Statek Corp. v. Development Specialists, Inc.

809 F.3d 94, 2015 U.S. App. LEXIS 22755, 61 Bankr. Ct. Dec. (CRR) 261
CourtCourt of Appeals for the Second Circuit
DecidedDecember 29, 2015
DocketDocket No. 14-3688-bk
StatusPublished
Cited by30 cases

This text of 809 F.3d 94 (Statek Corp. v. Development Specialists, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Second Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Statek Corp. v. Development Specialists, Inc., 809 F.3d 94, 2015 U.S. App. LEXIS 22755, 61 Bankr. Ct. Dec. (CRR) 261 (2d Cir. 2015).

Opinion

CHIN, Circuit Judge:

This case returns to us after our previous remand in Statek Corp. v. Development Specialists, Inc. (In re Coudert Bros. LLP) (“Coudert I”), 673 F.3d 180 (2d Cir.2012), which in part vacated the bankruptcy court’s denial of a motion to reconsider an order disallowing a claim. Appellant Statek Corp. (“Statek”) appeals from a September 19, 2014 order of the United States District Court for the Southern District of New York (Swain, /.), which affirmed orders of the United States Bankruptcy Court for the Southern District of New York (Drain, J.), dated August 23, 2013, and October 25, 2013, that again, on remand, denied reconsideration. In denying Statek’s latest motions for reconsideration, the bankruptcy court’s decisions relied on a prior alternative holding — that Statek’s argument was a “new argument” not proper for a motion for reconsideration — which this Court did not explicitly address in Coudert I.

Statek now challenges the bankruptcy court’s decisions on the ground that they do not comply with our mandate in Cou-dert I. For the reasons set forth below, we remand for the district court to instruct the bankruptcy court to reverse its orders denying reconsideration, vacate its claim disallowance order, and reinstate Statek’s claim.

BACKGROUND

This dispute arises out of Statek’s claim in bankruptcy against Coudert Brothers LLP (“Coudert”), a now-defunct New York law firm and 'debtor in bankruptcy. See Coudert I, 673 F.3d at 183-84. The underlying facts are set forth in detail in our prior opinion. See id. at 183-85. We briefly restate the allegations in Statek’s complaint.

From 1984 until 1996, Statek was controlled by Hans Frederick Johnston, who looted its treasury. In 1990, Johnston caused Statek to retain Coudert as counsel, and thereafter Coudert helped him hide his pilfered assets.

After Statek removed Johnston from power, Coudert failed to turn over files and other materials relating to the Johnston years — information to which Statek was entitled as a former client. Because of this nondisclosure, it was not until 2004 that Statek finally learned of Coudert’s role in laundering Johnston’s assets. Cou-dert’s malpractice caused Statek to undergo a prolonged, global search for its assets, at a cost of $85 million.

By complaint dated October 28, 2005, Statek sued Coudert for malpractice in Connecticut state court. Coudert soon went bankrupt, and its September 22, 2006 petition for Chapter 11 bankruptcy in the Southern District of New York automatically stayed the Connecticut action. See 11 U.S.C. § 362. On March 23, 2007, Sta-tek removed the Connecticut action to the United States District Court Lor the District of Connecticut pursuant to 28 U.S.C. § 1452. And on May 10, 2007, Statek filed a proof of claim in the bankruptcy court, attaching as an exhibit the original Connecticut action complaint.

In bankruptcy, appellee Development Specialists, Inc., the plan administrator (the “Plan Administrator”), moved to disallow Statek’s claim as time-barred. On July 21, 2009, the bankruptcy court granted that motion (the “Claim Disallowance Order”) (Drain, /.). The bankruptcy court reasoned that New York choice-of-law rules applied under the Erie doctrine, and New York’s “borrowing statute” requires claims to satisfy both the relevant New York statute of limitations and the limitations period of the state where the cause of action accrued. See N.Y. C.P.L.R. § 202. [97]*97The bankruptcy court found that Statek did not satisfy those requirements.

Statek moved for reconsideration, arguing that the bankruptcy court had erroneously applied the Eñe doctrine by not treating the bankruptcy court as the transferee court for the Connecticut action. See generally Ferens v. John Deere Co., 494 U.S. 516, 110 S.Ct. 1274, 108 L.Ed.2d 443 (1990) (holding federal courts follow choice-of-law rules of the transferor court). On September 8, 2009, the bankruptcy court denied that motion, employing the Federal Rule of Civil Procedure 59(e) standard. See 11 U.S.C. § 502(j); Fed. R. Bankr.P. 9023 (directing application of Rule 59). The bankruptcy court reasoned that the “transferee court” argument was “never raised” before and therefore was a new argument that could not be considered on reconsideration. In re Coudert Bros. LLP, No. 06-12226(RDD), 2009 WL 2928911, at *2 (Bankr.S.D.N.Y. Sept. 8, 2009). Moreover, the bankruptcy court held, “the argument [was] mistaken” because Statek’s claim was filed in New York and so there was no transfer. Id. at *3. Following Statek’s appeal, the district court affirmed (Hellerstein, J.). In re Coudert Bros. LLP, No. 09 Civ. 956(AKH), 2010 WL 2382397, at *4 (S.D.N.Y. June 14, 2010).

In Coudert I, we reversed. We first noted that we did not have subject matter jurisdiction over the Claim Disallowance Order because it was untimely appealed. Coudert I, 673 F.3d at 185-86 & n. 6 (holding Federal Rule of Bankruptcy Procedure 8002(a)’s appeal deadline is jurisdictional). But we vacated the denial of Statek’s motion for reconsideration and agreed with Statek’s “transferee court” reconsideration argument. We held, on this “question of first impression,” that for practical purposes the bankruptcy court was to be treated as the transferee court of the Connecticut action. Id. at 188, 190-91. Therefore, we ruled, Connecticut choice-of-law rules applied to Statek’s bankruptcy claim. We then instructed:

The portion of the district court’s order affirming the bankruptcy court’s denial of Statek’s motion for reconsideration is REVERSED, and the case is REMANDED to the district court with instructions to REMAND IN PART to the bankruptcy court with instructions to apply Connecticut’s choice of law rules in deciding Statek’s motion to reconsider.

Id. at 191; see also id. at 183 (instructing “bankruptcy court to apply the choice of law rules of Connecticut to decide Statek’s motion for reconsideration”). We did not, however, specifically address the alternative holding that the “transferee court” argument has been raised for the first time on the motion for reconsideration.

On remand, the bankruptcy court ordered additional briefing on whether it could still adhere to that alternative holding. On August 19, 2013, it concluded in In re Coudert Bros. LLP (“Coudert II ”), No. 06-12226(RDD), 2013 WL 4478824, at *2, *11 (Bankr.S.D.N.Y. Aug. 19, 2013), that it could. The bankruptcy court found, as an initial matter, that Connecticut choice-of-law rules pointed to Connecticut’s statute of limitations.

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809 F.3d 94, 2015 U.S. App. LEXIS 22755, 61 Bankr. Ct. Dec. (CRR) 261, Counsel Stack Legal Research, https://law.counselstack.com/opinion/statek-corp-v-development-specialists-inc-ca2-2015.