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In re Persaud

United States District Court, E.D. New York

January 30, 2013

In re Christine PERSAUD, Debtor.

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[Copyrighted Material Omitted]

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By: Mendel Zilberberg, Samuel Karpel, Mendel Zilberberg & Associates, PC, Brooklyn, NY, for Appellants.

By: Lee W. Stremba, Brett D. Goodman, Troutman Sanders LLP, New York, NY, for Appellees.


JOHN GLEESON, District Judge.

This is an appeal from an Order entered on March 5, 2012 by the United States Bankruptcy Court in this district (Stong, J.) authorizing the retention of Troutman Sanders, LLP (" Troutman" ) as general and bankruptcy counsel for John S. Pereira, the Chapter 7 Trustee for the Estate of Debtor Christine Persaud (hereinafter the " Estate" ). Appellant Abraham Klein (" Klein" ), who purports to be one of Persaud's creditors in the underlying Bankruptcy, objected to the retention of Troutman on grounds that Troutman represented him in connection with a proposed land deal in China in 2008 and, as a

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result of this prior engagement, gained access to confidential information that can be used in pursuing claims against him in the Chapter 7 proceeding.

After full briefing and an evidentiary hearing spanning nine days over several months, Judge Stong issued a Memorandum Decision overruling Klein's objections, approving Troutman's retention, and denying Klein's motion for reconsideration. See Mem. Decision, March 5, 2012, ECF No. 1-61. Klein appeals from this decision.[1] For the reasons that follow, I affirm the Bankruptcy Court in all respects.

A. Jurisdiction and Standard of Review

Appeals from cases originating in the bankruptcy courts are governed by 28 U.S.C. § 158, which vests district courts with appellate jurisdiction over bankruptcy court rulings. While final orders of the bankruptcy court may be appealed to the district court as of right, see 28 U.S.C. § 158(a)(1), appeals from non-final bankruptcy court orders may be taken only " with leave" of the district court, see id. § 158(a)(3). In this Circuit, a " flexible standard of finality" applies in bankruptcy cases. In re AroChem Corp., 176 F.3d 610, 620 (2d Cir.1999). Since the bankruptcy court order at issue authorized a Trustee to retain counsel and indicated that this decision would not be reconsidered, the order is final; accordingly, I have appellate jurisdiction pursuant to 28 U.S.C. § 158(a)(1) to review it. See In re Kurtzman, 194 F.3d 54, 57 (2d Cir.1999); In re AroChem Corp., 176 F.3d at 620.

When a district court functions in its capacity as an appellate court in a bankruptcy case, the order of the bankruptcy court is subject to plenary review. Thus, I " independently review the factual determinations and legal conclusions of the bankruptcy court," In re PCH Assoc., 949 F.2d 585, 597 (2d Cir.1991) (citation omitted). " Findings of fact ... shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the bankruptcy court to judge the credibility of the witnesses." Fed. R. Bankr.P. 8013. The bankruptcy court's legal conclusions are evaluated de novo. In re Momentum Mfg. Corp., 25 F.3d 1132, 1136 (2d Cir.1994).

B. Background

Section 327(a) of the Bankruptcy Code provides the basic authorization for the retention of professionals by the trustee:

Except as otherwise provided in this section, the trustee, with the Court's approval, may employ one or more attorneys, accountants, appraisers, auctioneers, or other professional persons, that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the trustee in carrying out the trustee's duties under this title.

11 U.S.C. § 327(a).

Under this provision, a trustee's choice of counsel is subject to the evaluation and approval of the bankruptcy court. See In re Vouzianas, 259 F.3d 103, 107-08 (2d Cir.2001). " In exercising its approval function, however, the bankruptcy court should interfere with the trustee's choice of counsel only in the rarest cases, such as when the proposed attorney has a conflict of interest, or when it is clear that the best interest of the estate would not be served

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by the trustee's choice." In re Smith, 507 F.3d 64, 71 (2d Cir.2007) (internal quotation marks and text modification omitted). Because " the relationship between attorney and client is highly confidential, demanding personal faith and confidence in order that they may work together harmoniously," courts give trustees wide ...

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