In Re Teligent, Inc.
640 F.3d 53
2d Cir.2011Background
- Mandl, former CEO of Teligent, had a $15 million loan with automatic forgiveness if terminated not for cause; he engaged K&L Gates for severance/termination proceedings.
- After Mandl’s severance, Teligent filed for Chapter 11; Savage & Associates represented the estate and pursued ~1,000 adversary proceedings, including Mandl’s loan balance recovery, with Mandl retaining K&L Gates for subsequent matters.
- Bankruptcy court found Mandl resigned before Teligent terminated for cause, so Mandl owed the loan balance; no appeal of that finding followed.
- Mediation involving Virginia action and malpractice claim against K&L Gates occurred; Protective Orders governed mediation confidentiality but did not specify when confidentiality could be lifted.
- K&L Gates sought to lift the Protective Orders to obtain mediation materials; bankruptcy court denied, district court affirmed; Savage sought to enjoin K&L Gates from using certain settlement defenses in separate action.
- The appellate panel held K&L Gates had no standing as a party in interest to challenge the settlement’s validity during its approval, but that did not bar later defenses in a separate malpractice action.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether disclosure of mediation communications was proper | Savage argued confidentiality should remain; disclosure requires special need and outweighs confidentiality. | K&L Gates contends a blanket lift is warranted for discovery relevance. | No error; no special need and no overriding interest to modify protective orders. |
| Whether K&L Gates could challenge the settlement's validity as a 'party in interest' during approval | Savage contends K&L Gates had standing as a party in interest to object to the settlement. | K&L Gates asserts it had standing to contest the settlement’s provisions. | K&L Gates was not a party in interest and lacked standing to object at approval; not barred from later defenses. |
| Whether collateral estoppel or related defenses bind K&L Gates in the malpractice action | Savage implies the settlement defense might be barred by prior rulings. | K&L Gates seeks to raise defenses in the malpractice action related to mediation. | Collateral estoppel not applicable; standing issue controlled outcome on appeal. |
Key Cases Cited
- The Street.Com, Inc. v. TheStreet.com, 273 F.3d 222, 273 F.3d 222 (2d Cir. 2001) (strong presumption against modification of protective orders; need exceptional circumstances)
- Martindell v. Int'l Tel. & Tel. Corp., 594 F.2d 291, 594 F.2d 291 (2d Cir. 1979) (protective orders modified only for extraordinary circumstances or compelling need)
- In re Teligent, Inc., 417 B.R. 197, 417 B.R. 197 (Bankr.S.D.N.Y. 2009) (bankruptcy court on mediation confidentiality and lifting protective orders)
- In re Refco Inc., 505 F.3d 109, 505 F.3d 109 (2d Cir. 2007) (interpretation of party in interest under 11 U.S.C. §1109)
- In re Johns-Manville Corp., 36 B.R. 743, 36 B.R. 743 (Bankr. S.D.N.Y. 1984) (ad hoc determination of 'party in interest' scope)