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IT IS ORDERED as set forth below: ai of _

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Date: April 19, 2021 (Liandy ¥ Hy

WendyL.Hagenaut™”

U.S. Bankruptcy Court Judge

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

IN RE: CASE NO. 15-58443-WLH

NILHAN DEVELOPERS, LLC, CHAPTER 11

Debtor.

IN RE: CASE NO. 15-58444-WLH

NRCT, LLC, CHAPTER 11

Debtor.

ORDER ON MOTIONS TO (1) REMOVE THE CHAPTER 11 TRUSTEE;

(2) DISQUALIFY GLASSRATNER ADVISORY & CAPITAL GROUP, LLC,

ACCOUNTANTS FOR THE TRUSTEE; (3) DISGORGE ANY FEES AND EXPENSES

OF THE TRUSTEE; AND, (4) DISGORGE ANY FEES AND EXPENSES OF THE

ACCOUNTANTS FOR THE TRUSTEE

THIS MATTER is before the Court on the Motions to (1) Remove the Chapter 11 Trustee;

(2) Disqualify GlassRatner Advisory & Capital Group, LLC, Accountants for the Trustee;

(3) Disgorge Any Fees And Expenses of the Trustee; and, (4) Disgorge Any Fees And Expenses

of the Accountants for the Trustee filed by Niloy Thakkar and Rohan Thakkar as equity interest

holders in the Debtors Nilhan Developers, LLC and NRCT, LLC (Case No. 15-58443 Doc. No.

238 & Case No. 15-58444 Doc. No. 178) (the “Motions”). The Motions require the Court to

determine whether Ron Glass (“Mr. Glass” or the “Trustee”) and GlassRatner Advisory & Capital

Group, LLC (“GR”) were and are disinterested, held or hold or represent an interest adverse to the

estate, or failed to make adequate disclosures about GR’s connections to NCT and Gateway (as

defined below).

The Court has jurisdiction over the parties and subject matter of these contested matters

pursuant to 28 U.S.C. §§ 1334(b) and 157(a), and this is a core matter under 28 U.S.C. §§ 157(b)(1)

and (2)(A).

I. FACTS

a. General

The Court makes the following finding of general facts. Nilhan Developers, LLC (“Nilhan

Developers”), NRCT, LLC (“NRCT”), Bay Circle Properties, LLC (“Bay Circle”), DCT Systems

Group, LLC (“DCT”), and Sugarloaf Centre, LLC (“Sugarloaf”), (collectively the “Debtors”),

each filed a petition for relief under Chapter 11 of the Bankruptcy Code on May 4, 2015. The

cases were procedurally consolidated. The manager of each of the Debtors is Chuck Thakkar, the

father of Niloy and Rohan Thakkar. Ownership in each debtor differs somewhat but is generally

held by members of the Thakkar family and/or a company the Thakkars own in part. According

to the schedules,

1. Nilhan Developers is owned 50% by Niloy Thakkar and 50% by Rohan Thakkar (Case No.

15-58443 Doc. No. 18 p.5);

2. NRCT is owned 50% by Niloy Thakkar and 50% by Rohan Thakkar (Case No. 15-58444

Doc. No. 18 p. 5);

3. Bay Circle is owned 50% by Chuck Thakkar and 50% by his wife, Saloni Thakkar (Case

No. 15-58440 Doc. No. 18 p. 5);

4. DCT is owned by 50% by Niloy Thakkar and 50% by Rohan Thakkar (Case No. 15-58441

Doc. No. 19 pp. 5-6); and

5. Sugarloaf is owned 100% by Sugarloaf Centre Partners, LLC (Case No. 15-58442 Doc.

No. 18 p. 5), which in turn is owned 50% by NRCT (one of the Debtors) and 50% by NCT

Systems, Inc. (“NCT”).

The immediate reason the Debtors filed bankruptcy was their default on a series of loan

agreements with Wells Fargo Bank, N.A.1 The obligations to Wells Fargo were secured by certain

real property owned by the Debtors. The first several months of these cases were devoted to the

Debtors liquidating or refinancing various pieces of property to meet milestone payment deadlines

agreed to by Wells Fargo.

Behind the scenes, these bankruptcy cases have been impacted and driven to a certain

extent by litigation between Mr. Thakkar and his family, on the one hand, and Good Gateway,

LLC and SEG Gateway, LLC (collectively “Gateway”), on the other. Prior to the filing of the

bankruptcy petitions, Gateway obtained judgments in the amounts of $2.5 million and $12 million

against Mr. Thakkar and other non-debtor entities in a Florida state court.

1 Wells Fargo Bank, N.A. began its association with the Debtors in 2008. The history is set out in several prior orders

issued by the Court, including the Order Denying Substantive Consolidation (Case No. 15-58440 Doc. No. 797).

All of the Debtors except NRCT liquidated property to satisfy Wells Fargo. NRCT held

only non-income producing real property and did not liquidate any real property to pay Wells

Fargo. As one of the milestone payments was approaching, Bay Circle sought to sell its property.

Gateway held a judgment lien on a one-half interest in the Bay Circle property by virtue of Mr.

Thakkar’s prior ownership of a one-half interest in the property. Gateway objected that its interest

in the Bay Circle property was unnecessarily lost and asked for adequate protection of the lien it

lost by virtue of the sale of the Bay Circle property. The Court approved the sale and provided

Gateway a replacement lien on Bay Circle’s claims for contribution and subrogation

(“Contribution Claim”) (Case No. 15-58440 Doc. No. 797) (the “AP Order”). The Court later

modified the AP Order.

At various times in the cases, Gateway has claimed multiple interests in the Debtors’ cases.

First, Gateway claims 100% ownership of NCT, an indirect owner with NRCT of Sugarloaf.

Gateway acquired its interest in NCT by virtue of its judgment and a court order transferring the

stock of NCT to Gateway. In compliance with the order, Mr. Thakkar executed a transfer

agreement on August 9, 2017 and, on August 11, 2017, he delivered the stock certificate to

Gateway. Second, Gateway claims an economic interest in NRCT, by way of a judgment against

Rohan Thakkar and certain charging orders. Third, Gateway asserts an interest in claims of Nilhan

Financial, LLC (“Nilhan Financial”), an entity also previously controlled by the Thakkars. Nilhan

Financial is a creditor of all the Debtors including Nilhan Developers and NRCT. Gateway filed

notices of transfer of Nilhan Financial’s claims against Bay Circle to it on March 10, 2017. Later,

Nilhan Financial had its own Chapter 7 bankruptcy case in Florida in which Gateway had various

claims. On May 18, 2018, Gateway and the Nilhan Financial Trustee filed a motion in the Florida

case seeking approval of a settlement agreement pursuant to which Gateway would receive 50%

of, inter alia, any recovery by Nilhan Financial in the Nilhan Developers and NRCT cases. The

settlement was approved on September 6, 2018 (Case No. 8:17-bk-03597-MGW, Bankr. M.D. Fla.

Sept. 6, 2018, Docs. Nos. 210 & 292). Fourth, Gateway holds the Contribution Claim in the Bay

Circle Case. Fifth, Gateway requested discovery from Sugarloaf and NRCT on July 31, 2018

(Case No. 15-58440 Docs. Nos. 856 & 857) relating to the management, organization, and

formation of Sugarloaf and Sugarloaf’s sole member, Sugarloaf Centre Partners, LLC, which is

owned 50% by NCT and 50% by NRCT.2

On October 10, 2018, after learning about actions taken without Court approval in the

Nilhan Developers case, actions which are extensively detailed in prior orders (see e.g., Amended

and Restated Order on Claim of Norcross Hospitality, Case No. 15-58443 Doc. No. 164), the Court

entered an order requiring the parties to show cause why a trustee should not be appointed. In

short, without notifying the Court or his counsel and without Court approval, Mr. Thakkar, on

behalf of Nilhan Developers, exercised an option to re-acquire property for over $9 million and

incurred unauthorized secured post-petition financing in that amount from an insider (for over $5

million) and a third party.

After a hearing on the show cause order, the U.S. Trustee filed a Motion to Appoint a

Chapter 11 Trustee (Case No. 15-58440 Doc. No. 903) on November 8, 2018. The Court held a

hearing on the Motion to Appoint Chapter 11 Trustee on December 4, 2018. The Court found the

U.S. Trustee had established a trustee was necessary for cause under section 1104, due to

management’s incompetence, gross mismanagement, dishonesty, lack of trustworthiness, self-

2 The Court granted the requests on August 1, 2018 (Case No. 15-58440 Docs. No. 858 & 859). Gateway then filed

a motion to compel the production on November 30, 2018, contending Sugarloaf and NRCT did not produce the

documents as directed (Case No. 15-58440 Doc. No. 912). The Trustee, upon his appointment, later responded on

February 28, 2019, stating he was not aware of any documents in his possession, custody, or control responsive to the

requests (Case No. 15-58440 Doc. No. 988).

dealing with insiders, and the consistent failure to follow the rules and procedures of the

Bankruptcy Code.

The Court explained that cause existed to appoint a trustee in all five cases, and it was in

the best interest of creditors in each case to do so. The Court also believed an independent party

was needed to analyze Bay Circle’s Contribution Claim—to review the financials of all five

debtors to “see who paid what and see if, in fact, there is a contribution claim that Bay Circle has

against anyone.” The Court stated, “[y]ou need to figure out if there is, in fact, a claim, and I think

a trustee is an ideal person to do that, get their accountant involved and actually, . . . get the books

and records together and figure out who paid what and . . . whether Bay Circle has a claim or not.”

In NRCT, the Court noted a trustee was appropriate because NRCT had significant assets and,

given management’s willingness in the Nilhan Developer’s case to buy, sell, and encumber estate

assets without Court permission, a trustee was necessary to ensure the assets remained

unencumbered until deemed necessary (unless and until it was determined there was some reason

that they need to be liquidated to pay claims, i.e. the Contribution Claim). Ultimately, the Court

counseled it wanted a trustee to methodically analyze what was necessary in all the cases.

At the conclusion of the December 4, 2018 hearing, the Court ordered the appointment of

a trustee. Counsel for the U.S. Trustee stated the U.S. Trustee would solicit suggestions from any

parties in interest as to who should serve as a trustee and invited anyone with a person to nominate

to do so by the close of business on December 6, 2018. On December 11, 2018, the U.S. Trustee

filed a Notice of Appointment of Chapter 11 Trustee and Setting of Bond (Case No. 15-58440

Doc. No. 920), and an Application for Approval of Appointment of Trustee (Case No. 15-58440

Doc. No. 921), which is discussed in more detail below. That same day, the Court entered an order

granting the Motion for the Appointment of a Chapter 11 Trustee (Case No. 15-58440 Doc. No.

919), and an order approving Mr. Glass as Trustee (Case No. 15-58440 Doc. No. 922).

On December 20, 2018, the Trustee filed an Application to Employ GR as Financial

Advisor (Case No. 15-58440 Doc. No. 934), which is described below. GR is a firm named for

Mr. Glass and Ian Ratner (“Mr. Ratner”). It has provided services for many years in the Atlanta

market and elsewhere, including forensic accounting, workout and restructuring services, and

services as a trustee, receiver, and chief restructuring officer. The Court granted the application

to employ GR on January 22, 2019 (Case No. 15-58440 Doc. No. 965).

Eventually, the Trustee moved forward in each case to bring matters to a posture to be

decided by the Court. When it became clear the cases were all taking different paths to resolution,

the cases were severed on May 5, 2020 (Case No. 15-58440 Doc. No. 1420). The DCT case was

dismissed on May 1, 2020 (Case No. 15-58440 Doc. No. 1417). Bay Circle was converted to a

case under Chapter 7 (Case No. 15-58440 Doc. No. 1420), and John Lewis, Jr. was appointed as

Chapter 7 Trustee. The Court entered an order granting GR’s Final Application for Compensation

and Reimbursement of Expenses in the Bay Circle case on June 22, 2020 (Case No. 15-58440 Doc.

No. 1444).

In Sugarloaf, the Trustee sold real property and initially filed a Chapter 11 plan. After the

secured lender filed a proof of claim that far exceeded the amount anticipated, the Trustee

determined dismissal was in the best interest of all parties. The Trustee objected to and settled the

lender’s claim, and then moved to dismiss the case on August 5, 2020 (Case No. 15-58442 Doc.

No. 147). The Court granted the Motion to Dismiss on August 28, 2020, subject to the final fee

applications being approved (Case No. 15-58442 Doc. No. 164). Final fee applications were

approved on November 17, 2020 (Case No. 15-58442 Docs. Nos. 200-202), and the orders

approving the applications are currently on appeal.

In the NRCT case, the Court confirmed the Trustee’s Fourth Amended Plan (Case No. 15-

58444 Docs. Nos. 131 & 132) and denied a request to dismiss the case filed by Mr. Thakkar (Case

No. 15-58444 Doc. No. 133). The plan provided for the Trustee to hold property of the estate

pending the outcome of the Contribution Claim and for disbursement upon its resolution. The plan

also provided for a release of the Trustee and GR for actions that predated the effective date. Mr.

Thakkar appealed the confirmation order, but the appeal was dismissed (Case No. 15-58444 Doc.

No. 170). The effective date of the plan was November 17, 2020 (Case No. 15-58444 Doc. No.

171).

In the Nilhan Developers case, the Court confirmed the Trustee’s Sixth Amended Plan on

December 8, 2020 (Case No. 15-58443 Doc. No. 227), and the plan became effective on December

23, 2020. The plan provided for immediate payment to certain creditors, and alternative means of

distribution to Nilhan Financial and Norcross Hospitality (an entity owned by Rohan and Niloy

Thakkar) depending on the outcome of Norcross Hospitality’s appeal of this Court’s order

regarding its entitlement to payment. The plan also provided for the release of the Trustee and GR

for actions that pre-dated the effective date.

As the cases have wound towards resolution, the Trustee and his professionals have filed

final applications for compensation. The Motions were filed in response to Final Fee Applications

in the Nilhan Developers case on January 5, 2021 (Case No. 15-58443 Doc. No. 238) and in the

NRCT case on January 8, 2021 (Case No. 15-58444 Doc. No. 178). Niloy and Rohan Thakkar

contend Mr. Ratner, Mr. Glass’s business partner at GR, represented an adversary of the equity

holders of Nilhan Developers and NRCT when he served as the President and Director of NCT, as

reflected on documents filed with the Florida Secretary of State on September 10, 2018 (prior to

the appointment of Mr. Glass as Trustee), until a new filing removed Mr. Ratner from the

designated positions on April 26, 2019. GR and Mr. Glass vehemently oppose the Motions,

arguing GR and Mr. Glass did not hold or represent a materially adverse interest to the estate and

were, and have been, disinterested.

The Court set the Motions for hearing on February 22, 2021, before having a hearing on

the merits of GR’s and Mr. Glass’s fee applications. Mr. Glass and GR filed a Motion for

Involuntary Dismissal Under Rule 52(c) on February 19, 2021 (Case No. 15-58443 Doc. No. 279

& Case No. 15-58444 Doc. No. 216), asking the Court to dismiss Niloy and Rohan Thakkar’s

claims and enter judgment in favor of Mr. Glass and GR.

The evidentiary hearing was attended by Mr. Glass, Mr. Ratner, William A. DuPré, IV and

Kimberly A. Miller (counsel for Mr. Glass and GR), John A. Moffa (counsel for Niloy and Rohan

Thakkar), Frank Wilensky (local counsel for Niloy and Rohan Thakkar), David Weidenbaum

(counsel for the U.S. Trustee), and Walter Jones (of Balch & Bingham LLP; Gateway’s local

counsel). After considering the evidence presented, and the testimony of Mr. Glass, Mr. Ratner,

and Mr. Jones, the Court took the Motions under advisement and invited the parties to file

supplemental briefs. On March 8, 2021, Mr. Glass and GR (Case No. 15-58444 Doc. No. 218),

the U.S. Trustee (Case No. 15-58444 Doc. No. 219); and Niloy and Rohan Thakkar (Case No. 15-

58444 Docs. Nos. 220 & 221) filed supplemental authority in support of their positions.

b. Facts Represented Prior to Hearing

The facts relating to this matter have evolved as more information has come to light. The

facts originally presented in the Trustee’s affidavit in connection with retention, in the Motions

and response to the Motions, and in Mr. Ratner’s declaration, are as follows.

i. Declarations

A Verified Statement of Ronald Glass was attached to the Application for Approval of

Appointment of Trustee (Case No. 15-58440 Doc. No. 921). The affidavit stated, in part:

To the best of my knowledge, information, and belief, I do not hold or represent

any interest adverse (i) to the estate of the Debtors; or (ii) to any class of creditors

or equity security holders, by reason of any direct or indirect relationship to,

connection with, or interest in, the Debtors, or for any other reason.

In September 2018, my partner, Ian Ratner, was approached by Walter Jones, Esq.

of Balch & Bingham, on behalf of NCT Systems, Inc. to serve as an Officer and as

a Board Member. Subsequently, an engagement letter was sent to NCT. The letter

was not executed. No conversations or information was exchanged, and

GlassRatner did no work on this matter.

I will promptly advise the Bankruptcy Court and the Office of the United States

Trustee of any circumstances that cause the foregoing to change.

The Application to Employ GR (Case No. 15-58440 Doc. No. 934), included a Declaration

of William McCaleb (“Mr. McCaleb”), a Managing Director of GlassRatner, which stated:

GlassRatner is a “disinterested person” as that term is defined in Section 101(14)

of the Bankruptcy Code, in that, except as otherwise disclosed herein, GlassRatner,

its principals, managing directors, managers and other employees

a. Are not creditors, equity holders, or insiders of Debtors;

b. Are not and were not, within 2 years before the date of filing of

the petition, a director, officer, or employee of the Debtors; and

c. Do not have interests materially adverse to the interests of the

estates or of any class of creditors or equity security holders, by

reason of any direct or indirect relationship to, connection with, or

interest in, the Debtors, or for any other reason.

To the best of my knowledge, information, and belief formed after reasonable

inquiry, other than in connection with this case, neither GlassRatner nor I have any

connection with the Debtors, their creditors, the United States Trustee, any

employee of the Office of the United States Trustee, the Bankruptcy Judge

presiding in this case, or any party in interest (including their respective attorneys

and accountants), except that (a) GlassRatner may have been engaged from time to

time in the past, and may be engaged in the future, in other matters where one or

more of such parties may have been or may be involved; and (b) GlassRatner may

have been engaged by certain creditors and other parties in interest or their

attorneys, accountants, or professionals in other matters unrelated to the Debtors’

jointly-administered cases. GlassRatner is a specialty financial advisory services

firm. As a result, GlassRatner has and may in the future represent certain parties-

in-interest in matters unrelated to the Debtors’ jointly-administered cases.

ii. Allegations in Motions

The Motions allege neither Mr. Glass nor GR were disinterested by virtue of Mr. Ratner’s

role as an officer and director of NCT. The Motions allege that NCT was dissolved by the Florida

Secretary of State at some point in 2017. On September 10, 2018, NCT was reinstated by the

filing of a 2018 Florida Profit Corporation Reinstatement with the Florida Secretary of State (the

“Reinstatement”). The Reinstatement listed Mr. Ratner as President and Director of NCT, and it

was electronically signed by “Ian Ratner, President, 09/10/2018.” Mr. Ratner continued on record

as President and Director until a 2019 Annual Report for NCT was filed with the Secretary of

State, Division of Corporations, on April 26, 2019 identifying Good Gateway, LLC as NCT’s

President and Director.

iii. Response to Motions

The position of GR and Mr. Glass is that Mr. Jones contacted Mr. Ratner about a possible

engagement and, while there were preliminary discussions between GR and Mr. Jones in which

the parties discussed Mr. Ratner serving as a corporate officer and/or director for NCT, the

conversations did not result in Mr. Ratner or GR being appointed and engaged. Mr. Ratner’s

declaration contends that in or about July 2018, several months prior to the appointment of Mr.

Glass and GR, Mr. Jones contacted Mr. Ratner by phone on behalf of Clay Townsend (Gateway’s

counsel at Morgan & Morgan, P.A. (“Mr. Townsend”)), Gateway, and NCT to possibly engage

GR to provide services. During a July 2018 telephone call, Mr. Jones provided Mr. Ratner and his

colleague, Jason Cristal (“Mr. Cristal”), with general background information about the scope and

terms of the potential engagement. GR ran a conflicts’ check and sent a proposed engagement

letter to Mr. Jones, outlining the proposed scope and terms of the proposed engagement, on

September 7, 2018.

Mr. Glass and GR characterize these discussions as preliminary and the relationship with

Gateway and NCT as brief and limited. Mr. Ratner acknowledged he sent an engagement letter to

Mr. Jones on September 7, 2018. Mr. Ratner contended, however, that he had no recollection of

receiving or reviewing the draft Written Consent of the Shareholders of NCT authorizing Mr.

Ratner to serve as President, Secretary, and Director of the company, and GR never received a

copy of the engagement letter signed by the named counterparties: NCT Systems, Good Gateway,

and Morgan & Morgan. Mr. Glass and GR maintained that neither Mr. Ratner nor GR were ever

engaged or instructed to perform any services for Good Gateway, NCT Systems, or Morgan &

Morgan. They stated GR never opened a file, performed any work, or billed for any work related

to the proposed engagement. According to Mr. Ratner, other than the draft Written Consent of the

Shareholders and the engagement letter, GR neither received nor reviewed any other documents

related to the proposed engagement, and no one at GR received any further information or

instruction with respect to the proposed engagement.

On September 10, 2018, NCT filed the Reinstatement. Mr. Ratner states he was unaware

of the filing.

The U.S. Trustee contacted Mr. Glass, at least by December 7, 2018, regarding serving as

trustee. Mr. Glass contends he disclosed Mr. Ratner’s prior contacts with NCT in response to the

U.S. Trustee’s inquiry to him. On December 7, 2018, Mr. Glass sent to the U.S. Trustee the

proposed engagement letter between GR and NCT stating, “The letter was never signed and

GlassRatner has not spoken to representatives of the company or done any work.” In response,

the U.S. Trustee office stated, “The Verified Statement needs to mention the proposed September

7, 2018 Engagement Letter Agreement with [NCT]. I’m not looking for a full-scale recitation, but

I do need a succinct description and ultimate outcome.” Mr. Glass’s verified statement did not

include the engagement letter and Mr. McCaleb’s Declaration did not mention Mr. Ratner’s

proposed engagement with NCT, nor did it refer to or incorporate Mr. Glass’s affidavit.

Mr. Ratner stated he did not hear anything more from Gateway or NCT about the

engagement. He said, at some point in April 2019, he learned his name appeared on the Florida

Secretary of State’s website as President and Director of NCT. Mr. Ratner maintained he never

served in either role, and he never authorized anyone to submit a record with the Florida Secretary

of State indicating he held a position with NCT. In an email sent April 22, 2019, Mr. Ratner asked

Mr. Jones to have the records corrected. A new Annual Report was filed on April 26, 2019 and

Mr. Ratner was not listed as an officer or director. Nevertheless, the Reinstatement was never

amended or withdrawn. Neither Mr. Glass nor GR supplemented their disclosures to explain what

had been discovered about Mr. Ratner’s prior identification as President and Director or the

subsequent annual report naming a new President and Director.

c. Facts Learned from Evidentiary Hearing

The evidence and testimony presented at the hearing on the Motions shows the relationship

between Mr. Ratner, GR, and NCT/Gateway was much more extensive than the brief and limited

interaction GR and Mr. Glass described. The evidence shows that, contrary to what GR and Mr.

Glass originally claimed and Mr. Ratner stated in his declaration, there were extensive discussions

about and numerous iterations of the engagement letter. Mr. Ratner signed the engagement letter

knowing it would be forwarded to Gateway for signature, and Mr. Ratner acknowledged receipt

of the NCT Written Consent of Shareholders and authorized Gateway to “proceed.” The Court

makes the following findings of fact.

In June 2018, earlier than originally believed, Mr. Jones contacted Mr. Ratner about GR

providing services as an officer of NCT. A sample engagement letter was sent by GR to Mr. Jones

on June 1, 2018. On July 23, 2018, Mr. Jones emailed Mr. Ratner asking for a proposal from GR

“along the lines . . . [of] the example engagement letter you sent me last month.” He described the

engagement, stating:

[W]e would want you to serve as non-member manager/CRO for an entity called

Sugarloaf Centre Partners, LLC. That entity is owned 50/50 by NCT Systems,

Inc. and NRCT. Our client holds 100% of the stock in NCT Systems. NRCT is a

debtor in a chapter 11 bankruptcy case before Judge Hagenau. Sugarloaf Centre

Partners is the sole member in an entity called Sugarloaf Centre, LLC, which is

also a chapter 11 debtor in bankruptcy.

Mr. Jones also provided Mr. Ratner with some background information. He wrote:

The principal of NRCT is an individual named Chuck Thakkar. Our client and

Thakkar have been engaged in litigation in Florida for nearly 10 years. Our client

holds a $15 million judgment against Thakkar and various entities of his, although

not against the Sugarloaf entities. Our client, on account of its 50% membership in

Sugarloaf Centre Partners (by way of its 100% interest in NCT Systems), would

like to assert control over Sugarloaf Centre Partners and thus assert control over

Sugarloaf Centre, LLC, which owns valuable property in Atlanta. The Sugarloaf

Centre, LLC property is subject to the lien of a DIP lender that we believe is

affiliated with Thakkar.

Until recently, John Christy represented Thakkar, NRCT, and the Sugarloaf

entities. Denise Dotson has recently stepped in. Either way, Thakkar is litigious.

Florida counsel is providing us with corporate documentation concerning Sugarloaf

Centre Partners so that our corporate guys can determine whether NCT Systems

has an absolute contractual right to replace Thakkar or his entity as manager of

Sugarloaf Centre Partners, LLC. Otherwise, we will be forced to file an adversary

proceeding.

Mr. Ratner responded stating that he could discuss “on Thursday,” and Mr. Jones and Mr. Ratner

talked about the engagement that Thursday, July 26, 2018. The planned length of the call was 30

minutes. That same day, at 6:05 p.m., Mr. Cristal sent a template fiduciary engagement letter to

Mr. Jones.

Discussions continued until August, as evidenced by an email from Mr. Cristal on August

10, 2018 scheduling a further call for “Monday.” By early September, Gateway was prepared to

move forward with the engagement. One impetus, according to Mr. Jones, was that Sugarloaf had

filed a Motion to Dismiss its bankruptcy case on July 25, 2018 (Case No. 15-58442 Doc. No.

100).3 Gateway wanted to object to the motion.4 NCT had been administratively dissolved in

Florida and needed to be reinstated, in Mr. Jones’ opinion, to file such an opposition.

The engagement of GR was finalized through a series of emails and drafts on September 6

and 7, 2018. On September 6, 2018, Mr. Jones emailed Mr. Ratner to set up a time to talk about

“a couple of possible engagements, including the one we discussed previously.” They agreed to

speak that afternoon.

The next day, September 7, 2018, at 10:39 a.m., Mr. Jones sent Mr. Ratner a draft of an

engagement letter based on the template sent by GR on July 26, 2018. Mr. Jones filled in the

description of the engagement and proposed that Mr. Glass and Mr. Ratner be co-CEO’s. The

email states:

As a follow up to my discussion with Ian yesterday, our clients Good Gateway,

LLC and Carson Good, would like to proceed with engaging GlassRatner to first

have Ian appointed as President/CEO of NCT Systems, Inc. and then to serve as

manager of Sugarloaf Centre Partners, LLC and Sugarloaf Centre, LLC, assuming

we are successful in gaining control of those two entities through a court action. As

you will recall, Good Gateway, LLC is the sole shareholder of NCT Systems, Inc.,

which is a 50% owner of Sugarloaf Centre Partners, LLC, which is the sole member

3 The Motion to Dismiss was docketed only in Sugarloaf’s bankruptcy case, though the cases were then jointly

administered.

4 Gateway filed an Emergency Motion to Reschedule Hearing (Case No. 15-58440 Doc. No. 871) seeking to

reschedule the hearing on Sugarloaf’s motion to dismiss set for August 30, 2018. Gateway argued the hearing

conflicted with a hearing in the Nilhan Financial bankruptcy case in Florida on the settlement agreement between

Gateway and the Nilhan Financial trustee which ultimately provided Gateway with a share of any recovery Nilhan

Financial would receive on its claims filed in the Nilhan Developers and NRCT cases. Gateway asked the Court to

delay the hearing on Sugarloaf’s motion to dismiss until after consideration of the Debtors’ disclosure statements in

mid-October. Sugarloaf responded in opposition, stating it wanted to continue with the hearing on the motion to

dismiss as scheduled to pursue dismissal and, ultimately, refinancing (Case No. 15-58440 Doc. No. 872). On August

23, 2018, the Court rescheduled the hearing for September 11, 2018 (Case No. 15-58440 Doc. No. 874).

of Sugarloaf Centre, LCC, a chapter 11 debtor and the owner of valuable CRE in

Atlanta.

Attached is [a] redline and clean copy of the Engagement Letter you sent over,

together with the corporate docs that counsel in Florida prepared concerning NCT

Systems. Appointing Ian as President/CEO of NCT Systems is not adversarial

considering Carson’s entity, Good Gateway, is the sole shareholder. It’s the first

step in the ultimate action. We need to finalize the appointment as soon as possible

because we have to file an Objection to a Motion to Dismiss Sugarloaf Centre’s

bankruptcy.

The email also included a proposed Written Consent of the Shareholders where Good Gateway, as

the shareholder of NCT, authorized and instructed NCT

to take all appropriate actions to reinstate the Corporation and to amend the annual

report to reflect Ian Ratner as President, Secretary, and Director; Ian Ratner as

Director; the Registered Agent as Morgan & Morgan, PA c/o Clay Townsend, Esq;

the principal place of business as 174 W. COMSTOCK AVENUE, STE. 100,

WINTER PARK, FL 32789[.]

The Written Consent of the Shareholders of NCT, when executed by Carson Good (“Mr. Good”),

as manager of Good Gateway, LLC, would appoint Mr. Ratner as President, Secretary, and

Director of NCT. The Written Consent included a recitation of the history of some of the litigation

between Gateway and Mr. Thakkar and the basis for Gateway’s assertion it owned NCT.

At 11:33 a.m. on September 7, 2018, Mr. Jones sent Mr. Ratner a second draft of the letter

incorporating comments from his client Gateway. The email states, “to be consistent with the

Consent I forwarded, I note the engagement as President.” This revision continued to name Mr.

Glass as co-president. A third revision of the engagement letter was sent by Mr. Jones at 12:11

p.m. It still contained the provision with Mr. Glass as co-president. At 12:50 p.m., Mr. Cristal of

GR sent Mr. Jones a fourth revision of the engagement letter which, among other things, removed

Mr. Glass as an officer.

A fifth revision was sent by Mr. Jones to Mr. Ratner at 1:55 p.m. Mr. Jones wrote: “See

below from Clay with a small revision to the paragraph concerning Morgan & Morgan. Please let

us know that this meets with your approval and Clay will have it executed.” He continued, “Also,

we need the okay from you guys on the Shareholders Consent appointing Ian as President etc.”

At 2:06 p.m., Mr. Cristal emailed “[t]his all looks fine to me, subject to Ian’s approval.”

At 2:59 p.m., Mr. Townsend emailed that he was waiting for Mr. Ratner’s approval before signing

and sending to Carson Good of Gateway for signature. He wrote: “I will wait for Ian’s approval

before signing and sending to Carson. I would like to have Ian’s and my signature on the final I

send to Carson please. tx”

Mr. Ratner responded at 3:24 p.m., “All good—thank you—proceed.” After several more

emails asking Mr. Ratner to sign on September 7, 2018, Mr. Cristal emailed a copy of the

engagement letter executed by Mr. Ratner at 4:25 p.m. to Mr. Jones and Mr. Townsend, copying

Mr. Ratner and Austin Alexander (an attorney with Balch & Bingham (“Mr. Alexander”))

(“Engagement Letter”).

The signed Engagement Letter provided:

This letter confirms and sets forth the terms and conditions of the engagement

between GlassRatner Advisory & Capital Group, LLC (“GlassRatner”) and the

Company [defined as NCT Systems, Inc.], including the scope of the services to be

performed and the basis of compensation for those services. Upon execution of this

letter by each of the parties below, this letter will constitute an agreement between

the Company and GlassRatner. It is anticipated that the Company will file an action

to gain control of Sugarloaf Centre Partners, LLC (“Sugarloaf Partners”) and

Sugarloaf Centre, LLC (“Sugarloaf Centre”), either in state court or in the chapter

11 bankruptcy case of Sugarloaf Centre, which case is pending in the United States

Bankruptcy Court for the Northern District of Georgia, Atlanta Division, before

The Honorable Wendy Hagenau (the “Control Action”). In the Control Action, the

Company would seek to have GlassRatner appointed as non-member manager of

Sugarloaf Partners and Sugarloaf Centre. Sugarloaf Centre owns and operates

commercial, income producing real property in the Atlanta area.

The Engagement Letter contemplated Mr. Ratner and Mr. Cristal would work on the matter as well

as “other staff as appropriate.” The Engagement Letter provided all compensation to be paid by

NCT to GR would be advanced by Gateway’s counsel, Morgan & Morgan. GR’s compensation

would be based on standard hourly rates (of $595 per hour for Mr. Ratner, $395 per hour for Mr.

Cristal, and $225--$395 per hour for other staff) for the first three months of the assignment, after

which GR would re-evaluate the fee structure and propose a monthly fixed fee.

The Engagement Letter was then signed by Mr. Good on behalf of Good Gateway, LLC.

Mr. Jones received a fully executed copy of the Engagement Letter on September 10, 2018.

However, Mr. Ratner testified GR never received the executed letter and Mr. Jones agreed he did

not forward it.

In apparent reliance on the signed Engagement Letter and approval of the Written

Shareholder Consent, NCT filed the Reinstatement on September 10, 2018 representing that Mr.

Ratner was President and Director of NCT. On the same day, Mr. Jones filed the opposition to

Sugarloaf’s motion to dismiss as planned (Case No. 15-58440 Doc. No. 878). It stated Gateway

was the sole shareholder of NCT, a 50% owner of Sugarloaf’s sole member and, as such, it had an

interest in the proper management of Sugarloaf and opposed dismissal (in light of Mr. Thakkar’s

involvement in the management and adversarial relationship between Mr. Thakkar and Gateway,

Gateway wanted Sugarloaf to remain in bankruptcy). Gateway also referenced the settlement

agreement in the Nilhan Financial bankruptcy case and noted it had recently requested discovery

from Sugarloaf and NRCT in their bankruptcy cases.5

On September 17, 2018, Mr. Cristal sent an email to Mr. Jones, Mr. Townsend, and Mr.

Ratner, copying Mr. Alexander, stating: “I just wanted to follow up on the Engagement letter. Is

there anything additional you need from us[?] Further, can we schedule a call, perhaps later this

week, to update case status, plan, etc.” Mr. Ratner testified GR did not receive a response, and

GR never opened a file, performed any work, or billed for any work related to the engagement.

5 At a hearing on September 27, 2018, the Court denied Sugarloaf’s motion to dismiss without prejudice.

On October 10, 2018, a month to the day after the Reinstatement was filed, the Court

ordered parties to show cause why a trustee should not be appointed. At the conclusion of the

December 4, 2018 hearing, the Court ordered the appointment of a trustee. Counsel for the U.S.

Trustee stated he would solicit suggestions from any parties in interest as to who should serve as

a trustee and invited anyone with a person to nominate to do so by the close of business on

December 6, 2018.

Mr. Jones testified he spoke with the U.S. Trustee’s office during the selection process and

informed it of the prior contacts between NCT and GR. While the U.S. Trustee, Mr. Glass, GR,

and Mr. Jones had information about the details of the Engagement Letter, and Mr. Jones, Mr.

Glass, and GR knew of the Reinstatement, none of this was filed with the Court or disclosed in

any Court hearing. Mr. Glass stated he never discussed the Reinstatement with Mr. Thakkar and

had no reason to believe he knew all the details.

In early 2019, Mr. Ratner was deposed in an unrelated case in Florida. There, he was asked

about NCT’s Reinstatement which had named him as President and Director of NCT. Mr. Ratner

testified he was surprised. Upon return to Atlanta, he contacted Mr. Jones on April 22, 2019 via

an email marked “URGENT” and asked Mr. Jones to remove his name as an officer and director.

Mr. Jones contacted Mr. Townsend and, on April 26, 2019, NCT filed a 2019 Annual Report that

identified Mr. Townsend as the registered agent and Good Gateway, LLC as NCT’s President and

Director. Mr. Ratner’s name was not listed on the annual report. Mr. Ratner testified that he

informed Mr. Glass about the Reinstatement and cure. Mr. Glass and Mr. McCaleb did not amend

their declarations to address the Reinstatement or the subsequent Annual Report, and no

information about the Reinstatement was provided to the Court.

The cases continued on their paths to resolution. The Court learned about the

Reinstatement and Mr. Ratner’s roles in NCT for the first time on January 5, 2021, when the first

of the Motions was filed.

II. APPLICABLE LAW

Separate standards apply to GR, as a professional to the Trustee, and Mr. Glass, as the

Trustee. The Court will look at the law for each before applying the law to the facts.

a. Glass Ratner

Movants seek an order disqualifying GR. The burden of proof lies with the Movants, as

the party seeking disqualification, to prove their case by a preponderance of the evidence. See

Evans v. Artek Sys. Corp., 715 F.2d 788, 794 (2d Cir. 1983); In re Barkany, 542 B.R. 699, 714

(Bankr. E.D.N.Y. 2015).

i. Denial of Compensation Pursuant to Section 328

Movants’ request that GR disgorge any fees and expenses previously paid, and that all

other fees and expenses should be denied, is analyzed under section 328 of the Bankruptcy Code.

Under section 328(c), and with exceptions that are not relevant,

the court may deny allowance of compensation for services and reimbursement of

expenses of a professional person employed under section 327 or 1103 of this title

if, at any time during such professional person’s employment under section 327 or

1103 of this title, such professional person is not a disinterested person, or

represents or holds an interest adverse to the interest of the estate with respect to

the matter on which such professional person is employed.

11 U.S.C. § 328(c). This section is a penalty for professionals who fail to satisfy section 327(a)’s

dual requirements by authorizing the bankruptcy court to deny compensation for services and

reimbursement of expenses. Kravit, Gass & Weber, S.C. v. Michel (In re Crivello), 134 F.3d 831,

836 (7th Cir. 1998).

Section 327 states, in part:

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 “disinterested person,” in turn, is defined as a person who

(A) is not a creditor, an equity security holder, or an insider;

(B) is not and was not, within 2 years before the date of the filing of the

petition, a director, officer, or employee of the debtor; and

(C) does not have an interest materially adverse to the interest of the estate

or of any class of creditors or equity security holders, by reason of any

direct or indirect relationship to, connection with, or interest in the

debtor or for any other reason.

11 U.S.C. § 101(14). The requirement that a professional be “disinterested” cannot be waived or

circumvented by agreement or consent among creditors and the debtor. See In re Granite Partners,

L.P., 219 B.R. 22, 34 (Bankr. S.D.N.Y. 1998).

“In construing the disinterestedness standard, bankruptcy courts have held trustees and

their retained professionals to a rigorous standard.” In re MF Global Inc., 464 B.R. 594, 600-01

(Bankr. S.D.N.Y. 2011) (citing In re Allegheny Int’l, Inc., 117 B.R. 171, 178-79 (W.D. Pa. 1990)).

“The purpose of the disinterestedness requirement is to avoid any associations or connections,

whether direct or indirect, between potential employees of the trustee and the estate, which could

introduce conflicting loyalties into the bankruptcy case.” In re Barkany, 542 B.R. at 713 (citing

Allegheny Int’l, Inc., 117 B.R. at 179 (citing In re Philadelphia Athletic Club, Inc., 20 B.R. 328,

333 (E.D. Pa. 1982))). “Adherence to the disinterestedness requirement avoids not only actual

conflicts of interests, but the appearance of conflicts, as well.” Id. “The requirements of section

327 cannot be taken lightly, for they ‘serve the important policy of ensuring that all professionals

appointed pursuant to [the section] tender undivided loyalty and provide untainted advice and

assistance in furtherance of their fiduciary responsibilities.’” In re Leslie Fay Cos., Inc., 175 B.R.

525, 532 (Bankr. S.D.N.Y. 1994).

The term “interest adverse to the estate” is not defined in the Code, but courts have held

that a party is “adverse” to the estate if it possesses “either an ‘economic interest that would tend

to lessen the value of the bankruptcy estate or that would create either an actual or potential dispute

in which the estate is a rival claimant . . . or . . . a predisposition under the circumstances that

render such a bias against the estate.’” In re Prince, 40 F.3d 356, 361 (11th Cir. 1994) (citation

omitted). While the use of adverse interest differs slightly between section 327(a) and section

101(14) (in section 327(a) the professional must not hold or represent an interest adverse to the

estate, while to be disinterested, the professional must not have an interest materially adverse to

the interest of the estate, or any class of creditors or equity holders), courts have generally

combined them and stated the adverse interest test is objective and precludes “any interest or

relationship, however slight, that would even faintly color the independence and impartial attitude

required by the Code and Bankruptcy Rules.” In re Black & White Stripes, LLC, 623 B.R. 34, 50

(Bankr. S.D.N.Y. 2020) (quoting Granite Partners, 219 B.R. at 33). “The determination of adverse

interest is objective and is concerned with the appearance of impropriety.” In re Angelika Films

57th, Inc., 227 B.R. 29, 38 (Bankr. S.D.N.Y. 1998). Whether an adverse interest exists is generally

determined on a case-by-case basis. Black & White Stripes, 623 B.R. at 50 (citing In re AroChem

Corp. 176 F.3d 610, 623 (2d Cir. 1999)). The interest “may be materially adverse either for one

of the specific reasons delineated in the statute or ‘for any other reason.’” In re Marvel Entm’t

Grp., Inc., 140 F.3d 463, 476 (3d Cir. 1998).

In determining whether to disqualify a professional who has or represents an interest

adverse to the estate, courts have held that section 327(a) “mandates disqualification when there

is an actual conflict of interest[.]” In re First Jersey Sec., Inc., 180 F.3d 504, 509 (3d Cir. 1999);

In re Fullenkamp, 477 B.R. 826, 832 (Bankr. M.D. Fla. 2011). But the court has “wide discretion

in deciding whether to approve the appointment of a law firm with a potential conflict.” Marvel

Entm’t Grp, 140 F.3d at 477. Whether a conflict is actual, potential, or presents an appearance of

conflict, and “the decision concerning whether to disqualify a professional . . . in situations not yet

rising to the level of an actual conflict[,] are matters committed to the bankruptcy court’s sound

exercise of discretion.” In re Art Van Furniture, LLC, 617 B.R. 509, 515 (Bankr. D. Del. 2020)

(citation omitted).

On the one hand, a court may approve a professional with a potential conflict “where the

possibility that the potential conflict will become actual is remote,” such as where the length and

extent of a prior representation were minimal. In re Vascular Access Centers, L.P., 613 B.R. 613,

627 (Bankr. E.D. Pa. 2020) (citation omitted). In Vascular Access before representing the debtor,

the professional represented an LLC that was clearly adverse to the debtor. 613 B.R. at 627. The

court concluded that, at a minimum, the professional had a potential conflict of interest. Id.

Throughout the course of the bankruptcy case, the professional only filed pleadings on behalf of

the debtor, not the LLC, and did not send any invoices to, or receive payment from, the LLC. Id.

The court concluded, in light of the short period of time he represented the LLC, which did not

overlap with the firm’s representation of the debtor, it would not exercise its discretion to

disqualify the professional based upon his potential conflict of interest. Id.

On the other hand, even a prior engagement that is limited in scope and short may

disqualify a professional from later serving as a professional to the estate. In Black & White

Stripes, 623 B.R. at 51, for example, the bankruptcy court found a law firm’s prior representation

of the bankrupt LLC’s members, in jointly administered Chapter 11 cases in which one of the

estate’s most significant assets was its avoidance claims against these same members, was a

disqualifying conflict that prevented the law firm’s employment as general bankruptcy counsel to

the debtors. The law firm argued its representation of the members was brief and its scope was

adequately limited by the retainer agreement. Id. The court found, though, that the firm’s position

was belied by the plain terms of the state-court retainer, which provided for “review of the entire

litigation file and services as may, in [the firm’s] opinion, be necessary or proper in connection

with that matter.” Id. The court noted, however brief the firm’s role was in the prior action, the

representation undermined the firm’s ability to perform faithfully as bankruptcy counsel. Id. at

52. The court concluded the prior representation created, at the very least, a potential conflict and

it was “worrying that proposed counsel would be so dismissive of such claims.” Id.

Courts have also found a professional may hold an interest adverse to the estate even in the

absence of a formal agreement or formalized relationship. In In re New River Dry Dock, Inc., 497

F. App’x 882, 887 (11th Cir. 2012), the professional argued he had no formal agreement or

understanding with the buyers. The court found that fact not material—while he “may not have

formalized his relationship with the buyers”, “he discussed working for them and had a strong

expectation that he would work for them.” Id. That strong expectation was enough to give him

an interest adverse to the estate, and he should have disclosed that interest to the bankruptcy court.

The court acknowledged the estate may not have suffered any actual financial loss because of the

professional’s relationship with the buyers, and the professional may not have intended to enrich

himself at the expense of the estate, but the issue was not whether he caused any actual harm but,

rather, whether the professional “could have unbiasedly made decisions in the best interest” of the

estate. Id. (citing Prince, 40 F.3d at 360).

Some courts have found, as a general rule, one member’s disinterestedness affects the

entire firm’s disinterestedness “such that the firm must be disqualified under section 327(a) of the

Code.” In re Essential Therapeutics, Inc., 295 B.R. 203, 211 (Bankr. D. Del.2003). The majority

of courts to consider the issue, however, have found there is no per se rule of imputation. See In

re McDermott Int’l, Inc., 614 B.R. 244, 254 (Bankr. S.D. Tex. 2020); In re Timber Creek, Inc.,

187 B.R. 240, 244 (Bankr. W.D. Tenn.1995).

These courts observe there is no express basis for indirect or imputed disqualification in

sections 101(14)(A) & (B), which provide a “disinterested person” means “a person that (A) is not

a creditor, an equity security holder, or an insider; and (B) is not and was not, within 2 year before

the date of the filing of the petition, a director, officer, or employee of the debtor.” 11 U.S.C.

§ 101(14)(A) & (B). Person” is defined in § 101(41) as including an “individual, partnership, and

corporation”. 11 U.S.C. § 101(41). Section 101(14) by its plain language applies only to the

“person” serving in the defined capacity. Thus, an individual’s disqualification under section

101(14)(A) or (B) will not automatically disqualify the individual’s firm. In re Young Mens

Christian Ass’n of Marquette Cty., 570 B.R. 64, 68-69 (Bankr. W.D. Mich. 2017) (attorney was

disqualified under section 101(14)(B) but not necessarily his firm—“a distinct ‘person’ as that

term is defined in section 101(41)”); In re Sea Island Co., 2010 WL 4386855, at *4 (Bankr. S.D.

Ga. Oct. 20, 2010) (while some attorneys were disqualified under section 101(14)(A), the

disqualifying interests did not disqualify the firm from representing the debtors provided the firm

maintained an ethical screen with certain features).

An entire firm may, however, be non-disinterested due to one professional’s involvement

under section 101(14)(C), which covers a person (here the firm) that has:

an interest materially adverse to the interest of the estate or of any class of creditors

or equity security holders, by reason of any direct or indirect relationship to,

connection with, or interest in, the debtor, or for any other reason.

11 U.S.C. § 101(14)(C). Under this provision, one professional’s direct connection with the estate

or any class of creditors or equity security holders creates an indirect and potentially disqualifying

connection for the professional’s firm. Sea Island Co., 2010 WL 4386855 at *3; In re Cygnus Oil

& Gas, 2007 WL 1580111, at *3 (Bankr. S.D. Tex. May 29, 2007).

The foregoing law regarding disinterestedness and adverse interest as developed under

section 327 applies in determining whether a court should deny fees under section 328. The

decision to discount or deny fees under section 328(c) is within the discretion of the bankruptcy

court. In Prince, the Court of Appeals for the Eleventh Circuit stated that “the language of 11

U.S.C. § 328(c) permits a court to deny compensation to professionals found not to be disinterested

persons but does not require a denial of fees in those instances.” 40 F.3d at 359. Instead, the

bankruptcy courts have “wide discretion to determine whether full or partial denial or

disgorgement of fees and expenses is appropriate”. In re US Bentonite, Inc., 536 B.R. 948, 958

(Bankr. D. Wyo. 2015); see also In re Shelnut, 577 B.R. 605, 611–12 (Bankr. S.D. Ga. 2017). This

is true even if the court subsequently learns that a professional never should have been employed

under section 327(a) in the first place. If the court errs in approving a professional person’s

employment (when the person is either “not a disinterested person” or “represents or holds an

interest adverse to the interest of the estate”), a bankruptcy court has discretion under section

328(c) to deny the erroneously employed professional’s fees, in whole or in part. In re Fish &

Fisher, Inc., 574 B.R. 608, 614-16 (Bankr. S.D. Miss. 2017). “[Section] 328(c) remains as a

retroactive penalty for those professionals whose retention under § 327(a) was improper or who

fail to satisfy § 327(a) requirements while working for the estate.” Id. at 616; see also In re

Mitchell, 497 B.R. 788, 793 (Bankr. E.D.N.C. 2013). A bankruptcy court should weigh the

equities in deciding whether to deny fees under section 328(c), Crivello, 134 F.3d at 838, and may

limit the denial or reduction of fees to the specific time period when the conflict existed. See e.g.,

In re Paine, 14 B.R. 272 (W.D. Mich. 1981).

A bankruptcy court retains jurisdiction over an award of fees even after the conclusion of

the bankruptcy case. New River Dry Dock, 497 F. App’x at 886; see also Greater Blessed

Assurance Apostolic Temple, Inc., 2021 WL 1117760, at *2 (Bankr. M.D. Fla. Mar. 24, 2021).

Moreover, a Chapter 11 plan’s “release of liability against professionals does not affect the Court’s

authority over the fees paid to those professionals.” Id.; see 11 U.S.C. §§ 328(c), 330(a)(2). For

example, in New River Dry Dock, the bankruptcy court initially reviewed and approved a

professional’s fee without knowledge that he had an interest adverse to the estate. 497 F. App’x

at 886. Once the court learned of the adverse interest, it had the authority to revisit the

professional’s prior fee award. Id.

ii. Disclosure Pursuant to Rule 2014

Whether a professional is disinterested and may be employed under section 327 is a

separate question from whether the professional adequately disclosed all connections. See In re

Condor Sys., 302 B.R. 55, 74 n.32 (Bankr. N.D. Cal. 2003) (quoting In re EWC, Inc., 138 B.R.

276, 281 (Bankr. W.D. Okla. 1992)). Rule 2014(a) “effectuates [section] 327(a)’s

disinterestedness requirement, and mandates that a[n . . . ] application to employ the professional

‘be accompanied by a verified statement of the person to be employed setting forth the person’s

connections with the debtor, creditors, any other party in interest, their respective attorneys and

accountants, the United States Trustee, or any person employed in the office of the United States

Trustee.’” Vascular Access, 613 B.R. at 625 (citing In re Jade Mgmt. Servs., 386 Fed.Appx. 145,

150 (3d Cir. 2010) (quoting Rule 2014(a)).

The professional seeking to be retained must make “[f]ull, complete, and timely disclosure”

of all the professional’s connections to the debtor, creditors and any other party in interest. In re

Harris Agency, LLC, 451 B.R. 378, 390 (Bankr. E.D. Pa. 2011); see also In re B.E.S. Concrete

Prods., Inc., 93 B.R. 228, 237 (Bankr. E.D. Cal. 1988). While the term “connections” is not

defined in Rule 2014(a), the disclosure requirements of Rule 2014(a) are much broader than the

rules governing disqualification, and an applicant must disclose all connections regardless of

whether they rise to the level of a disqualifying interest under section 327(a). See Granite Partners,

219 B.R. at 35 (citations omitted) (emphasis added). The disclosure requirements of Rule 2014

are strictly applied and impose an independent duty upon the professional applicant; thus, failure

to comply with the disclosure rules is a sanctionable violation, even if proper disclosure would

have shown that the professional had not actually violated any Bankruptcy Code provision or any

Bankruptcy Rule. “[T]hese standards are ‘strict’ and . . . attorneys engaged in the conduct of a

bankruptcy case ‘should be free of the slightest personal interest’ … [a]ccordingly, we are

‘sensitive to preventing conflicts of interest’ and require a ‘painstaking analysis of the facts and

precise application of precedent.’” I.G. Petroleum, L.L.C. v. Fenasci (In re West Delta Oil Co.),

432 F.3d 347, 355 (5th Cir. 2005) (citations omitted). “There is no de minimus threshold excusing

[a professional] from failing to disclose” information regarding his connections. Greater Blessed

Assurance Apostolic Temple, 2021 WL 1117760, at *3.

It is incumbent upon the professional to disclose all its previous contacts and professional

connections so that the bankruptcy court can determine if there are any conflicts or potential

conflicts. Miller Buckfire & Co., LLC v. Citation Corp. (In re Citation Corp.), 493 F.3d 1313,

1321-22 (11th Cir. 2007). The bankruptcy court, not the professionals, must determine which

prior connections rise to the level of an actual conflict or pose the threat of a potential conflict.

See Granite Partners, 219 B.R. at 35. “[I]t is the role of the court, and not the professional, to make

the ultimate determination vis-à-vis the information disclosed and compliance with the Bankruptcy

Code and Rules.” In re GSC Grp., Inc., 502 B.R. 673, 729 (Bankr. S.D.N.Y. 2013). “[B]y making

the determination there was no connection worth disclosing, the firm broke the “cardinal principle

of Rule 2014(a) . . . [, it] arrogated to [itself] a disclosure decision that the Court must make” and

deprived the court of its function to make a section 327(a) determination. Condor Sys., 302 B.R.

at 71.

Professionals cannot pick and choose the connections they deem relevant or important.

United States v. Gellene, 182 F.3d 578, 588 (7th Cir. 1999). As the bankruptcy court noted in In

re Saturley, 131 B.R. 509 (Bankr. D. Me. 1991), carefully crafted, say-nothing disclosures are

“coy” and insufficient because they require the court to “ferret out pertinent information from other

sources.” Id. at 517. The Court should not have to “rummage through files or conduct independent

fact-finding investigations’ to determine if the professional is disqualified.’” Granite Partners, 219

B.R. at 35 (citations omitted); see also Rome v. Braunstein (In re Chestnut Hill Mort., Corp.), 158

B.R. 547, 551 n.3 (D. Mass. 1993) (observing that it is not the job of the bankruptcy judge to

review all documents in the file to determine whether the professional’s affidavit is truthful and

comprehensive).

Although Rule 2014 does not explicitly require ongoing disclosure, see Granite Partners,

219 B.R. at 35, courts hold that professionals have an ongoing duty to update disclosures and to

promptly notify the court if a potential conflict arises. See West Delta Oil Co., 432 F.3d at 355

(“Case law has uniformly held that under rule 2014(a), (1) full disclosure is a continuing

responsibility, and (2) [a professional] is under a duty to promptly notify the court if any potential

for conflict arises.”) (citation omitted). As one court explained, “[t]he need for professional self-

scrutiny and avoidance of conflicts of interest does not end upon appointment.” Rome, 19 F.3d at

57-58; accord In re Unitcast, Inc., 214 B.R. 979, 986 (Bankr. N.D. Ohio 1997) (citation omitted).

Continuing disclosure is necessary to preserve the integrity of the bankruptcy system by ensuring

that the trustee’s professionals remain conflict free. See EWC, Inc., 138 B.R. at 280-81.

In addressing Rule 2014 violations, a bankruptcy court has wide discretion to determine

whether nondisclosure justifies remedial measures and, if so, which. See Citation Corp., 493 F.3d

at 1321-22 (“[n]either Rule 2014 nor the Bankruptcy Code mandates a sanction for the violation

of Rule 2014. In such situations, whether to impose a penalty and the nature and extent of the

penalty is generally a matter left to the bankruptcy court’s discretion”). Decisions in this area are

fact-specific and have run the gamut, from nominal reductions to complete disallowance.

On the one hand, a willful or intentional failure to disclose merits the harshest

sanctions. Banner v. Cohen, Estis & Assocs., LLP. (In re Balco Equities Ltd.), 345 B.R. 87, 112

(Bankr. S.D.N.Y. 2006) (citations omitted). Given the important role of disclosure, bankruptcy

courts punish a willful failure to disclose connections required by Rule 2014 as severely as

attempts to put forth a fraud upon the court. Crivello, 134 F.3d at 839. Purposefully vague and

misleading disclosures also warrant considerable sanctions. See In re Matco Elecs. Grp., Inc., 383

B.R. 848, 853, 856 (Bankr. N.D.N.Y. 2008).

On the other hand, a reduction in fees is generally not warranted when nondisclosure is

unintentional and harmless. See e.g., In re Raymond Prof’l Group, Inc., 421 B.R. 891,0907 (Bankr.

N.D. Ill. 2009); In re Adam Furniture Indus. Inc., 191 B.R. 249, 260 (Bankr. S.D. Ga. 1996). But,

“[a] professional may be sanctioned for incomplete disclosures even if proper disclosure would

have shown that the professional was disinterested”. Jacques H. Geisenberger, Jr., P.C. v.

DeAngelis, 2011 WL 4458779, at *6 (M.D. Pa. 2011). For example, in Vascular Access, 613 B.R.

at 616, the law firm had an engagement letter with the partner of the ultimate debtor. The

representation lasted only a few days before the firm realized the debtor entity should be the entity

to file bankruptcy, and the firm did not receive any fees in connection with the representation. Id.

The law firm provided a very general disclosure in the bankruptcy case that eliminated the critical

fact of the execution of the engagement letter, the identity of the first “contact,” and what was

really done. Id. While the court found disqualification was not required (the law firm merely had

a potential conflict of interest since the firm did not represent both parties at the same time), the

court found the firm’s fees should be reduced due to the firm’s failure to disclose all relevant

information. Id. at 616-17.

iii. Disqualification

Movants ask the Court to disqualify GR. The request is now moot as GR’s work is

complete and it no longer serves as financial advisor to the Trustee.

b. Mr. Glass

i. Appointment of a Chapter 11 Trustee

The standards for approval of a Chapter 11 Trustee are different from those that apply to

his professionals because a Chapter 11 trustee is not appointed under section 327. Rather, section

321 provides, in pertinent part, “A person may serve as trustee in a case under this title only if such

person is an individual that is competent to perform the duties of trustee[.]” 11 U.S.C. § 321(a)(1).

While former Rule 209(d) specifically required that a trustee have no interest adverse to

the estate, section 321 does not require that a trustee have no interest adverse to the estate. 3

Collier on Bankruptcy P 321.02 (16th 2020). However, the requirement that a trustee be a

“disinterested person” has been expressly incorporated under various sections of the Code

including section 1104(d), which provides:

If the court orders the appointment of a trustee . . ., then the United States trustee,

after consultation with parties in interest, shall appoint, subject to the court’s

approval, one disinterested person other than the United States trustee to serve as

trustee . . . in the case.

Thus, the same definition of disinterestedness discussed above applies to a Chapter 11 trustee. The

disinterestedness definition includes some concept of adverse interest, but as discussed above, it

is slightly different from section 327.

ii. Trustee Disclosure

A trustee is obligated under Rule 2007.1 to disclose connections. The “trustee is required

to disclose all facts that may have a bearing on his disinterestedness.” In re Bennett Funding Grp.,

Inc., 226 B.R. 331, 335 (Bankr. N.D.N.Y. 1998).

Rule 2007.1(c) provides:

The application shall be accompanied by a verified statement of the person

appointed setting forth the person’s connections with the debtor, creditors, any

other party in interest, their respective attorneys and accountants, the United States

trustee, or any person employed in the office of the United States trustee.

The 1991 Advisory Committee Note to Rule 2007.1 explains that information about connections

is required “in the interest of full disclosure and confidence in the appointment process and to give

the court all information that may be relevant to the exercise of judicial discretion in approving the

appointment of a trustee or examiner in a chapter 11 case.”

As with disclosures required by Rule 2014, it is incumbent on the person seeking to serve

as trustee to make full disclosure; the court should not have to rummage through files or conduct

its own investigation to determine if the person is disinterested. Disclosure is particularly

important because, while the U.S. Trustee appoints a Chapter 11 trustee, it is the court that must

approve the trustee. 11 U.S.C. § 1104(d); In re Plaza de Diego Shopping Ctr., Inc., 911 F.2d 820,

827 n.12 (1st Cir. 1990). The court can only make its evaluation and determine if approval is

appropriate based on the information disclosed. It is not the job of the bankruptcy judge to review

all documents in the file to determine whether an affidavit is truthful and comprehensive. Rome,

158 B.R. at 551 n.3.

iii. Removal of a Trustee

The Thakkars seek to remove Mr. Glass from serving as trustee. Section 324(a) provides

the court may remove a trustee for cause. 11 U.S.C. § 324(a). “Removal of a bankruptcy trustee

is probably as serious of an action as a bankruptcy judge could possibly decide. Accordingly, any

allegations that a trustee should be removed must be proven by clear and convincing evidence, not

by a mere preponderance of evidence.” In re Walker, 2004 WL 3152787, at *1 (S.D. Fla. Dec. 1,

2004), aff’d sub nom. Walden v. Walker, 2006 WL 8451170 (S.D. Fla. Mar. 8, 2006), aff’d sub

nom. In re Walker, 515 F.3d 1204 (11th Cir. 2008); see also In re Empire State Conglomerates,

Inc., 546 B.R. 306, 317 (Bankr. S.D.N.Y. 2016).

“Cause” for removal is not defined and may exist in a variety of circumstances. Lack of

disinterestedness may constitute cause and grounds for removal. For example, in Walker, 2004

WL 3152787, at *3, 14 (S.D. Fla. Dec. 1, 2004), the Chapter 7 trustee indicated on her verified

statement that she had no connections with any creditors. The court found the trustee failed to

disclose that she served as a registered agent for entities owned and controlled by an unsecured

creditor and lied about the connections both on the verified statement and during oral testimony

before the court. Id. The court found the trustee’s statements amounted to fraud and constituted

cause for removal under section 324(a). Id. at *15; see also Marvel Entm’t Grp., 140 F.3d at 476.

The U.S. Trustee contends Mr. Glass cannot be removed as Trustee pursuant to section 324

because he is no longer serving as trustee. The Court agrees. Pursuant to section 1141(b), unless

otherwise stated in the plan or the order confirming the plan, confirmation vests all of the property

of the estate in the debtor. 11 U.S.C. § 1141(b). Accordingly, once the plan is confirmed, the

duties of a Chapter 11 trustee appointed pursuant to section 1104 are essentially completed. A

plan may provide for a “plan trustee” to perform post-confirmation duties; the “plan trustee,”

however, is a separate and distinct entity from the previously appointed Chapter 11 trustee. While

a Chapter 11 trustee appointed pursuant to section 1104 is appointed by the U.S. Trustee and

directed by statutory mandates of the Bankruptcy Code, the Bankruptcy Rules, and requirements

of the U.S. Trustee, a “plan trustee” is selected and generally governed by the terms of the plan.

This is true even if the Chapter 11 trustee and the “plan trustee” are the same person. See

Department of Justice Chapter 11 Trustee Handbook. And, as other courts have noted, “[i]t is

questionable whether [section] 324 applies to a post-confirmation liquidating trustee appointed

pursuant to a plan or trust agreement.” In re Syntax-Brillian Corp., 554 B.R. 723, 726 (Bankr. D.

Del. 2016).

At the time the Motions were filed, Mr. Glass was no longer serving as Trustee of either

Nilhan Developers or NRCT. Upon confirmation the Trustee was replaced by the Plan Agent and,

accordingly, there is no Trustee who can be removed under section 324.

III. ANALYSIS

a. GR

The Court must decide whether GR, at any time during its employment, did not satisfy the

disinterestedness and adverse interest criteria set forth in section 327(a). GR contends it was

disinterested and did not hold or represent an adverse interest because it did not actually represent

NCT since the Engagement Letter was not effective. The Court disagrees.

GR contends the Engagement Letter is not binding because assent to a proposed agreement

must be communicated. “As a general proposition, however, ‘[a]ssent to the terms of a contract

may be given other than by signatures.’ . . . [A]cceptance may be inferred by part performance or

other facts, such as acceptance of benefits or performance.” Ga. Contracts Law and Litigation

§ 3:3 (2d ed. 2020). See also, Terry Hunt Constr. v. AON Risk Svcs., 272 Ga. App. 547, 552

(2005).

Notably, assent may be implied from the circumstances and the conduct of the parties. See

Redmond & Co. v. Atlanta & Birmingham Air Line R., 129 Ga. 133, 142–143 (1907); Tom Brown

Contracting v. Fishman, 289 Ga. App. 601, 603–604 (2008). In Cox Broadcasting Corp. v.

National Collegiate Athletic Ass’n, 250 Ga. 391 (1982), the Georgia Supreme Court indicated that

“the circumstances surrounding the making of the contract, such as correspondence and

discussions, are relevant in deciding if there was a mutual assent to an agreement, and courts are

free to consider such extrinsic evidence.” Id. at 395. A professional relationship can be inferred

from representations or conduct by the professional inducing a “reasonable belief on the part of

the would-be client that he/she was being represented” by the professional. Telematics Corp. v.

Networkfleet, Inc., 2011 WL 13217743, at *4 (N.D. Ga. Nov. 22, 2011) (citations omitted). An

engagement letter is just one of many pieces of evidence signifying mutual assent between the

parties. Meunier Carlin & Curfman, LLC v. Scidera, Inc., 2018 WL 10396435, at *2 (N.D. Ga.

Dec. 26, 2018).

Under the terms of the Engagement Letter, it became effective upon execution. While GR

did not receive the signed Engagement Letter or instructions to proceed with its representation of

NCT and Gateway, the Engagement Letter together with the actions of the parties created a

contract for GR’s engagement with NCT. The email communications surrounding the

Engagement Letter show there was a meeting of the minds about the scope of the proposed

engagement. The parties agreed to the language of the contract and to what was intended—Mr.

Ratner was to serve as President and Director of NCT—and NCT’s purpose in retaining GR—to

ultimately gain control of Sugarloaf Centre Partners, LLC and Sugarloaf, the Debtor.

Further, the back-and-forth communications on September 7, 2018 indicate Mr. Ratner

signed the Engagement Letter knowing it would be forwarded to Gateway for signature and knew

timing was critical. In an email sent at 1:55 p.m. on September 7, 2018, Mr. Jones wrote: “Please

let us know that this meets with your approval and Clay will have it executed.” Mr. Townsend

also emailed stating he was waiting for Mr. Ratner’s approval before signing and sending to Mr.

Good for signature. He wrote, “I would like to have Ian’s and my signature on the final I send to

Carson please.” Mr. Ratner signed the Engagement Letter and Mr. Cristal emailed it to Mr. Jones

and Mr. Townsend.

The Engagement Letter was then signed by Mr. Good on behalf of Good Gateway, LLC,

just as Mr. Jones and Mr. Townsend said it would be. Mr. Jones received a fully executed copy

of the Engagement Letter on September 10, 2018. While Mr. Jones did not forward the duly signed

Engagement Letter, and GR had not seen the letter signed by Gateway until discovery related to

this matter, it was signed on September 10, 2018. Given the communications between the parties,

this should not have been a surprise. Mr. Ratner was told more than once, by both Mr. Jones and

Mr. Townsend, that the Engagement Letter would be sent to Mr. Good for signature after he signed

it.

Mr. Ratner testified he did not know he had been appointed as President and Director of

NCT. However, Mr. Ratner was provided with a draft of a consent of shareholders appointing him

as President, Secretary, and Director. Mr. Jones revised the Engagement Letter stating he was

doing so to be consistent with the shareholder’s consent. Further, Mr. Jones specifically asked for

Mr. Ratner’s “okay on the Shareholders Consent appointing Ian as President etc.” Finally, Mr.

Jones stated in his email on September 7, 2018 at 10:39 am, “We need to finalize the appointment

as soon as possible because we have to file an objection to a motion to dismiss Sugarloaf Centre’s

bankruptcy.” So, Mr. Ratner was told about his appointment, the reason for the appointment and

the urgency for the appointment. Mr. Cristal responded, “[t]his all looks fine to me, subject to

Ian’s approval.” Mr. Ratner then replied, “All good—thank you—proceed.” The instruction to

“proceed” convinces the Court that Mr. Ratner knew that he was engaged to serve as an officer

and director, and he directed counsel to move forward with the steps to make that happen. Mr.

Ratner was in fact identified as President and Director of NCT in the Florida Secretary of State’s

records. And NCT/Gateway filed their opposition to Sugarloaf’s Motion to Dismiss on the same

day as the Reinstatement, just as Mr. Jones had stated.

GR contends Mr. Cristal’s email of September 17 shows GR did not know the letter had

been signed. The Court does not read the email as addressing the execution of the Engagement

Letter. Rather, Mr. Cristal was asking about next steps in the representation. The Court concludes

the preponderance of the evidence shows the Engagement Letter was effective and Mr. Ratner was

President and Director of NCT from September 10, 2018 until the 2019 Annual Report was filed

listing a new President and Director on April 26, 2019. The question is whether he was

disinterested as a result of serving in this capacity and, if so, whether that should be imputed to

GR in each case, and whether GR held or represented an interest adverse to the estate as a result.

i. NRCT

Mr. Ratner was an insider of NRCT. An insider is, by definition, not a “disinterested

person.” 11 U.S.C. § 101(14). An insider is an entity “whose close relationship with the debtor

subjects any transaction made between the debtor and such entity to heavy scrutiny.” Miami Police

Relief & Pension Fund v. Tabas (In re The Fla. Fund of Coral Gables, Ltd.), 144 F. App’x 72, 75-

76 (11th Cir. 2005). Section 101(31) defines “insider” in an illustrative manner to include:

(B) if the debtor is a corporation—

(i) director of the debtor;

(ii) officer of the debtor;

(iii) person in control of the debtor;

(iv) partnership in which the debtor is a general partner;

(v) general partner of the debtor; or

(vi) relative of a general partner, director, officer, or person in control of the

debtor;

. . .

(E) affiliate, or insider of an affiliate as if such affiliate were the debtor . . . .

11 U.S.C. § 101(31) (emphasis added).

Section 101(2), in turn, provides an affiliate is, among other things,

(A) [an] entity that directly or indirectly owns, controls, or holds with power to

vote, 20 percent or more of the outstanding voting securities of the debtor, …

(B) [a] corporation 20 percent or more of whose outstanding voting securities are

directly or indirectly owned, controlled, or held with power to vote, by the

debtor, or by an entity that directly or indirectly owns, controls, or holds with

power to vote, 20 percent or more of the outstanding voting securities of the

debtor, other than an entity that holds such securities…

Id.

As President and Director of NCT, Mr. Ratner was an insider of NCT. NCT is an affiliate

of Sugarloaf since it indirectly owns 50% of Sugarloaf. NRCT was also an affiliate, and therefore

an insider, of Sugarloaf since it indirectly owns the other 50% of Sugarloaf. An insider of an

affiliate is also considered an insider of the debtor, and, since Mr. Ratner was an insider of

Sugarloaf, the affiliate, he was also an insider of NRCT, the Debtor. Because Mr. Ratner was an

insider of NRCT, he was not a disinterested person pursuant to section 101(14) during the time he

served as an officer and director of NCT.

Mr. Ratner’s role as an insider, however, does not automatically create a disqualifying

connection for his firm. Here, though, GR’s role in providing a President and Director to NCT

made it not disinterested. NCT engaged GR, not just Mr. Ratner, to work on its behalf. This is

evidenced by the Engagement Letter which stated the engagement was with the firm and

contemplated Mr. Ratner and Mr. Cristal would work on the matter as well as “other staff as

appropriate.” Moreover, Mr. Ratner was not alone in communicating with counsel for NCT and

Gateway on behalf of GR; several emails to and from Mr. Cristal show he was intimately involved

in the discussions regarding GR’s engagement. The Court concludes GR was not disinterested in

the period while Mr. Ratner served as an officer and director of NCT pursuant to 11 U.S.C.

§ 101(14)(C) because it held an interest materially adverse to NRCT by reason of its direct and

indirect relationship with NCT.

Even if Mr. Ratner is not an insider of NRCT, the Court finds GR represented an interest

materially adverse to the estate while Mr. Ratner was an officer and director of NCT and therefore

it was not qualified to be employed as a professional under section 327 during that period. At the

time GR was approved as financial advisor in this case, it was engaged to represent NCT and,

indirectly, Gateway, the 100% shareholder of NCT, which held and asserted several economic

interests that would tend to lessen the value of the NRCT bankruptcy estate.

First, NCT/Gateway objected to Sugarloaf’s Motion to Dismiss which was supported by

NRCT, the other indirect 50% owner of Sugarloaf. According to Mr. Jones, opposing Sugarloaf

and NRCT was the reason for reactivating NCT at that time. So, the action of serving as an officer

and director was an adverse action as to NRCT under the facts of this case.

Second, Gateway requested discovery from Sugarloaf and NRCT on July 31, 2018 (Case

No. 15-58440 Docs. Nos. 856 & 857) relating to the management, organization, and formation of

Sugarloaf’s sole member, Sugarloaf Centre Partners, LLC, which is owned 50% by NCT and 50%

by NRCT. Gateway explained it owned a 50% interest in Sugarloaf Centre Partners, LLC through

NCT and sought additional information as to the management, organization, and formation of

Sugarloaf and its sole owner to determine NCT’s rights in the Debtor Sugarloaf and its owner.

One of the purposes of GR’s engagement was for it to serve as the controlling person in NCT and

ultimately in Sugarloaf, certainly an interest adverse to Sugarloaf. Because NRCT co-owned the

direct owner of Sugarloaf, such a move by NCT would also be adverse to the interest of NRCT

which, at that point in time, continued to control Sugarloaf indirectly. This discovery request was

outstanding when the Trustee was appointed and when GR was retained as financial advisor.

Third, by virtue of the Contribution Claim, Gateway held a replacement lien on the net

proceeds of Bay Circle’s claims for contribution and subrogation against the other Debtors. While

Bay Circle may have a claim for contribution or subrogation (the Court has not determined Bay

Circle has such a claim and has not fixed the amount of any such claim), Gateway is the real party

in interest. And while the Court has not specified against whom Bay Circle might have a claim,

because all the Debtors except NRCT liquidated property to satisfy Wells Fargo, NRCT is a likely

target. The adversarial positions of Gateway and NRCT are evident since Gateway filed an

adversary complaint on behalf of the Trustee against NRCT with respect to the Contribution Claim

on August 13, 2019, initiating Adversary Proceeding No. 19-5284.

GR’s role in this matter was central. When the Trustee was appointed, the Court

specifically tasked him with investigating whether Bay Circle may have a claim, against whom,

and the range of possible outcomes. The Trustee retained GR to use its financial analysis expertise

to report to the Court about possible outcomes. GR conducted this analysis while Mr. Ratner was

an officer and director of NCT, which was 100% owned by Gateway6. GR’s relationship with

Gateway creates at least the appearance of a conflict and a perception that it did not have the

independence and impartial attitude required for an estate professional.

Fourth, Gateway asserted an interest in claims of Nilhan Financial in the NRCT case. The

NRCT schedules listed claims in the amount of $13,953,776 and $91,524 held by Nilhan Financial.

Thus, at the time the Engagement Letter was signed, Gateway stood to receive a significant sum

(approximately $7 million if the Nilhan Financial claims were paid in full) from NRCT by virtue

of its agreement with Nilhan Financial. Gateway’s interest was evident by its zealous opposition

to the objection of Niloy and Rohan Thakkar (NRCT’s equity holders) to the payment of the claim.

The Court ultimately disallowed Nilhan Financial’s $13,953,776 claim but allowed the $91,524

claim to which no objection was made. It is important to note that the litigation over Nilhan

Financial’s claim occurred after Mr. Ratner was no longer an officer and director of NCT, but

Gateway’s interest in the Nilhan Financial claim existed while he was an officer and director.

These interests demonstrate NRCT and NCT/Gateway did not share an identity of interests

and were directly contrary to each other. The interest of NCT, represented by GR, was material

as described above, and the interest of NCT/Gateway represented by GR was on the very matters

on which the Trustee was to serve and GR was to assist. NCT’s and GR’s role in the bankruptcy

cases was identified in the Engagement Letter and known by GR from the start. The Court

6 The Preliminary Report showing NRCT’s potential liability was filed on March 29, 2019.

concludes GR was not disinterested based on its direct relationship and connection to NCT and

GR represented a material interest adverse to the NRCT estate based on Mr. Ratner’s role as officer

and director of NCT for the period while he served in those roles.

ii. Nilhan Developers

The relationship between NCT and Nilhan Developers is not as direct as the relationship

between NCT and NRCT, but is nevertheless sufficient to find that GR was not disinterested and

represented a material interest adverse to the estate during the time that Mr. Ratner served as an

officer and director of NCT.

The Bankruptcy Code defines “insider” to include an affiliate. The definition of “affiliate”

includes a corporation, 20 percent or more of whose outstanding voting securities are directly or

indirectly owned or controlled by the debtor or by an entity that directly or indirectly owns and

controls 20 percent or more of the stock of the debtor. 11 U.S.C. §101(2)(B). Thus, corporations

with common ownership are affiliates and, therefore, insiders of each other. Redmond v. Ellis

County Abstract & Title Co. (In re Liberty Livestock Co.), 198 B.R. 365, 371 (Bankr. D. Kan.

1996); In re Lettick Typografic, Inc., 103 B.R. 32, 38 n.7 (Bankr. D. Conn. 1989); In re TS

Employment, Inc., 2015 WL 4940348 (Bankr. S.D.N.Y. Aug. 18, 2015).

In this case, the ownership of NRCT and Nilhan Developers is the same, with Niloy and

Rohan Thakkar owning each. As such, NRCT is an affiliate of Nilhan Developers. The Court has

ruled above that Mr. Ratner was an insider of NRCT while he served as an officer and director of

NCT. An insider of an affiliate is an insider of the debtor, 11 U.S.C § 101(31)(E), so he was also

an insider of Nilhan Developers during the time he served NCT. As discussed above, Mr. Ratner’s

insider status is imputed to GR under the facts of this case and GR is not disinterested under 11

U.S.C. § 101(14)(C).

But even if Mr. Ratner was not an insider of Nilhan Developers, GR represented a material

interest adverse to the Nilhan Developers’ estate while it represented NCT. As described above,

Gateway (the 100% owner of NCT which appointed Mr. Ratner) held a financial interest in the

claims of Nilhan Financial against Nilhan Developers. The Nilhan Developers schedules listed

debts owed to Nilhan Financial in amounts of $9,500,000, $83,672, and $15,434.07. The equity

owners (Niloy and Rohan Thakkar) objected to the $9.5 million claim as having been satisfied.

As in the NRCT case, Gateway vigorously opposed the reductions in the claims as asserted by

Niloy and Rohan Thakkar. The Court ultimately reduced the scheduled claim and allowed Nilhan

Financial a claim in the Nilhan Developers case in the amount of $2,300,000 in addition to the

claims of $83,672 and $15,434.07, to which no objections were made. Again, it is important to

note the litigation on Nilhan Financial’s claim occurred after Mr. Ratner was no longer an officer

or director of NCT, but Gateway’s interest in Nilhan Financial’s claim existed while he was an

officer and director.

Because GR was not disinterested and represented a material interest adverse to the Nilhan

Developers’ estate while Mr. Ratner served as an officer and director of NCT, it was not authorized

to serve as a professional person under section 327 during that period.

iii. GR’s Disclosures Were Inadequate

GR contends it adequately disclosed all connections it had with Gateway. The Court

disagrees. GR made no disclosure of its relationship to NCT in its application to serve as financial

advisor, nor did it supplement its disclosure. While Mr. Glass made some disclosure of the

connection, that is not the same as GR disclosing its connection, and GR cannot fully rely on it, at

least where it was not incorporated or referenced in any way.

Mr. McCaleb stated in his affidavit that GR “may have been engaged by certain creditors

and other parties in interest or their attorneys, accountants, or professionals in other matters

unrelated to the Debtors’ jointly-administered cases.” This broad statement is vague and

misleading. It states GR may have represented creditors in unrelated matters, but GR’s connection

with NCT was directly related to these bankruptcy cases, as GR was retained specifically to file

an action to gain control of Sugarloaf in its Chapter 11 bankruptcy case.

Later, when Mr. Ratner learned he had been listed in the Reinstatement as President and

Director of NCT, GR remained silent. GR did not amend its disclosures despite its prior

representations it would do so and despite the ongoing duty professionals have to update

disclosures. In fact, Mr. McCaleb never amended his affidavit, and no subsequent disclosures

were ever made to the Court. Were it not for the Motions, the Court would likely never have

learned about GR’s connections to Gateway and NCT and the Reinstatement.

GR contends its relationship with Gateway and NCT was brief and minimal, but there is

no de minimus threshold excusing a professional from the disclosure requirements. Despite GR’s

representations, the Court finds the connection extremely significant and one that should have been

disclosed under Rule 2014(a). The Court is not concerned merely with the technical questions of

who an applicant represents and whether an applicant serves as an officer. Rather, it is the breadth

of disclosure that allows the Court to determine if an applicant like GR, directly or indirectly, or

for any reason, should be disqualified. GR was contacted to act on behalf of Sugarloaf Centre

Partners, LLC, the owner of one of the Debtors in these cases, in a way directly adversarial to

existing equity in the Debtors and Sugarloaf Partners. GR knew it, but it did not disclose it.

Moreover, the pervasiveness of Gateway’s interests in these cases makes a lack of disclosure

critical. Failing to disclose impairs the parties’ confidence in the process where virtually every

matter in the last three years has pitted a Thakkar interest against a Gateway interest.

GR ignored its obligations and the abundant case law that places the burden squarely on

the professional to plainly, openly, and timely disclose all necessary information directly to the

bankruptcy court. The lack of disclosure thwarted the ability of the Court and the parties in interest

to fully vet their connections at the outset of the case. The discussion above shows full information

about the connections between GR and Gateway by virtue of its ownership of NCT was critical

and, if known, would likely have affected the Court’s decision to approve GR as financial advisor.

b. Mr. Glass

Section 101(14)(C) provides a professional is not disinterested if a person has “an interest

materially adverse to the interest of the estate . . . by reason of direct or indirect relationship to . .

. the debtor.” Further, the adverse interest may be based on “the specific reasons delineated in the

statute or ‘for any other reason.’” Marvel Entm’t Grp., 140 F.3d at 476. The Court finds Mr. Glass

was not disinterested by reason of his direct relationship with Mr. Ratner and his indirect

connection to NCT and Gateway.

The Court found cause to appoint a Chapter 11 trustee in these cases to provide an

objective, dispassionate, and disinterested view regarding various matters in these cases, including

analysis and resolution of the Contribution Claim and all other contested matters. The Court

desired a neutral party to mediate disputes between the Debtors and their creditors and to provide

an independent analysis. Mr. Glass was appointed as Trustee and, rather than being a truly

impartial third party, he had ties to Gateway, a creditor who had taken an active role in the Debtors’

cases and has been involved in extensive and contentious litigation against the Debtors and their

management for years.

Mr. Glass is a named partner in the GR firm which was engaged by NCT. Mr. Glass has

worked closely with Mr. Ratner for years. This is not a case involving a professional who is

engaged on a discrete matter and closed off from others in the firm. Rather, the GR firm, of which

Mr. Glass is a founder and integral part of the firm’s continued operations, was engaged to do work

by Gateway’s counsel. Further, when the parties discussed the engagement, Mr. Glass was listed

as a co-CEO in drafts of the Engagement Letter. Regardless of whether he knew he was included

as a potential officer in NCT, the fact stands that he was considered when outlining GR’s retention.

His firm represented NCT and indirectly represented Gateway, and he worked closely with Mr.

Ratner who served as President and Director of NCT when he was appointed as Trustee. These

close relationships demonstrate Mr. Glass had at least a potential conflict of interest.

Moreover, Mr. Glass’s disclosure was insufficient under Rule 2007.1. Mr. Glass did make

a partial disclosure, and the Engagement Letter was shared with the U.S. Trustee. His

communications with counsel for the U.S. Trustee, however, have turned out not to be entirely

accurate. He stated the Engagement Letter was not executed (which evidence has shown to the

contrary), and that “[n]o conversations or information was exchanged[.]” This statement was not

accurate, as the abundant email communications demonstrate. Information about Sugarloaf and

Gateway’s interest in the case was also shared with GR in several emails and in the text of the

Engagement Letter itself, which Mr. Glass had and shared, and in the shareholder’s consent. Mr.

Glass had to have known GR was retained specifically to take action against Sugarloaf; it was

stated plainly in the Engagement Letter. This demonstrates Mr. Glass’s failure to fully disclose

the Engagement Letter was not inadvertent. He intentionally chose not to fully disclose the nature

of the planned engagement. Further, Mr. Glass did not supplement or amend his disclosures at

any time even though he was aware that Mr. Ratner was identified on the Secretary of State’s

website as an officer and director of NCT.

c. Waiver

GR and the Trustee contend the Court cannot order disgorgement of fees because the

NRCT and Nilhan Developers Chapter 11 plans released all claims against professionals arising

from the bankruptcy case.

Section 13.4a of NRCT’s confirmed plan (Case No. 15-58444 Doc. No. 131) is an

exculpation provision that releases parties, including the Trustee and GR, “from, any claim,

obligation, cause of action or liability . . . for any act or omission in connection with, relating to,

or arising out of the Bankruptcy Case, . . . the Plan . . . or other occurrence taking place before the

Effective Date . . . provided, however, that nothing in the Plan shall release . . . claims due to . . .

gross negligence or willful misconduct.” Section 13.4b is an injunction to bring such claims. The

Nilhan Developers Plan (Case No. 15-58443 Doc. No. 225) includes a similar exculpation

provision in section 13.4a and an injunction in section 13.4b.

A similar argument was raised and rejected in New River Dry Dock, 451 B.R. 586. There,

the debtor hired a broker to sell its primary asset. The broker did not disclose his connections to

the buyers. After the sale, the court confirmed the debtor’s reorganization plan, which included a

release by the debtor and creditors of claims against professionals employed by the estate. Later,

an unsecured creditor alerted the court to the broker’s relationship with the buyer and sought

disgorgement of the broker’s commission fees. The brokers argued such a claim was precluded as

a matter of law because the plan of reorganization did not expressly preserve the right to pursue a

claim for disgorgement of fees. The bankruptcy court disagreed. The court stated “[i]t would be

improper to allow fees which were obtained through dishonesty and non-compliance with the

Bankruptcy Code only because a plan has been confirmed.” The court said it was particularly so

because “the plan specifically carves out an exception to the clause releasing pre-confirmation

professionals for ‘gross-negligence or willful misconduct.’” The bankruptcy court concluded the

broker’s failure to disclose his prior relationship in derogation of the disclosure requirements of

Rule 2014 constituted willful misconduct akin to a fraud on the court and on the debtor’s estate

and, accordingly, claims related to the failure to disclose were excluded from the plan’s release.

Id. at 589-90.

On appeal, the district court agreed. Denison, 2012 WL 75768, at *3. The court noted

professionals should not profit while the estate and creditors suffer, by virtue of the withholding

of material information which would have affected the decision to appoint the professionals in the

first instance. On appeal, the Eleventh Circuit once again agreed that “[t]he plan’s release of

liability against professionals did not affect the bankruptcy court’s authority over the fees paid to

those professionals.” New River Dry Dock, Inc., 497 F. App’x at 886. The bankruptcy court

initially reviewed and approved the broker fee without knowledge that he had an interest adverse

to the estate. Once the court learned this fact, it had the authority to revisit the fee award. Id.

The NRCT and Nilhan Developers’ plans’ release of liability against professionals does

not affect the Court’s authority over the fees paid to GR and the Trustee. Before a professional

can be paid, a bankruptcy court must review and approve the fees to be paid. See 11 U.S.C.

§ 330(a); New River Dry Dock, 497 F. App’x at 886. A bankruptcy court retains jurisdiction over

an award of fees even after the conclusion of the bankruptcy case. Id. The Court has not yet

approved GR’s and the Trustee’s fee requests on a final basis. The Court has not examined the

reasonableness of GR’s or the Trustee’s fees in the cases. The Court retains jurisdiction to do so,

notwithstanding the exculpating language in the plan. Further, as in New River Dry Dock, the

exculpation provision in the plans did not release GR from willful misconduct.

Additionally, Section 3.3 of both plans set a deadline for the Trustee and his professionals

to file applications for payment of administrative claims and for objections thereto. The Court

finds this demonstrates the parties did not intend to bar objections to fee applications. The specific

language of Section 3.3 contemplated parties would have an opportunity to raise objections to the

Trustee’s and his professional’s requests for fees, notwithstanding the exculpating language of

Section 13.4a. Reading the plan as a whole, and recognizing the Court’s obligation to review all

fees, the Court finds the plans do not bar the claims for disgorgement in the Motions.

GR and the Trustee also contend a settlement agreement entered in the Nilhan Developers

case bars the disgorgement of and objection to fees now.7 The Trustee filed a Motion for Entry of

an Order Approving Settlement among the Trustee, Mr. Thakkar and his wife, Niloy Thakkar,

Nilhan Developers (collectively the “Thakkar Parties”), and various parties related to Westplan

(Case No. 15-58440 Doc. No. 1176). The Court granted the motion on September 13, 2019 (Case

No. 15-58440 Doc. No. 1209).

The settlement agreement included a release in paragraph 4(c) that provided that the

Thakkar Parties for themselves and on behalf of their, inter alia, agents, children, successors, and

assigns:

absolutely, forever, fully, and finally, releases, waives, acquits, and discharges the

Trustee, both personally and in his capacity as the Chapter 11 Trustee . . . from any

and all claims, obligations, suits, judgments, damages, demands, debts, rights,

actions, causes of action, liabilities, defenses, liens, costs, and expenses of any

nature . . . from the beginning of the world to the Effective Date of this Agreement[.]

7 The agreement did not involve NRCT and has no bearing on the NRCT case.

The agreement further provided the Thakkar Releasing Parties—other than Nilhan Developers—

agreed they “shall not object, and hereby waive and relinquish any rights for making any objection,

to any application for compensation of reasonable fees or expenses made on behalf of the Trustee

or any professionals of the Trustee for work performed in the bankruptcy case.” This latter

provision specifically excluded Nilhan Developers.

The Court concludes the Settlement Agreement’s release of liability does not affect the

Court’s authority over the fees paid to the Trustee and his professionals. See 11 U.S.C. §§ 328(c);

330(a)(2). As noted above, a bankruptcy court retains jurisdiction over an award of fees even after

the conclusion of the bankruptcy case, and a bankruptcy court may deny fees to a professional “at

any time” pursuant to section 328. “[T]he mandatory provisions of section 327(a) do not allow

for waiver”. Granite Partners, 219 B.R. at 34. The Court’s responsibility to “monitor the integrity

of the proceedings” is among the reasons the Court must address any improprieties coming to its

attention. In re Vebeliunas, 231 B.R. 181, 187 (Bankr. S.D.N.Y. 1999). The disqualifying conflict

was not known at the time the parties entered into the Settlement Agreement and, once the Court

learned of the conflict, it had the authority to consider GR’s and the Trustee’s fees in light of it.

d. Sanctions

Movants seek full disgorgement and denial of GR’s and the Trustee’s fees and expenses.

The U.S. Trustee contends disallowance of all fees is not warranted but agrees GR’s compensation

should be reduced in light of the firm’s failure to properly disclose its connections as required by

Rule 2014. GR and the Trustee contend a reduction is not warranted. The Court finds a reduction

of GR’s and the Trustee’s fees is appropriate under section 328 of the Bankruptcy Code and as a

sanction for improper disclosure of both of their contacts with Gateway. The Court, however,

declines to deny all fees.

The decision to discount or deny fees under section 328(c) is within the discretion of the

bankruptcy court, and the bankruptcy court’s power to deny fees under section 328(c) is

permissive. The Court’s decision must balance the acts of GR and the Trustee in failing to properly

disclose connections and in failing to be qualified to serve against any harm caused to the estate

and any benefit provided by GR and the Trustee. The mere fact that the estate may not have

suffered or established any actual financial loss is not the issue. Rather it is whether even the

perception that the Trustee or GR were not impartial is sufficient on the given facts to justify

sanctions. The intent or willfulness of GR and the Trustee also contribute to a determination as to

the proper sanction.

It is indisputable that neither GR nor the Trustee adequately disclosed the connections of

Mr. Ratner and GR to the Gateway interests. It is unfathomable to the Court that an Engagement

Letter specifically identifying these consolidated cases and this judge was not disclosed to the

Court, even if GR thought it was unsigned. This is particularly true when the outcome sought in

the Engagement Letter (replacing management in Sugarloaf with someone from GR) is exactly

what happened when the Court appointed Mr. Glass as the Trustee and GR as his financial advisor.

The innocuous description of the contact, compared to the actual relationship, is striking. It is

most disappointing to the Court that although GR, the Trustee, the US Trustee, and Gateway’s

counsel all knew the details of the proposed and (the Court finds consummated) engagement, not

a single person thought to mention it in the almost three years since the contact occurred,

notwithstanding that all of the foregoing parties have been before the Court for virtually every

single hearing in this case. The response that no one objected to the retention of GR or Mr. Glass

is woefully short sighted. As the case law makes clear, it is the duty of the proposed professionals

to inform the court; it is not the duty of the court to make inquiry. A failure to fully disclose a

connection, even one that a professional may assume is insignificant, leads to exactly the situation

in which we now find ourselves—at the end of hotly contested cases with doubt now cast on

virtually every step of the process.

Moreover, GR and the Trustee failed to update their disclosures when they learned of the

Reinstatement. It is also very troubling that GR and the Trustee seemingly take no responsibility

for their failure to disclose. They place the responsibility of “discovering” the issue on everyone

else—the U.S. Trustee, their counsel Morris Manning and Martin, the Court, and Mr. Thakkar. To

be clear, the responsibility of accurate disclosures is on the professional. While the U.S. Trustee

must propose the specific trustee, it is the Court who approves the trustee, not the U.S. Trustee.

So, it is the Court to whom the professional owes the duty, not the U.S. Trustee.

At the same time, the Court recognizes that Mr. Glass did disclose the full Engagement

Letter to the U.S. Trustee, so an argument can be made that he did not attempt to hide the contact.

Moreover, while doubt has been cast on the cases by these late disclosures, no evidence was

presented of actual harm to the estate. To the contrary, the Court concludes GR and the Trustee

did contribute to the NRCT and Nilhan Developers cases and did real work on which the Court

relied. For example, GR prepared monthly operating reports for the Debtors and it acted as a

property manager and collected money due to the Debtors. It assisted in making distributions and

paying bills. The Trustee sold a major asset of Nilhan Developers, generating substantial cash for

the estate. He proposed and confirmed both plans in these cases, a feat that would not have been

possible without a trustee.

Balancing all of the facts, and using its discretion, the Court concludes that the appropriate

sanction is to deny fees to the Trustee and GR for the period in which Mr. Ratner served as an

officer and director of NCT and/or his name appeared on the Secretary of State records as such.

This period is from the inception of the Trustee’s and GR’s work through April 26, 2019.

As a further sanction, the Court will remove Mr. Glass as Plan Agent under both confirmed

plans and remove GR from working for any Plan Agent in these cases. The issues raised here now

make it most difficult to move forward with either of them involved in these cases.

The failure of GR and the Trustee to fully disclose their contacts, by itself, justifies these

sanctions and, to be clear, the Court would impose these sanctions even if it found that GR and the

Trustee were disinterested and did not represent a material interest adverse to the estate.

I. CONCLUSION

The Court is very disappointed to find these cases and these parties in this situation.

Disallowing fees and removing professionals is not something the Court looks forward to doing.

But the bankruptcy process must be based on fairness and impartiality, both actual and perceived.

The failure to properly disclose material contacts and the failure of the Trustee and GR to be

disinterested and to be free of representation of adverse interests leads the Court to this conclusion

IT IS THEREFORE ORDERED that the fees otherwise allowable to GR and the Trustee

for work performed from the date of inception through April 26, 2019 are disallowed. When the

Court hears the actual fee applications, it will make appropriate orders as to the amounts and

whether disgorgement is required based on the amounts allowed and the amounts paid.

IT IS FURTHER ORDERED that Mr. Glass is removed as Plan Agent in both the NRCT

and Nilhan Developers plans and GR is also removed as professional to the Plan Agent and barred

from being employed by any subsequent plan agent effective as of the appointment of a

replacement agent.

IT IS FURTHER ORDERED that the Motion for Involuntary Dismissal is DENIED.

END OF ORDER

Distribution List

Frank W. DeBorde Ronald L. Glass

Lisa Wolgast Glass Ratner Advisory & Capital Group

Morris, Manning & Martin, LLP 3445 Peachtree Rd NE, Ste 1225

3343 Peachtree Rd NE, Ste 1600 Atlanta, GA 30326

Atlanta, GA 30326

William A. DuPré, IV M. Denise Dotson

Miller & Martin PLLC M. Denise Dotson, LLC

1180 W Peachtree St NW, Ste 2100 PO Box 767

Atlanta, GA 30309-3407 Avondale Estates, GA 30002

David Weidenbaum John A. Moffa

Office of the U.S. Trustee Moffa & Breuer, PLLC

75 Ted Turner Dr SW, Rm 362 3081 E. Commercial Blvd, #204

Atlanta, GA 30303 Fort Lauderdale, FL 33308

Frank B. Wilensky

Macey, Wilensky & Hennings, LLP

5500 Interstate Pkwy North, Ste 435

Atlanta, GA 30328