as the Privacy Plaintiffs should be left in a position where there is no responsible person, counsel or otherwise, available as a knowledgeable representative of the Debtors." [ECF No. 72 ¶ 2]. At a hearing in late September, the Court adjourned the Motion to Withdraw given these concerns as the Chapter 7 Trustee prepared a motion to designate a representative for the Debtors.

About a week after the hearing, the Chapter 7 Trustee filed an application for the entry of an order designating Julian Wheatland ("Wheatland") as the person responsible to perform the obligations of the Debtors under the Bankruptcy Code (the "Designation Motion") [ECF No. 78]. The Chapter 7 Trustee noted Wheatland's role "[a]s the signatory to the Debtors' petitions and the representative of the Debtors at the 341 Meeting." Designation Motion ¶ 13. The Chapter 7 Trustee filed an affidavit of service [ECF No. 79] affirming that the Designation Motion had been served by First-Class Mail upon various parties, including Wheatland at 22 West 15th Street, # 20B, New York, NY 10011 (the "Fifteenth Street Address") - the address Wheatland himself provided as his address in the Debtors' Statements of Financial Affairs (SOFAs) filed with the Court. [See ECF No. 12 at 13]; [Case No. 18-11501, ECF No. 12 at 2, 13]. The copy of the Designation Motion that was served on Wheatland at the Fifteenth Street Address was never returned to the Chapter 7 Trustee as undeliverable, and there has been no other indication that delivery to the Fifteenth Street Address failed.

The Court held a hearing on the Motion to Withdraw and the Designation Motion on October 24, 2018. At the hearing, the Court expressed concerns about Debtors' counsel's inability to provide information on whether Wheatland received the Designation Motion and whether Wheatland's contact information was accurate:

... when you say, 'Well, that's the [contact] information we have.' Is that the information you have from the filing of the case? Has there been any attempt to reach out to Mr. Wheatland by you, his counsel [?] ... obviously if you're counsel and you say, 'Well, Mr. Wheatland is the person who signed the papers on behalf of the debtor, our client, and so in the normal way, you would be the ones counted on to get that information to him. So you haven't been relieved of counsel as yet, so the notion of just reciting this sort of, you know, very dry and kind of matter of fact rules about what service means, I understand that, but that's not really what I was hoping for.

Oct. 24, 2018 Hr'g Tr. at 25:3-22 [ECF No. 91]. Debtors' counsel responded that they had "the same [contact] information" as the Chapter 7 Trustee. Id. at 24:8-9.

*4The Court granted the Designation Motion at the hearing, but it further adjourned the Motion to Withdraw given Wheatland's lack of response to the Designation Motion and lingering concerns about his cooperation. Such concerns proved well-founded when counsel to Wheatland filed a letter on November 1, 2018 (the "Letter") [ECF No. 90], stating that Wheatland "only recently became aware of the [Designation Motion] after the response deadline had passed" and requested a telephonic status conference "prior to adjudicating the [Designation Motion]." Letter at 1. The Letter argued that "Mr. Wheatland does not have the time, information, or resources necessary to fulfill the role of Debtors' designated representative" and that he "[would] face numerous hardships if forced to be the designated representative of the Debtors in these U.S.-based proceedings." Id. Counsel further asserted that "Mr. Wheatland has no access to any information relevant to the Debtors' bankruptcy cases because all of the electronically and nonelectronically stored information is now either in the possession of the Chapter 7 Trustee or the professionals involved in the UK insolvency proceedings of the Debtors' affiliates." Id. at 2.

The Court held a telephonic status conference a few days later, during which Wheatland's counsel argued that (i) the designation of Wheatland was premature, (ii) Wheatland was not the right person to serve as the representative, and (iii) the designation was prejudicial to Wheatland. The Court, however, explained that it had already heard and granted the Designation Motion from the bench and, therefore, Wheatland would need to seek any requested relief by motion.2

Wheatland subsequently filed the Motion to Vacate. The Motion argued that Wheatland was not properly served with the Designation Motion and, therefore, "this Court lacks personal jurisdiction over Mr. Wheatland, and the Designation Order is void as a matter of law." Motion to Vacate ¶ 1. The Motion explained that service of process was ineffective because the Fifteenth Street Address is not Wheatland's "dwelling house or usual place of abode" or "the place where [he] regularly conducts a business or profession," as is required under Bankruptcy Rule 7004(b)(1). Id. ¶ 12; see generally id. ¶¶ 13-16. The Motion also vaguely suggested that - even though Wheatland should not be required to serve as the representative - Wheatland could somehow help in a more limited capacity, though it did not provide any details about how he would do this. See id.

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596 B.R. 1, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-cambridge-analytica-llc-nysb-2019.