holding that a trustee "breache[s] the duty of disclosure" when he "contemplate[s] and discusse[s] a specific situation involving a potentiality for conflict" but fails to disclose it
How later courts described this case
- holding that a trustee "breache[s] the duty of disclosure" when he "contemplate[s] and discusse[s] a specific situation involving a potentiality for conflict" but fails to disclose it
- holding that a trustee “breache[s] the duty of disclosure” when he “contemplate^] and discusse[s] a specific situation involving a potentiality for conflict” but fails to disclose it
- stating that a factor courts must consider in assessing a conflict of interest of a professional representing two estates in a bankruptcy action is "whether the interests of the related estates are parallel or conflicting”
- holding that a trustee who has "contemplated and discussed a specific situation involving a potentiality for conflict" has a duty to disclose it
Written by the judges who cited it.
The opinion
O’NEILL, District Judge,
concurring.
As trustee of BH & P, Maggio filed proofs of claim against the Herman and Berkow estates and complaints alleging fraud and defalcation against Herman and Berkow personally. The complaint against Herman alleges that, within one year of the filing of BH & P’s Chapter 11 Petition, BH & P, on behalf of a general partnership called Hermkow, transferred $1,758,250 to certain limited partnerships organized for the purpose of investing in Texas real estate. The complaint alleges that 10% of Hermkow was owned by Herman and 90% by Berkow, and that of the aforesaid amount $1,458,250 (almost 83%) was transferred after BH & P learned that the AT & T contract was being terminated. The complaint also alleges that Herman breached his fiduciary duty while he was president, a member of the Board of Directors and a 10% stockholder of BH & P. Finally, the complaint seeks judgment against Herman personally in the amount of $1,758,-250, and alleges that this debt is non-dis-chargeable under the Bankruptcy Code. Although the appendix does not include the complaint against Berkow, counsel represents that it contains similar allegations.
Given the gravity of these claims and the obligation of the trustee to pursue them diligently, I am unable to conclude that the bankruptcy court abused its discretion when it removed the trustee and his counsel because of a conflict of interest.