Order Signed on 1272011 Directing SI - Mg Order GENERIC

8/3/2019 Order Signed on 1272011 Directing SI - Mg Order GENERIC

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UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

In re:

MF GLOBAL INC.,

Debtor.

Case No. 11-2790 (MG) SIPA

ORDER DIRECTING SIPA TRUSTEE TO FILE FURTHER DISCLOSURESCONCERNING DISINTERESTEDNESS

A P P E A R A N C E S:

HUGHES HUBBARD & REED LLPCounsel for James W. Giddens, Trustee for the SIPA Liquidation of MF Global Inc.

One Battery Park PlazaNew York, New York 10004By: Anson Frelinghuysen, Esq.

James B. Kobak, Jr., Esq.Christopher K. Kiplok, Esq.Jeffrey S. Margolin, Esq.

ROBERT MARTINPro Se

3 Kenwood RoadSaddle River, New Jersey 07458

MITCH FINEPro Se

575 San Pablo AvenueEmeryville, California 94608-3325

MARTIN GLENN

UNITED STATES BANKRUPTCY JUDGE

James W. Giddens (Giddens or the Trustee), the liquidation trustee of MF Global

Inc. (MFGI), has moved the Court to determine the disinterestedness of the Trustee and his

counsel, Hughes Hubbard & Reed LLP (HHR). (ECF Doc. #45). Giddens is a partner in

HHR. The Trustee and HHR were selected for their respective roles in this SIPA liquidation

11-02790-mg Doc 660 Filed 12/07/11 Entered 12/07/11 13:32:08 Main DocumentPg 1 of 7


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percentage of revenue of HHR, but the declaration does not clearly disclose whether JPM is a

current client of HHR.1

(ECF Doc. #509). The status of an entity as a current client (as opposed

to a former client) can make an important difference in evaluating conflicts and

disinterestedness.

Numerous press reports and statements by counsel in this case, and in the parallel chapter

11 case,In re MF Global Holdings Ltd., Case No. 11-15059 (Bankr. S.D.N.Y.), have

acknowledged that JPM is the agent and a lender to MF Global Holdings Ltd. and serves as the

administrative agent of a $300 million secured facility between MFGI and several other lenders.

Disclosures to the Court by the parties in these two cases regarding the facts and

circumstances leading to the collapse of MFGI have been sparse, but press accounts have raised

questions whether funds or property were transferred from MFGI to JPM in the days leading up

to the filing of the SIPA Liquidation and chapter 11 case. Press accounts, of course, are not

1 The supplemental declaration states:

As a general practice firm of over 300 attorneys, the Firm represents manyentities, including financial entities or investors, who may have been involved inthe past with transactions in which MFGI, MFGIs parent, or some MFGIaffiliate was involved or may have been a counterparty. Some of these entitiesinclude parties-in-interest in this proceeding such as JPMorgan Chase Bank(JPMC) and PricewaterhouseCoopers LLP (PwC USA), which the Firmmay from time to time represent on other unrelated matters. . . .

In 2009 and 2010, fees generated from [representation of JPMC] constituted lessthan one-tenth of one percent of total Firm revenue for each year. In 2011, anysuch syndicate or other representations are projected to generate revenueconstituting less than one one-thousandth of one percent of total Firm revenue

for the year. . . .

In 2009 and 2010, fees generated from [representation of PwC USA and itsforeign affiliates] constituted 3.08% and 1.89% percent [sic] respectively of theFirms revenue. In 2011, these representations are projected to generate feesconstituting less than one-half of one percent of the Firms revenue.

(ECF Doc. 509, 2-4 (footnotes omitted)).



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evidence. But, at a minimum, in order for the Court to determine whether the Trustee and HHR

are disinterested under SIPA and the Bankruptcy Code, further specific disclosures are required.

Therefore, the Court will provide one further opportunity to HHR to provide the

information necessary for the Court to make the required determinations. The Trustees counsel

(or SIPC, to the extent appropriate) shall file supplemental disclosures and memoranda of law on

or before 5:00 p.m., Monday, December 12, 2011, addressing the following factual and legal

questions:

FACTUAL QUESTIONS

1.

Are JPM, PWC, or any lenders involved in MFGIs $300 million secured credit facility

current clients of HHR?

2. Are any other current clients of HHR creditors of MFGI? If so, please provide details.3. If the answers to Questions 1 or 2 are affirmative, provide details of each current matter,

including the name of the client, a description of the matter and the nature of the services

being provided by HHR, the date when HHR was retained, an estimate of when the

matter will be concluded, the amount of fees billed and/or collected to date, and, if

possible, an estimate of future fees before the matter is concluded.

4. Are JPM or PWC creditors of MFGI? If so, please provide details.5. Can HHR commence legal action against JPM, PWC, or any other current clients that are

creditors of MFGI, if necessary and appropriate? If JPM, PWC, or any other creditors of

MFGI are current clients of HHR and you state that you can commence legal action

against any of them, provide the legal basis for that conclusion.



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6. Does HHR have an engagement letter with JPM, PWC, or any other current clients thatare creditors of MFGI, that addresses whether HHR may be adverse to those clients in

other unrelated matters? If so, please provide details.

7. Based on information currently available to HHR, during the ninety days prior to thecommencement of the SIPA Liquidation, did MFGI make any payments or transfers of

property or funds belonging to MFGI or to any ofMFGIs customers, to or for the benefit

of JPM, or to any other current clients of HHR?

8. Based on information currently available to HHR, if there were such payments ortransfers, do you believe that the Trustee or any of MFGIs customers have a basis in fact

and law to seek to recover any payments or transfers that were made to or for the benefit

of JPM or other current clients of HHR?

9. If necessary and appropriate to commence legal action to recover any payments ortransfers, can HHR do so with respect to each recipient of such payment or transfer?

10.What, if any, policy or practice has SIPC followed with respect to selecting conflictscounsel to handle any matters that a trustees counsel may not handle in a SIPA

liquidation because of a conflict of interest?

11.What, if any, policy or practice has SIPC followed with respect to addressing issuescustomarily addressed by a SIPA trustee if the trustee has a conflict of interest in a

particular matter?

LEGAL QUESTIONS

1. Can HHR threaten or bring an action on behalf of the Trustee against JPM or any othercurrent client of HHR?



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2. Can conflicts counsel be used in a SIPA liquidation proceeding if a trustees counsel isprecluded by ethical rules from undertaking a conflicting representation?

3. If HHR is not disinterested in a particular matter in this SIPA Liquidation, is the Trusteewho is a partner in HHR likewise not disinterested?

4. If the Trustee is not disinterested with respect to a particular matter within this SIPALiquidation, may SIPC act instead of the Trustee in that matter? See 15 U.S.C.

78eee(b)(6)(A) (stating that except that SIPC shall in all cases be deemed

disinterested, and an employee of SIPC shall be deemed disinterested if such employee

would, except for his association with SIPC, meet the standards set forth in this

subparagraph).

5. Please address at least the following cases and other authorities in any furthermemorandum of law filed in response to this Order:

Cases

In re AroChem Corp., 176 F.3d 610 (2d Cir. 1999)In re Crivello, 134 F.3d 831 (7th Cir. 1998)Rome v. Braunstein, 19 F.3d 54 (1st Cir. 1994)In re Blinder, Robinson & Co., 131 B.R. 872 (D. Colo. 1991)In re Allegheny Intl, Inc., 117 B.R. 171 (W.D. Pa. 1990)In re Project Orange Assocs., LLC, 431 B.R. 363 (Bankr. S.D.N.Y. 2010)In re Granite Partners, L.P., 219 B.R. 22 (Bankr. S.D.N. Y. 1998)In re Leslie Fay Cos., 175 B.R. 525 (Bankr. S.D.N.Y. 1994)In re Perry, Adams & Lewis Sec., Inc., 5 B.R. 63 (Bankr. W.D. Mo. 1980)

Other Authorities

RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS 128(2000)(stating that alawyer may not represent one client to assert or defend a claim against or brought byanother client currently represented by the lawyer, even if the matters are not related)

MODEL RULES OF PROFL CONDUCT R. 1.7 & cmt. (2010) (discussing rule and generalprinciples of conflicts of interest regarding current clients)



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JOINT RULES OF THE APPELLATE DIVISIONS OF THE SUPREME COURT,RULES OFPROFESSIONAL CONDUCT R. 1.7 (2009) (stating New York rule on Conflict of Interest:Current Client).

IT IS SO ORDERED.

Dated: December 7, 2011New York, New York.

_____/s/Martin Glenn_______MARTIN GLENN

United States Bankruptcy Judge


Documents

Order Signed on 1272011 Directing SI - Mg Order GENERIC