464 B.R. 594
Bankr. S.D.N.Y.2011Background
- MF Global Inc. liquidation under SIPA; Trustee Giddens and counsel HHR appointed; matter moved to bankruptcy court for disinterestedness review.
- Objectors (two pro se customers) challenged disinterestedness based on HHR’s representation of JPMC and PwC.
- Initial disclosures by Giddens and HHR were deemed insufficient; subsequent disclosures were ordered and later supplemented.
- SIPC may select conflicts counsel or a co-trustee if conflicts arise; the court contemplated remedial options.
- Court found that, after third disclosures, Trustee and HHR are disinterested under SIPA and the Bankruptcy Code, though conflicts could arise with PwC or other current clients of HHR.
- Disclosures remain an ongoing obligation; early, full disclosure is essential and conflicts may require conflicts counsel or co-trustee.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Trustee and counsel are disinterested under SIPA | Giddens asserts disinterestedness under SIPA §78eee(b)(6) | Objectors contend conflicts due to JPMC/PwC representations | Yes; the Court finds disinterestedness present at the time of decision. |
| Whether disclosure was adequate to support disinterestedness finding | Trustee maintains disclosures were sufficient after amendments | Objectors argue initial disclosures were sparse and incomplete | Initially inadequate disclosures; after Third Disclosure Statement, disclosures were sufficient. |
| Whether appearance of impropriety or adverse interests exists requiring remedies | Trustee can proceed with potential conflicts managed by disclosures and SIPC | Objectors cite potential conflicts with JPMC/PwC as adversarial to estate | Current information shows potential conflicts are attenuated; unlikely to require removal or conflicts counsel at present. |
| Whether conflicts counsel or co-trustee should be appointed | Remedies possible but not presently necessary | Conflict considerations may warrant appointment if issues widen | Not required at this time; possible in future if conflicts intensify. |
Key Cases Cited
- In re Granite Partners, L.P., 219 B.R. 22 (Bankr.S.D.N.Y.1998) (disinterestedness and disclosure standards; scope of conflicts)
- In re Blinder, Robinson & Co., 131 B.R. 872 (D.Colo.1991) (appearance of impropriety; adverse interests standard)
- In re Perry, Adams & Lewis Sec., Inc., 5 B.R. 63 (Bankr.W.D.Mo.1980) (conflicts and use of conflicts counsel)
- In re Project Orange Assocs., LLC, 431 B.R. 363 (Bankr.S.D.N.Y.2010) (overlaps between disinterestedness and adverse interest; testing standard)
- Bank Brussels Lambert v. Coan (In re AroChem Corp.), 176 F.3d 610 (2d Cir.1999) (broad concept of adverse interest and conflicts)