United States District Court, S.D. New York
In re SOUND VIEW ELITE LTD., et al., Debtors.
CORINNE BALL, as Chapter 11 Trustee of SOUNDVIEW ELITE, LTD., Appellee. ALPHONSE FLETCHER, JR., Appellant,
MEMORANDUM OPINION AND ORDER
GREGORY H. WOODS, District Judge.
Appellant Alphonse Fletcher, Jr. appeals from a September 23, 2014 order of the bankruptcy court that, in relevant part (1) awarded attorney's fees to Peter M. Levine, then counsel for Soundview Composite Ltd. ("Soundview Composite"), an investment company owned and controlled by Fletcher; (2) found that Soundview Composite had waived the attorney-client privilege; (3) preserved certain restraints on Soundview Composite's bank account; and (4) ordered Fletcher or Richcourt USA, Inc. ("Richcourt") to provide certain information regarding disbursements made from Soundview Composite's bank account. The Court holds that Fletcher lacks standing to appeal the challenged portions of the bankruptcy court's order. Accordingly, the appeal is dismissed.
A. Bankruptcy Court Proceedings
In September 2013, Soundview Elite, Ltd. ("Soundview Elite"), an investment company, filed for bankruptcy under Chapter 11. See S.D.N.Y. Bankr. No. 13-13098, Dkt. No. 1. On April 1, 2014, Corinne Ball, Soundview Elite's bankruptcy trustee (the "Trustee"), commenced an adversary proceeding against Soundview Composite. The Trustee alleged that Soundview Elite had invested $12.87 million to acquire 100% of the non-voting shares of Soundview Composite, that Soundview Elite had requested the redemption of those shares, and that Soundview Composite had failed to honor that request. The Trustee sought the turnover of approximately $3.8 million that Soundview Composite held in an account at Wilmington Trust (the "Wilmington Trust Account") in order to partially recover the amount allegedly owed by Soundview Composite. Although not named as a defendant, Fletcher was implicated by the Trustee's allegations by virtue of owning and controlling Soundview Composite, at least indirectly through his ownership and control of the entities Soundview Capital Management and Fletcher Asset Management. As of September 2012, Fletcher was also a director of all three Soundview entities. See S.D.N.Y. Bankr. No. 14-1923 ("Adv."), Dkt. No. 1.
The Trustee subsequently filed a motion for summary judgment, which was opposed by Soundview Composite and remains pending before the bankruptcy court as of the date of this decision. See Adv. Dkt. Nos. 11-14, 19-21
On August 5, 2014, Levine, then counsel for Soundview Composite, filed a letter in which he requested that the court hold a conference to discuss the disbursement of funds from the Wilmington Trust Account. According to Levine, such a conference was necessary because the funds in the Wilmington Trust Account had previously been frozen by the bankruptcy court. Levine specifically sought the disbursement of $50, 000 to himself as payment for outstanding attorney's fees owed by Soundview Composite and as a retainer for future fees; and $50, 000 to the law firm Sher Tremonte LLC ("Sher Tremonte") as a retainer for representing Soundview Capital Management in a related SEC investigation. See Adv. Dkt. No. 25.
On August 8, 2014, the bankruptcy court held a conference to address the issues raised in Levine's letter. Fletcher appeared at the conference by telephone. The bankruptcy court confirmed that it had frozen the funds in the Wilmington Trust Account pursuant to certain "consensual agreements, " but also stated that it would entertain a formal motion by the Trustee for a preliminary injunction with the same effect. Adv. Dkt. No. 28 at 34. The bankruptcy court ultimately authorized the $100, 000 in disbursements requested by Levine while reiterating that its restraints on the funds in the Account otherwise remained in place. Id. at 38-40.
On August 26, 2014, Levine filed a letter stating that $100, 000 had been wired from the Wilmington Trust Account to an account owned by Richcourt, another entity owned and controlled by Fletcher; that he had not been paid out of the released funds; and that there was no indication that Sher Tremonte had been paid out of the released funds. Based on correspondence with his client, Levine concluded that he would not be paid without court intervention and requested an order relieving him as counsel for Soundview Composite, directing Soundview Composite or Richcourt to pay him $50, 000, and directing Soundview Composite to either return the balance of the released funds to the Wilmington Trust Account or to use it to retain SEC counsel. See Adv. Dkt. No. 29.
On September 3, 2014, Fletcher filed a letter in which he indicated that Sher Tremonte had, in fact, been retained in connection with the SEC investigation. Additionally, in the letter, Fletcher disclosed portions of two emails that he had exchanged with Levine regarding attorney's fees for representing Soundview Composite. See Adv. Dkt. No. 34.
In a responsive letter filed on the same day, Levine asserted that Fletcher had waived the attorney-client privilege with respect to the subject matter of the partially disclosed emails. Citing the "rule of completeness, " Levine disclosed both of the emails at issue in their entirety, as well as the email thread that preceded them. See Adv. Dkt. No. 33.
That same day, the bankruptcy court held a conference to discuss the issues raised in the above letters. As to the purported waiver of the attorney-client privilege, Levine informed the court that, in addition to partially disclosing certain emails, Fletcher had filed on behalf of Soundview Composite a Client Request for Fee Arbitration with the New York County Lawyers' Association accusing Levine of disregarding Soundview Composite's instructions and making unreasonable demands. Levine argued that Soundview Composite had thereby waived the attorney-client privilege in all respects, and not solely with respect to the subject matter of the disclosed emails. The bankruptcy court agreed and ruled that the attorney-client privilege between Levine and Soundview Composite had been waived. See Adv. Dkt. No. 35 at 51-52.
Regarding the funds in the Wilmington Trust Account, Fletcher admitted that a substantial portion of the $100, 000 disbursed from that Account had been used to pay himself and his associates personally for various "directors' fees, accountings fees, and other ordinary expenses of the Soundview Richcourt group." Id. at 39-40. Concluding that Fletcher had thereby failed to abide by the restraints on the funds in the Account, the court ordered Fletcher to provide to all parties an accounting of the disposition of the money that had been transferred from the Wilmington Trust Account to Richcourt. Id. at 40. Additionally, the court ordered Richcourt to return to the Wilmington Trust Account all funds that had not been used to retain Sher Tremonte, ordered Soundview Composite to pay Levine's outstanding attorney's fees, and granted Levine's request to withdraw as counsel for Soundview Composite. Id. at 46.
On September 4, 2014, Fletcher sent the parties a purported accounting that failed to specifically identify the recipients of the funds disbursed from the Wilmington Trust Account or the purposes for ...