Prosser v. Gerber (In re Prosser)
| Decision Date | 20 December 2011 |
| Docket Number | Case No. 06-30009,Related to Doc. No. 29,Related to Doc. No. 43,Related to Doc. No. 30,Adv. Pro. 10-3001 |
| Court | U.S. District Court — Virgin Islands, Bankruptcy Division |
| Parties | In re: JEFFREY J. PROSSER, Debtor. JEFFREY J. PROSSER, Movant, v. TOBY GERBER; FULBRIGHT & JAWORSKI, L.L.P.; JAMES J. LEE; VINSON & ELKINS, L.L.P.; STAN SPRINGEL; JAMES P. CARROLL; FOX ROTHSCHILD, L.L.P.; GENOVESE, JOBLOVE & BATTISTA, P.A.; PAUL BATTISTA; THERESA VAN VLIET; ALVAREZ & MARSAL, LLC, Respondents.1 |
The matter before the Court is Jeffrey J. Prosser's Amended Motion Seeking Evidentiary Hearing to Determine Whether an Order Should be Entered Imposing Sanctions, Disqualification and/or Referral for Further Disciplinary Proceedings and Other Equitable Relief Adding Toby Gerber as Respondent Per the Court's Order Entered March 1, 2010 (hereinafter "Amended Motion for Evidentiary Hearing"). Adv. Doc. No. 43.3 Prior to the filing of the Amended Motion for Evidentiary Hearing, Jeffrey Prosser filed his original Motion for Evidentiary Hearing to Determine Whether an Order Should be Entered Imposing Sanctions, Disqualification and/or Referral for Further Disciplinary Proceedings Against Plaintiffs and/or Certain Attorneys and the Supplement thereto. See Adv. Doc. Nos. 29 and 30. This action originated in the District Courtfor the U.S. Virgin Islands on January 6, 2010, when Jeffrey Prosser filed the Motion for Evidentiary Hearing and Supplement. See Case No. 10-cv-08, Doc. Nos. 3 and 8. On January 29, 2010, the District Court referred the matter to this Court for evidentiary hearing. See Case No. 10-cv-08, at Doc. No. 9.
For procedural reasons, this action is filed as an adversary proceeding related to Jeffrey Prosser's bankruptcy case, despite the fact that it was commenced by way of a motion.4 An evidentiary hearing was held on May 24, 2010, to determine whether reasonable grounds exist to make a referral to the United States Attorney's Office and/or an attorney disciplinary committee. See Transcript of 05/24/10 hearing, Adv. Doc. No. 254 (hereinafter "Hearing Transcript"), at 13 (). Closing arguments were heard on July 22, 2010.
At the outset, we note the highly contentious and litigious nature of the related bankruptcy cases5 involved in this action as is evident from numerous motions for sanctions, contempt, and/or disqualification that have been filed in the main bankruptcy cases and relatedadversary proceedings since the cases commenced. The United States Attorney was made aware of some of the allegations by counsel to Jeffrey Prosser and of those contained in the Amended Motion for Evidentiary Hearing by the U.S. Trustee at the request of the Court.6 The U.S. Attorney was notified of the allegations set forth in the Motion for Evidentiary Hearing due to the severity of those allegations alone. No findings were made by the Court at that time, and, in fact, the trial had not yet commenced.
It is the responsibility of this Court to determine whether, based upon the evidence presented, reasonable grounds exist to refer any or all Respondents for criminal investigation and/or disciplinary proceedings. See 18 U.S.C. §3057. We have examined the documents provided, assessed the credibility of the witnesses, and considered the totality of the evidence, the arguments of counsel and the briefs. We find no basis upon which to make a referral as to the enumerated alleged crimes or professional conduct violations. Although the conduct of certain Principal Actors falls below the high standards expected by this Court, see discussion infra, astark contrast exists between the standards of behavior expected by this Court and a reasonable basis to make a criminal or disciplinary referral. Respondents concede that errors were made. Upon review of the evidence, what is lacking is an intent to violate the law and sufficient evidence to warrant the relief sought.
The genesis of these proceedings was the series of events that led to the January 12, 2010, deposition of Arthur Stelzer ("Stelzer"), who served as a witness in a trial in June 2008 in Jeffrey Prosser's bankruptcy case, and what followed. The deposition raised certain questions as to the conduct of the Respondents.7 The Respondents, in various capacities, have been involved in thebankruptcy case of Jeffrey Prosser, Case No. 06-30009, and three related bankruptcy cases of Emerging Communications, Inc. ("Emerging" or "EmCom"), Innovative Communication Company, LLC ("ICC-LLC"), and Innovative Communication Corporation ("New ICC"), Case Nos. 06-30007, 06-30008, and 07-30012, respectively (collectively, "ICC Cases").8
New ICC, a management and holding company, formerly owned, directly or indirectly, 100% of the common stock of various operating subsidiaries that provide telephone, newspaper, and other services to the citizens of the United States Virgin Islands and surrounding areas.9 New ICC is a wholly-owned subsidiary of Emerging, which, in turn, is directly and indirectly owned by ICC-LLC. Jeffrey Prosser was Chairman of the Board, President, and CEO of New ICC and sole member of its ultimate parent company, ICC-LLC.
Although there were prior filed involuntary bankruptcy cases then pending, on July 31, 2006, Emerging, ICC-LLC, and Jeffrey Prosser each filed voluntary petitions seeking relief underchapter 11 of the Bankruptcy Code, commencing Case Nos. 06-30007, 06-30008, and 06-30009, respectively. Subsequently, Jeffrey Prosser's case was converted to a chapter 7, and John Ellis was appointed as trustee. See Case No. 06-30009, Doc. No. 865. Mr. Ellis later resigned, and James Carroll ("Trustee Carroll") was appointed and continues to serve as Chapter 7 Trustee. Case No. 06-30009, Doc. No. 948.
On July 5, 2007, the Greenlight Entities10 filed an Involuntary Petition against New ICC, commencing Case No. 07-30012. An Order for Relief was entered on September 21, 2007. See Case No. 07-30012, Doc. No. 60. Stan Springel ("Trustee Springel") was appointed Trustee in the Chapter 11 cases. Case No. 06-30007, Doc. No. 543, on March 15, 2007; Case No. 06-30008, Doc. No. 523, on March 15, 2007; Case No. 07-30012, Doc. No. 125, on October 4, 2007. Jeffrey Prosser's control of the Parent Debtors was severed when the Trustee was appointed in these bankruptcy cases. Thereafter, he was removed from the Board of Directors of New ICC.
As discussed in note 1, supra, nine Respondents remain in this proceeding. Jeffrey Prosser withdrew his claims against Trustee Carroll, and the Court dismissed Trustee Carroll's counsel, Fox Rothschild, from this action. Trustee Springel; his legal counsel in the corporate bankruptcy cases, Vinson and Elkins ("V&E"); and his financial advisors in the corporate bankruptcy cases, Alvarez & Marsal, LLC ("A&M"),11 are parties to this proceeding. James Lee("Lee"), a partner in the law firm of V&E, is lead trial counsel in connection with courtroom matters, trials, and hearings in the corporate bankruptcy cases, and he was individually named as a Respondent. See Transcript of hearing on 5/24/10, Adv. Doc. No. 254, at 28-29. Also named as Respondents are Fulbright and Jaworksi, L.L.P. ("F&J") and Toby Gerber ("Gerber"), a partner at F&J. See Hearing Transcript, at 47-48. F&J represents the Rural Telephone Finance Cooperative ("RTFC"), the largest creditor in the Prosser individual bankruptcy and in the related corporate bankruptcies. See Hearing Transcript, at 48, 265. The other respondents, Genovese, Joblove, & Battista, P.A. ("GJB"), and two individual attorneys at the firm, Paul Battista ("Battista") and Theresa Van Vliet ("Van Vliet"), are counsel to Stelzer, who, although paid through New ICC, was actually employed prepetition as Jeffrey Prosser's valet and personal assistant and was a witness in the Exemptions Trial.12
Stelzer testified and was released as a witness in the Exemptions Trial in June 2008. A year and a half later, in December 2009, Jeffrey Prosser filed a Notice of Oral Deposition of Arthur Stelzer in the Discharge Proceedings.13 The Plaintiffs (both Trustees and the RTFC), in their respective adversary proceedings, filed emergency motions for a protective order in response. The Court permitted a limited deposition of Stelzer on January 12, 2010, at which the Court was present telephonically. See Order Denying in Part and Granting in Part Motions for Protective Order Regarding Jeffrey Prosser's Notice of Oral Deposition of Arthur Stelzer, Adv.No. 07-3011, Adv. Doc. No. 98; Adv. No. 07-3012, Adv. Doc. No. 92; Adv. No. 08-3011, Adv. Doc. No. 41; Adv. No. 08-3012, Adv. Doc. No. 35.
When Stelzer was deposed on January 12, 2010, some of his responses to questions by Jeffrey Prosser's counsel led to further inquiry and prompted Jeffrey Prosser to seek an evidentiary hearing related to the retention of GJB by Stelzer and payment of GJB's legal fees on Stelzer's behalf. In response to the inquiry, V&E revealed that it assured Battista that certain work done by GJB for Stelzer would be paid by V&E. Subsequently, Daniel Stewart, a partner at V&E, (on behalf of V&E), Gerber (in his individual capacity), and Trustee Springel (on behalf of A&M) agreed to split the GJB counsel fees equally (referred to hereinafter as the "thirds arrangement"). Although payment was made initially by New ICC, the Principal Actors contend that payment was mistakenly made. New ICC was ultimately reimbursed pursuant to the thirds arrangement. Based upon the evidence presented, Jeffrey Prosser contends that reasonable grounds exist to investigate the Respondents for bribery, bankruptcy fraud, perjury, and ethical violations.
We note that the manner in which this action developed on this Court's docket is curious. Due to questions raised at the January 12, 2010, deposition of Stelzer, at the close of the deposition, the Court instructed Lee "to find out, to the best of [his]...
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