In re Dreier LLP

482 B.R. 863, 2012 WL 5464634
CourtUnited States Bankruptcy Court, S.D. New York
DecidedNovember 8, 2012
DocketNo. 08-15051 (SMB)
StatusPublished

This text of 482 B.R. 863 (In re Dreier LLP) 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 Dreier LLP, 482 B.R. 863, 2012 WL 5464634 (N.Y. 2012).

Opinion

MEMORANDUM DECISION GRANTING TRUSTEE’S APPLICATION TO RETAIN CONSTELLATION INVESTMENT CONSULTING CORP.

STUART M. BERNSTEIN, Bankruptcy Judge.

Sheila M. Gowan, the chapter 11 trustee (the “Trustee”) of Dreier LLP, wants to retain Constellation Investment Consulting Corp. (“Constellation”) as Special Litigation Advisor and, potentially, as an expert trial witness, in connection with her adver[865]*865sary proceeding against Amaranth Advisors LLC and Amaranth Partners LLC (collectively, “Amaranth”), entitled Gowan v. Amaranth Advisors LLC, et al., Adv. Pro. No. 10-3493 (Bankr.S.D.N.Y.) (SMB) (the “Adversary Proceeding”). (See Trustee’s Application for Entry of an Order Under 11 U.S.C. §§ 327(a) and 328(a) Authorizing the Retention and Employment of Constllation [sic] Investment Consulting Corp. as Special Litigation Advisor in Connection with Adversary Proceedings, Nunc Pro Tunc to June 28, 2012, dated July 3, 2012 (‘Application”) (ECF Doc. # 1402).)1 The principal of Constellation is Boris Onefater, and the balance of this opinion will refer to them collectively as Onefater.

Amaranth has objected to the retention based on an alleged conflict. In a prior litigation, In re: Amaranth Natural Gas Commodities Litigation, No. 07 Civ. 6377 (S.D.N.Y.) (SAS) (the “Amaranth Class Action”), Amaranth’s Chief Executive Officer Nicholas Maounis retained Onefater as an expert. Amaranth argues that Onefa-ter received confidential information regarding Amaranth’s due diligence practices in connection with that retention, and the same information is relevant to the issues in this Adversary Proceeding. (See Objection of Amaranth Partners LLC and Amaranth Advisors L.L.C. to the Trustee’s Application for Entry of an Order Under 11 U.S.C. §§ 327(a) and 328(a) Authorizing the Retention and Employment of Constellation Investment Consulting Corp. as Special Litigation Advisor in Connection with Adversary Proceedings, Nunc Pro Tunc to June 28, 2012, dated July 17, 2012 (‘Objection”) (ECF Doc. #1407).)

The Court heard argument on August 28, 2012, and granted Amaranth’s request to submit a post-hearing in camera affidavit setting forth the specific relevant privileged and confidential information it alleges was disclosed to Onefater. Amaranth also filed a public pleading. (See Supplemental Submission in Support of Objection of Amaranth Partners LLC and Amaranth Advisors L.L.C. to the Trustee’s Application for Entry of an Order Under 11 U.S.C. §§ 327(a) and § 328(a) Authorizing the Retention and Employment of Constellation Investment Consulting Corp. as Special Litigation Advisor in Connection with Adversary Proceedings, dated September 10, 2012 (“Supplemental Submission ”) (ECF Doc. # 1464).)

For the reasons that follow, the Court concludes that Amaranth has failed to carry its burden to identify relevant confidential information that was transmitted to Onefater. Accordingly, Amaranth’s Objection is overruled, and the Trustee’s Application is granted.

BACKGROUND

The Adversary Proceeding is described in detail in Gowan v. Amaranth LLC (In re Dreier LLP), 452 B.R. 451 (Bankr.S.D.N.Y.2011). The Court assumes familiarity with that decision, and limits its discussion to the facts relevant to the instant controversy.

A. The Amaranth Class Action

As stated, Amaranth’s objection stems from the retention of Onefater in the Amaranth Class Action, and we begin there. The Amaranth Class Action was commenced against Amaranth, Maounis and others in or around February 2008. (See Plaintiffs’ Corrected Consolidated Class Action Complaint, dated February [866]*86614, 2008 (“Class Complaint ”), at ¶¶ 22-40, annexed as Exhibit A to the Trustee’s Reply in Support of Application for Entry of an Order Under 11 U.S.C. §§ 827(a) and 328(a) Authorizing the Retention and Employment of Constllation [sic] Investment Consulting Corp. as Special Litigation Advisor in Connection with Due Diligence Issues, Nunc Pro Tunc to June 28, 2012, dated Aug. 3, 2012 (“Reply”) (ECF Doc. # 1418).) The plaintiffs alleged that certain of the defendants manipulated the prices of New York Mercantile Exchange (“NYMEX”) natural gas contracts in violation of the Commodity Exchange Act, 7 U.S.C. §§ 9, 13b & 13(a)(2), and the common law, (id. at ¶ 1), and Maounis aided and abetted those violations. (Objection at 1111.)

In or around July of 2011, Maounis’s counsel, Bingham McCutchen LLP (“Bingham”), retained Onefater to serve as a consulting and testifying expert on Maounis’s behalf. (Declaration of Peter C. Neger, dated July 17, 2012 (“Neger Declaration ”) at ¶ 2 (ECF Doc. # 1408).) Onefater was to opine on whether Amaranth’s “governance structure, investment process, and risk management procedures were acceptable and within industry standards.” (Id.) According to Onefater, “my task was to assess whether Amaranth’s risk management system was properly constructed, had appropriate management oversight, and prompted managerial responses to the information flow generated.” (Declaration of Boris Onefater, dated Aug. 3, 2012 (“Onefater Declaration ”), at ¶ 4, annexed as Exhibit B to the Reply.) Specifically, he was asked to evaluate:

(1)Amaranth’s “organizational structure and internal communication and information flow” and the qualifications of its senior personnel, as related to its natural gas portfolio;

(2) the oversight, governance, and risk management that was in place, and how Amaranth sought to understand, manage and mitigate the risk inherent to its natural gas portfolio; and

(3) “whether the risk management reporting system employed properly reported findings to Maounis and prompted a response from management.”

(Id.)

Onefater’s engagement was governed by a retention agreement between Onefater and Bingham dated July 8, 2011 (the “Retention Agreement”).2 (Neger Declaration at ¶¶ 2, 5.) According to Peter Neger, a member of Bingham, the Retention Agreement deemed communications between members of Bingham and Onefater to be “privileged and confidential and made solely for the purpose of assisting Bingham in rendering legal services to Mr. Maounis.” (Id. at ¶ 5.) In addition, Amaranth and Maounis entered into a Joint Defense Agreement3 under which they cooperated with each other throughout the Amaranth Class Action.

The parties to the Amaranth Class Action also entered into two court-approved agreements that were intended to preserve the confidentiality of certain materials. The

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Bluebook (online)
482 B.R. 863, 2012 WL 5464634, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-dreier-llp-nysb-2012.