361 F.2d 164 (2nd Cir. 1966), 316, In re Ira Haupt & Co.

Docket Nº:316, 30218.
Citation:361 F.2d 164
Party Name:In the Matter of IRA HAUPT & CO., a Limited Partnership, Bankrupt. v. Charles SELIGSON, as Trustee in Bankruptcy of Ira Haupt & Co., Appellee. Gladys KNAPP, Bernard Klebanow, George Lewis, Egon H. Ottinger, Michael Sloan, Henry Schlenger, and Harold L. Marantz, Kenneth Alan Marantz and Edith F. Marantz, as Executors of the Estate of Charles Marantz
Case Date:May 03, 1966
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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361 F.2d 164 (2nd Cir. 1966)

In the Matter of IRA HAUPT & CO., a Limited Partnership, Bankrupt.

Gladys KNAPP, Bernard Klebanow, George Lewis, Egon H. Ottinger, Michael Sloan, Henry Schlenger, and Harold L. Marantz, Kenneth Alan Marantz and Edith F. Marantz, as Executors of the Estate of Charles Marantz, Appellants,

v.

Charles SELIGSON, as Trustee in Bankruptcy of Ira Haupt & Co., Appellee.

Nos. 316, 30218.

United States Court of Appeals, Second Circuit.

May 3, 1966

Argued April 6, 1966.

Page 165

Max Freund, New York City (Rosenman, Colin, Kaye, Petschek & Freund, New York City, Jerome E. Sharfman, New York City, of Counsel), for appellants.

Harvey R. Miller, New York City, (Seligson & Morris, New York City) for appellee.

Before FRIENDLY and HAYS, Circuit Judges, and CLARIE, District Judge. [a1]

FRIENDLY, Circuit Judge:

The appellants are limited partners of Ira Haupt & Co., who have filed claims as creditors in the bankruptcy proceeding of that firm now pending before Referee Ryan in the District Court for the Southern District of New York. Although an involuntary petition was filed on March 23, 1964, and the firm was adjudicated a bankrupt on June 16, it was not until October 6 that a trustee was appointed. Two days later the trustee, Charles Seligson, Esq., applied to the Referee ex parte for authority to employ his own law firm, Seligson & Morris, as his counsel under a general retainer. See General Order 44. His affidavit said that he wished 'to employ the aforesaid law firm, notwithstanding his membership therein because of the expertise of said law firm in proceedings of this nature quite apart from the experience of applicant.' The trustee also stated his belief 'that the circumstances relevant to this proceeding are such that a most intimate relationship between the Trustee and his counsel is imperative' and that retention of his firm would 'enable a close cohesive administration of the bankrupt estate which will enure to the benefit of the bankrupt's creditors.' He disclaimed compensation other than his commissions as trustee for any legal services he might personally render, but announced an intention to share his compensation as trustee with his partners and to participate in the compensation received by his firm for the services of other members and associates. The Referee granted the application without a hearing. A week later, he granted another ex parte application by the trustee to retain an independent law firm 'to render professional services in conjunction with his general counsel' in handling claims under various insurance bonds and policies-- a matter of urgency because

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contractual periods of limitation were about to expire.

Shortly after his appointment, the trustee requested appellants' counsel to send him copies of complaints in derivative actions they had initiated, presumably with a view to determining whether he should take over the prosecution. See Meyer v. Fleming, 327 U.S. 161, 167-168, 66 S.Ct. 382, 90 L.Ed. 595 (1946); Klebanow v. New York Produce Exch., 344 F.2d 294, 299 (2 Cir. 1965). Counsel promptly complied with this request and called the trustee's attention to additional areas believed to require investigation with a view to suit. In January 1965, appellants' counsel complained to the trustee about delay in the prosecution of the derivative actions, expressed the feeling that this was due to the trustee's general counsel being understaffed, and voiced a fear that the trustee's ability to pass on that question was compromised by the retainer of his own firm. Not being satisfied with a letter from the trustee giving his view of the situation, appellants' counsel moved before the Referee to require the trustee to terminate the general retainer of his own firm and hire another or others. The supporting affidavit, in addition to alleging the background of the controversy, charged that three of the five partners of the firm at the time of its retainer had left, including one whose qualifications had been stressed by the trustee in applying for the firm's appointment; and that the firm now comprised only the two named partners and at most four young associates. 1 The motion was argued, the trustee later submitted an affidavit, and appellants' counsel filed a supplemental affidavit to the effect that after the argument the trustee had retained still another firm to investigate and advise him as to the merits of three derivative actions. The Referee denied the motion and Judge Palmieri dismissed a petition to review. This appeal followed.

Although the parties have not questioned our power to hear this appeal, we are bound to consider and determine our jurisdiction. The appeal comes within the letter...

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