Coan v. Dunne, 3:15-cv-00050 (JAM)
| Decision Date | 22 January 2019 |
| Docket Number | No. 3:15-cv-00050 (JAM),Adv. Proc. No. 15-5019 (JAM) (consol.),3:15-cv-00050 (JAM) |
| Court | U.S. District Court — District of Connecticut |
| Parties | RICHARD M. COAN, Plaintiff-Trustee, v. SEAN DUNNE et al., Defendants. |
Plaintiff-Trustee Richard M. Coan and defendants Gayle Killilea, Mountbrook USA, LLC, and Wahl, LLC are at odds over whether the Trustee may retain two sets of lawyers in connection with the consolidated proceedings now before the Court and pending trial in May 2019. The Trustee has applied for permission to hire the Connecticut firm of Updike, Kelly, & Spellacy, P.C. (Updike) as special counsel. Doc. #102. The Trustee has also applied to the Court for permission to hire the Irish firm of AMOSS Solicitors for necessary assistance in Ireland. Doc. #104. Defendants have opposed both applications (Doc. #127; Doc. #128).
I will deny the application as to Updike and grant it as to AMOSS. As an initial matter, I conclude that the appointment of Updike and AMOSS is consistent with the statutory requirements of the Bankruptcy Code, 11 U.S.C. § 327. As to Updike, however, I conclude that it has a "former client" conflict of interest pursuant to Rule 1.9(a) of the Connecticut Rules of Professional Conduct that prevents its representation of the Trustee in light of its prior representation of defendant Mountbrook. As to AMOSS, I conclude that I have no authority to regulate AMOSS's participation in any Irish bankruptcy proceedings and that, to the extent that AMOSS's involvement may extend to any activities in the case now before me, AMOSS does not labor under a conflict or other disqualifying interest.
This case is a consolidated action involving claims by a bankruptcy trustee seeking to recover assets relating to the bankruptcy of Sean Dunne. See In re Dunne, No. 13-50484 (Bankr. D. Conn.). Dunne was a prominent real estate developer in Ireland with a reported net worth of more than $900 million in 2007. Doc. #50 at 2. But Dunne soon suffered devastating financial reversals after the global financial crisis struck in 2008, and this has set in motion years of efforts by creditors and bankruptcy trustees in the United States and Ireland to recover from him.
In 2010 the government of Ireland created the National Asset Management Agency ("NAMA") to acquire troubled bank assets and other obligations. Ibid. In the meantime, Dunne and his spouse—defendant Gayle Killilea—moved to Greenwich, Connecticut in 2010. Ibid.; Doc. #1-1 at 15. In 2012 Dunne consented to a stipulated judgment against him and in favor of a NAMA-related entity known as National Asset Loan Management, Ltd. ("NALM") for about $235 million stemming from personal guarantees that Dunne had given to secure debt for his companies. Ibid.
NALM, however, suspected that Dunne had concealed assets from his creditors, and so NALM filed an action in 2012 in the Connecticut Superior Court claiming that Dunne had fraudulently transferred various assets to others including his spouse Gayle Killilea Dunne (Killilea). Id. at 3. Among the defendants named in NALM's action were Dunne, Killilea, and a Connecticut limited liability company known as Mountbrook USA, LLC that Dunne had allegedly formed but later claimed that Killilea was the sole member. Doc. #1 at 1; Doc. #1-1 at 11-13. Mountbrook was alleged to have paid real estate taxes on certain properties in Greenwich as well as to own cars driven by Dunne and Killilea. Doc. #1-1 at 13, 15. NALM's state court complaint alleged that Dunne had fraudulently transferred his interest in Mountbrook to Killilea,as well as fraudulently transferred various other funds and assets including real estate in Greenwich and in Switzerland. Doc. #1-1 at 16-21.
While this state court action was pending, Dunne filed for bankruptcy in March 2013 in the U.S. Bankruptcy Court in the District of Connecticut, and his creditors soon commenced a bankruptcy action against him as well in Ireland. Doc. #50 at 3-4. In January 2015, Dunne waived his discharge in the U.S. bankruptcy action, and the bankruptcy trustee—plaintiff Richard Coan—moved to intervene in the state court action and to remove it to this Court. Id. at 4; Doc. #1. The Court granted the Trustee's motion to intervene and denied defendants' motion to remand. Doc. #38.
About two months later, the Trustee commenced a separate but somewhat duplicative adversary proceeding in the Bankruptcy Court against Killilea and others in March 2015. See Coan v. Killilea, Adv. Proc. No. 15-05019 (D. Conn.). The Trustee alleged 35 causes of action based on alleged fraudulent transfer of assets or money to Killelea from 2005 to 2008, including claims that Dunne had fraudulently transferred his interests in Mountbrook to Killilea. Doc. #50 at 4-5.
A few years passed before the case became active again on my docket. On July 27, 2018, I entered an order for trial to commence in May 2019. Doc. #46. I also granted the Trustee's unopposed motion to consolidate before me the removed state court action with the adversary proceeding that had been proceeding on a separate track in the Bankruptcy Court. Doc. #52. Parallel and related proceedings are also taking place in Ireland. See Lehane v. Dunne 2014 7820 P (H. Ct.) (Ir.); In re Dunne (A Bankrupt) 2013 Bankr. No. 2478 (H. Ct.) (Ir.).
The Trustee's application to retain Updike
Although the Trustee is already represented by another law firm, the Trustee proposes to retain Updike as special counsel to render advice and counsel to the Trustee in connection with the trial and any appeal. Doc. #102 at 3. Updike would serve in a "subordinate litigation role on an 'as needed' basis, from time to time, in order to evaluate certain elements and strategy of the matter and to render advice and guidance for the preparation and prosecution of the case," including for purposes of strategy for any appeal. Ibid. According to the Trustee, "most" of the time to be incurred by attorneys at Updike would be by attorney Paul Gilmore. Ibid.
The Trustee acknowledges that Updike has two prior connections to entities at issue in this case. The first is Updike's prior representation of defendant Mountbrook USA, LLC, and the second is Updike's prior representation of an entity known as Newinvest Holding International Ltd. (Newinvest). I will discuss these prior representations in turn.
Updike's prior representation of Mountbrook
In mid-2016 an Updike attorney named Thomas Gugliotti represented defendant Mountbrook USA, LLC, as a creditor for purposes of a bankruptcy proceeding involving 151 Milbank, LLC, which is a single asset real estate entity owning property for a luxury condominium project at 151 Milbank Street in Greenwich. Doc. #102 at 4; Doc. #151 at 12; Doc. #276 to In re 151 Milbank, LLC, No. 15-51485 (Bankr. D. Conn. 2016). Mountbrook was the general contractor for the condominium project, and the bankruptcy plan treated Mountbrook as an unsecured creditor. Doc. #151 at 13.
Both Mountbrook and 151 Milbank, LLC, have been named as defendants by the Trustee in the consolidated proceeding that is now before me. Killilea has submitted an affidavit attesting that she owns the membership interests in Mountbrook, that she directs counsel for Mountbrook,and that she consulted with Updike during the course of its representation of Mountbrook in the 151 Milbank bankruptcy proceeding. Doc. #128 at 5-6; Doc. #128-1 at 2-3.
Updike represented Mountbrook at a hearing on the debtor's disclosure statement in that proceeding, Doc. #151 at 10-11, and Updike was counsel for Mountbrook as the debtor filed a pair of amended disclosure statements, the latter of which the Bankruptcy Court approved. See Docs. #281, 284, 294, 299, 310 to In re 151 Milbank, LLC, No. 15-51485 (Bankr. D. Conn. 2016). The disclosure statements discussed Mountbrook's role as an unsecured insider creditor of 151 Milbank, LLC, and that determinations of its claims would be handled either through the claims objection process or by way of a judicial determination in the adversary proceeding that has been consolidated before me. See Doc. #151 at 13; Doc. #284 at 8, 16 to In re 151 Milbank, LLC, No. 15-51485 (Bankr. D. Conn. 2016). Ultimately, Updike filed a motion to withdraw as counsel for Mountbrook in June of 2016, Doc. #294 to In re 151 Milbank, LLC, No. 15-51485 (Bankr. D. Conn. 2016), and the Bankruptcy Court granted that motion in late July 2016, Doc. #310 to id.
Updike's prior representation of Newinvest
The Trustee states that Updike "very briefly" represented Newinvest Holding International Ltd. Doc. #102 at 4. This entity is not a defendant in this action but holds a mortgage on a property at 22 Stillman Lane in Greenwich, Connecticut, which is owned by defendant Wahl. Doc. Doc. #187 at 2. The Trustee referenced the Newinvest mortgage in its complaint in the adversary action in the course of allegations that 22 Stillman Lane has been another object of fraudulent transfer. Doc. #102 at 4. The Trustee represents that "the Killilea Adversary does not challenge the validity of said mortgage and, as aforesaid, the mortgagee [Newinvest] is not a party to the Killilea Adversary," nor "a creditor of the Dunne estate." Ibid.By contrast, defendants maintain that the Trustee's act of filing a lis pendens on the property of 22 Stillman Lane was adverse to Newinvest's interests as a mortgage holder on the property and adverse to Wahl's selling of the property. Doc. #187 at 2.
AMOSS prior representation
In 2014, a consultant for defendant Killilea named James Ryan contacted solicitor Gavin Simons of AMOSS in Dublin, Ireland, to discuss the possibility of having Simons and AMOSS represent Killilea or Dunne in Irish bankruptcy and related proceedings there. Doc. #127-1 at 2-3 (¶¶ 2-4). Ryan asserts that he discussed Dunne's bankruptcies in the United States and Ireland, claims against Dunne and Killilea in the United States, the potential for future claims against them, and the...
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