The opinion of the court was delivered by: BONSAL
Petitioners, former limited partners of Ira Haupt & Co. (Haupt), a New York limited partnership which was adjudicated a bankrupt on June 26, 1964, have filed a petition to review a decision and order of Referee Ryan dated June 1, 1967. Jurisdiction is based upon Section 39(c) of the Bankruptcy Act, 11 U.S.C. § 67(c). Petitioners have filed claims in the Haupt bankruptcy proceeding, which claims are for the most part subordinated to approximately $30 million of claims filed by general creditors.
Since the Referee's order was well within his discretion, and in the interest of the bankrupt estate, the petition for review is denied.
On April 10, 1967 petitioners applied to the Referee for an order to compel the trustee in bankruptcy of Haupt (the trustee) to attempt to revoke a demand for arbitration made prior to Haupt's adjudication as a bankrupt, allegedly on behalf of Haupt, in Klebanow v. New York Stock Exchange (the breach of trust action),
pending in Supreme Court, New York County, New York, and to sell to petitioners all of the trustee's right, title and interest in the claims asserted derivatively on behalf of Haupt in the breach of trust action and in two actions pending in this court,
Klebanow v. Funston, 64 Civ. 692 (the Securities Exchange Act action),
and Klebanow v. Funston, 64 Civ. 935 (the anti-trust action),
the sale to be on the following terms:
1) the payment by petitioners of all expenses incurred in the prosecution of the three actions;
2) the payment by petitioners to the trustee of one-third of any recovery in the actions that remains after, (a) reimbursement to petitioners of their out-of-pocket expenses incurred in the prosecution of the actions, and, (b) payment to petitioners' counsel of one-third of any recovery after such reimbursement;
3) the remaining amount of any recovery (after making the payments in 2) above) to be divided among petitioners in proportion to their claims as filed in the Haupt bankruptcy proceeding.
Objections to petitioners' application were filed by the New York Stock Exchange, the Chase Manhattan Bank (National Association), Morgan Guaranty Trust Company of New York, First National City Bank, Manufacturers Hanover Trust Company, Wm. Brandt's Sons & Co. Ltd., Charterhouse Japhet & Thomasson Limited, Kleinwort, Benson Limited, Continental Illinois National Bank and Trust Company of Chicago, and First National State Bank of New Jersey, all of which have filed claims in the Haupt bankruptcy proceeding as general creditors. The New York Stock Exchange is named as a defendant in the three actions. The trustee does not object to the continued prosecution of the actions by petitioners provided that:
1) the actions are prosecuted at petitioners' expense for the benefit of the estate, with any recovery being paid in full to the trustee;
2) the compensation of petitioners' attorneys and reimbursement for out-of-pocket expenses are fixed upon application to the court in accordance with the Bankruptcy Rules; and
3) the trustee retains the right to apply to the court for abatement of the prosecution of the actions, or any of them, should the trustee determine that continued prosecution may prejudice the estate.
By the decision and order dated June 1, 1967, the Referee directed that:
1) petitioners are authorized to continue the prosecution of the three actions for the benefit of Haupt, with the amount of any recovery to be paid to the trustee;
2) the compensation of petitioners' attorneys and the payment of out-of-pocket expenses would be determined upon application in accordance with the Bankruptcy Act and the Rules of the court;
3) the trustee, upon written request by petitioners, is authorized to execute a document, in form satisfactory to him, to attempt to revoke the demand for arbitration ...