United States District Court, S.D. New York
November 2, 2005.
SECURITIES AND EXCHANGE COMMISSION, Plaintiff,
BEACON HILL ASSET MANAGEMENT LLC, et al., Defendants.
The opinion of the court was delivered by: LEWIS KAPLAN, District Judge
The Joint Official Liquidators of Beacon Hill Master, Ltd.
("Master Fund") and the Official Liquidator of Bristol Fund, Ltd.
("Bristol Fund") move for instructions as to whether it is
necessary for them to obtain court approval prior to prosecuting
actions against third parties related to those funds*fn1
and, if such approval is necessary, for authorization to
prosecute their claims against Banc of America Securities, LLC
("BoA") and Prudential Financial, Inc. ("Prudential"). The
Securities and Exchange Commission ("SEC") contends that court
approval is necessary, objects to the use of the Master Fund to
finance the claim of Bristol Fund against Prudential, and submits
that 20 to 50 percent of the fees incurred by counsel pursuing
these should be withheld until the litigation is concluded in
order to provide an incentive for a speedy resolution.
The SEC points out that the Stipulation and Order Granting
Preliminary Injunction and Other Relief, dated November 13, 2002,
requires that the Master Fund obtain court approval prior to
making any "outside of the ordinary course of business." Paying
for the cost of affirmative litigation plainly falls into that
category. The movants tacitly concede the point, which alone is
dispositive with respect to the Master Fund. Accordingly, the
payment of litigation expenses incurred by the Master Fund in
suing BoA and Prudential absent court approval would be
Having established the principle that Court approval is
required for the maintenance of litigation by the Master Fund, the SEC proceeds to take "no
position on the wisdom of the state court lawsuit." SEC Mem. 4.
Rather, it contends that Master Fund assets should not be used to
finance Bristol's suit.
The fee question is premature. The Court is advised that the
liquidators of the Master Fund and Bristol Fund are attempting to
work out a cost and fee sharing arrangement with Milestone. Any
such proposal shall be presented to the Court for approval.
Moreover, the movants have not shared with the Court the terms of
its retainer of counsel in the pending action. Absent further
order of the Court, no assets of the Master Fund shall be
disbursed to pay costs or fees in the pending litigation.
© 1992-2005 VersusLaw Inc.