Fletcher International, Ltd. v. Davis (In Re Fletcher International, Ltd.)

15-2991
In re: Fletcher International, Limited
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN
ELECTRONIC DATABASE (WITH THE NOTATION ASUMMARY ORDER@). A PARTY CITING TO A SUMMARY
ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit,
held at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of
New York, on the 3rd day of November, two thousand sixteen.
PRESENT:
ROBERT A. KATZMANN,
Chief Judge,
RALPH K. WINTER,
RICHARD C. WESLEY,
Circuit Judges.
________________________________________
In the Matter of: Fletcher International, Limited
________________________________________
Fletcher International, Limited
Debtor.
________________________________________
Alphonse Fletcher, Jr.,
Appellant,
v. 15-2991-bk
Richard J. Davis,
Appellee.
________________________________________
1
FOR APPELLANT: Alphonse Fletcher, Jr., pro se, San Francisco, CA.
FOR APPELLEE: Michael Luskin, Lucia T. Chapman, Stephan E.
Hornung, Luskin, Stern & Eisler LLP, New York,
NY.
Appeal from a judgment of the United States District Court for the Southern District of
New York (Sullivan, J.).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED, AND
DECREED that the judgment of the district court is AFFIRMED.
Appellant Alphonse Fletcher, Jr., proceeding pro se, appeals from the district court’s
judgment affirming an order of the bankruptcy court for the Southern District of New York, which
denied Mr. Fletcher’s motions to (1) vacate the appointment of the Chapter 11 trustee, Richard J.
Davis (the “Trustee”), and the professionals he retained pursuant to 11 U.S.C. § 327(a), and (2)
disgorge their fees and expenses. We assume the parties’ familiarity with the underlying facts, the
procedural history of the case, and the issues on appeal.
“A district court’s order in a bankruptcy case is subject to plenary review, meaning that this
Court undertakes an independent examination of the factual findings and legal conclusions of the
bankruptcy court.” In re Cacioli, 463 F.3d 229, 234 (2d Cir. 2006) (internal quotation marks
omitted). Thus, we review the bankruptcy court’s conclusions of law de novo and its findings of
fact for clear error. See In re First Cent. Fin. Corp., 377 F.3d 209, 212 (2d Cir. 2004). A
bankruptcy court’s denial of a motion to remove the trustee, however, and its decision regarding an
award of compensation are reviewed for abuse of discretion. See In re Eloise Curtis, Inc., 326 F.2d
698, 701 (2d Cir. 1964) (describing the election of a trustee “as an issue of discretion”); In re
Arlan’s Dep’t Stores, Inc., 615 F.2d 925, 943 (2d Cir. 1979) (“It is basic that we will not interfere
2
with the district court’s assessment of the compensation to be awarded attorneys in bankruptcy
proceedings absent a clear abuse of discretion.”). A bankruptcy court abuses its discretion when its
ruling “(1) rests on an error of law … or a clearly erroneous factual finding, or (2) cannot be
located within the range of permissible decisions.” In re Smith, 507 F.3d 64, 73 (2d Cir. 2007)
(internal quotation marks and brackets omitted). “Bankruptcy judges’ findings on conflict of
interest questions are entitled to deference because a bankruptcy judge is on the front line, in the
best position to gauge the ongoing interplay of factors and to make the delicate judgment calls
which such a decision entails.” In re AroChem Corp., 176 F.3d 610, 628 (2d Cir. 1999) (internal
quotation marks omitted).
We conclude first that the bankruptcy court did not abuse its discretion in denying Mr.
Fletcher’s motion on the ground that Mr. Fletcher had repeatedly failed to file proper papers and
comply with court orders in connection with his application. Mr. Fletcher did not timely object to
the appointment of the Trustee or the professional firms he retained as his counsel and special
consultant (Luskin, Stern & Eisler LLP and Goldin Associates, LLC, respectively (collectively,
the “Retained Professionals”)). Indeed, Mr. Fletcher raised his conflict-of-interest allegations well
over a year after the court approved those appointments and only after the Trustee filed a report
finding that Mr. Fletcher had defrauded his investors and proposed a liquidation plan that deeply
subordinated Mr. Fletcher’s claims. Still, the bankruptcy court afforded Mr. Fletcher multiple
opportunities to present his allegations in appropriate papers, culminating in the bankruptcy
court’s instruction at an April 2, 2014 conference to file a brief within 30 days specifying the
relevant statutory provisions, the manner in which they had been allegedly violated, and the relief
3
Mr. Fletcher sought. At the time the bankruptcy court entered its June 24, 2014 order denying Mr.
Fletcher’s motions, Mr. Fletcher had still not filed such a brief. The bankruptcy court was well
within its discretion to deny Mr. Fletcher’s motions for these reasons alone. See In re Rafter Seven
Ranches L.P., 414 B.R. 722, 739 (B.A.P. 10th Cir. 2009) (“A bankruptcy court’s power to manage
a case … arises from the court’s inherent authority to issue pretrial case management orders and to
enforce them by appropriate measures.” (internal quotation marks omitted)).
Nor did the bankruptcy court abuse its discretion in determining that Mr. Fletcher’s
various filings did not give rise to any viable theory of conflict. Under 11 U.S.C. § 324(a), the
bankruptcy court may, “remove a trustee … for cause.” 11 U.S.C. § 324(a). “Grounds for
disapproval or removal of a trustee in bankruptcy are not to be found in his formal relationships,”
and, in assessing whether cause for removal exists, “[w]e have traditionally stressed the elements
of fraud and actual injury to the debtor interests.” In re Freeport Italian Bakery, Inc., 340 F.2d 50,
54 (2d Cir. 1965) (internal quotation marks omitted).
The Trustee’s alleged conflicts of interest were primarily based on professional
relationships between the firm at which he was formerly a partner, Weil Gotshal & Manges LLP,
and entities in some way affiliated with the defendants in an unrelated litigation brought by Mr.
Fletcher involving his cooperative apartment building (the “Dakota Litigation”). However, the
Trustee had retired from Weil Gotshal some nine months before he was appointed trustee, and Mr.
Fletcher failed — and continues to fail — to explain how any such connection to the Dakota
Litigation (to which the debtor is not a party) could render the Trustee or the Retained
Professionals adverse to the estate. Mr. Fletcher’s conclusory accusations of fraud and attenuated
4
allegations of conflict are fundamentally insufficient to remove a Chapter 11 trustee. Nor does Mr.
Fletcher plausibly allege actual injury to the debtor’s interests. The bankruptcy court thus did not
abuse its discretion in denying the motion to remove the Trustee.
With respect to Mr. Fletcher’s efforts to vacate the appointments of the Retained
Professionals based on their connections with various third parties, Mr. Fletcher’s conclusory
allegations failed to raise any presently held conflict with the debtor’s estate. See In re AroChem
Corp., 176 F.3d at 623 (“[C]ounsel will be disqualified under section 327(a) only if it presently
‘hold[s] or represent[s] an interest adverse to the estate,’ notwithstanding any interests it may have
held or represented in the past.” (quoting 11 U.S.C. § 327(a))). Mr. Fletcher did not plausibly show
how any of the third parties he points to are adverse to the estate, let alone how the Retained
Professionals’ relationships with those third parties render the Retained Professionals adverse to
the estate. For that reason, even if Mr. Fletcher were correct that the Trustee and the Retained
Professionals should have disclosed certain connections pursuant to Federal Rule of Bankruptcy
Procedure 2014, the bankruptcy court did not abuse its discretion in denying Mr. Fletcher’s
motions. See Fed. R. Bankr. P. 2014(a) (requiring the disclosure “to the best of the applicant’s
knowledge” of “all of the [professional] person’s connections with the debtor, creditors, any other
party in interest, [and] their respective attorneys and accountants”). In any event, the Retained
Professionals disclosed in their retention applications the majority of the relationships at issue, and
Mr. Fletcher failed to timely object.
5
For the same reasons, the bankruptcy court did not abuse its discretion in denying Mr.
Fletcher’s request that it disgorge the Trustee’s and the Retained Professionals’ compensation or in
declining to hold an evidentiary hearing.
We have considered Mr. Fletcher’s remaining arguments and find them to be without
merit. Accordingly, we AFFIRM the judgment of the district court.
FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk
6