Coan et al v. Dunne et al

Filing 190

ORDER RE APPLICATIONS TO RETAIN COUNSEL. For the reasons stated in the accompanying ruling, the Trustee's motion to retain the law firm of Updike, Kelly, & Spellacy, P.C. (Doc. # 102 ) is DENIED, and the Trustee's motion to retain AMOSS Solicitors (Doc. # 104 ) is GRANTED. It is so ordered.Signed by Judge Jeffrey A. Meyer on 1/22/2019. (Rubin, N.)

UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT

RICHARD M. COAN,
Plaintiff-Trustee,
No. 3:15-cv-00050 (JAM)
Adv. Proc. No. 15-5019 (JAM) (consol.)

v.
SEAN DUNNE et al.,
Defendants.

ORDER RE APPLICATIONS TO RETAIN COUNSEL
Plaintiff-Trustee Richard M. Coan and defendants Gayle Killilea, Mountbrook USA,
LLC, and Wahl, LLC are at odds over whether the Trustee may retain two sets of lawyers in
connection with the consolidated proceedings now before the Court and pending trial in May
2019. The Trustee has applied for permission to hire the Connecticut firm of Updike, Kelly, &
Spellacy, P.C. (Updike) as special counsel. Doc. #102. The Trustee has also applied to the Court
for permission to hire the Irish firm of AMOSS Solicitors for necessary assistance in Ireland.
Doc. #104. Defendants have opposed both applications (Doc. #127; Doc. #128).
I will deny the application as to Updike and grant it as to AMOSS. As an initial matter, I
conclude that the appointment of Updike and AMOSS is consistent with the statutory
requirements of the Bankruptcy Code, 11 U.S.C. § 327. As to Updike, however, I conclude that
it has a “former client” conflict of interest pursuant to Rule 1.9(a) of the Connecticut Rules of
Professional Conduct that prevents its representation of the Trustee in light of its prior
representation of defendant Mountbrook. As to AMOSS, I conclude that I have no authority to
regulate AMOSS’s participation in any Irish bankruptcy proceedings and that, to the extent that
AMOSS’s involvement may extend to any activities in the case now before me, AMOSS does
not labor under a conflict or other disqualifying interest.

1

BACKGROUND
This case is a consolidated action involving claims by a bankruptcy trustee seeking to
recover assets relating to the bankruptcy of Sean Dunne. See In re Dunne, No. 13-50484 (Bankr.
D. Conn.). Dunne was a prominent real estate developer in Ireland with a reported net worth of
more than $900 million in 2007. Doc. #50 at 2. But Dunne soon suffered devastating financial
reversals after the global financial crisis struck in 2008, and this has set in motion years of efforts
by creditors and bankruptcy trustees in the United States and Ireland to recover from him.
In 2010 the government of Ireland created the National Asset Management Agency
(“NAMA”) to acquire troubled bank assets and other obligations. Ibid. In the meantime, Dunne
and his spouse—defendant Gayle Killilea—moved to Greenwich, Connecticut in 2010. Ibid.;
Doc. #1-1 at 15. In 2012 Dunne consented to a stipulated judgment against him and in favor of a
NAMA-related entity known as National Asset Loan Management, Ltd. (“NALM”) for about
$235 million stemming from personal guarantees that Dunne had given to secure debt for his
companies. Ibid.
NALM, however, suspected that Dunne had concealed assets from his creditors, and so
NALM filed an action in 2012 in the Connecticut Superior Court claiming that Dunne had
fraudulently transferred various assets to others including his spouse Gayle Killilea Dunne
(Killilea). Id. at 3. Among the defendants named in NALM’s action were Dunne, Killilea, and a
Connecticut limited liability company known as Mountbrook USA, LLC that Dunne had
allegedly formed but later claimed that Killilea was the sole member. Doc. #1 at 1; Doc. #1-1 at
11–13. Mountbrook was alleged to have paid real estate taxes on certain properties in Greenwich
as well as to own cars driven by Dunne and Killilea. Doc. #1-1 at 13, 15. NALM’s state court
complaint alleged that Dunne had fraudulently transferred his interest in Mountbrook to Killilea,

2

as well as fraudulently transferred various other funds and assets including real estate in
Greenwich and in Switzerland. Doc. #1-1 at 16-21.
While this state court action was pending, Dunne filed for bankruptcy in March 2013 in
the U.S. Bankruptcy Court in the District of Connecticut, and his creditors soon commenced a
bankruptcy action against him as well in Ireland. Doc. #50 at 3–4. In January 2015, Dunne
waived his discharge in the U.S. bankruptcy action, and the bankruptcy trustee—plaintiff
Richard Coan—moved to intervene in the state court action and to remove it to this Court. Id. at
4; Doc. #1. The Court granted the Trustee’s motion to intervene and denied defendants’ motion
to remand. Doc. #38.
About two months later, the Trustee commenced a separate but somewhat duplicative
adversary proceeding in the Bankruptcy Court against Killilea and others in March 2015. See
Coan v. Killilea, Adv. Proc. No. 15-05019 (D. Conn.). The Trustee alleged 35 causes of action
based on alleged fraudulent transfer of assets or money to Killelea from 2005 to 2008, including
claims that Dunne had fraudulently transferred his interests in Mountbrook to Killilea. Doc. #50
at 4–5.
A few years passed before the case became active again on my docket. On July 27, 2018,
I entered an order for trial to commence in May 2019. Doc. #46. I also granted the Trustee’s
unopposed motion to consolidate before me the removed state court action with the adversary
proceeding that had been proceeding on a separate track in the Bankruptcy Court. Doc. #52.
Parallel and related proceedings are also taking place in Ireland. See Lehane v. Dunne 2014 7820
P (H. Ct.) (Ir.); In re Dunne (A Bankrupt) 2013 Bankr. No. 2478 (H. Ct.) (Ir.).

3

The Trustee’s application to retain Updike
Although the Trustee is already represented by another law firm, the Trustee proposes to
retain Updike as special counsel to render advice and counsel to the Trustee in connection with
the trial and any appeal. Doc. #102 at 3. Updike would serve in a “subordinate litigation role on
an ‘as needed’ basis, from time to time, in order to evaluate certain elements and strategy of the
matter and to render advice and guidance for the preparation and prosecution of the case,”
including for purposes of strategy for any appeal. Ibid. According to the Trustee, “most” of the
time to be incurred by attorneys at Updike would be by attorney Paul Gilmore. Ibid.
The Trustee acknowledges that Updike has two prior connections to entities at issue in
this case. The first is Updike’s prior representation of defendant Mountbrook USA, LLC, and the
second is Updike’s prior representation of an entity known as Newinvest Holding International
Ltd. (Newinvest). I will discuss these prior representations in turn.
Updike’s prior representation of Mountbrook
In mid-2016 an Updike attorney named Thomas Gugliotti represented defendant
Mountbrook USA, LLC, as a creditor for purposes of a bankruptcy proceeding involving 151
Milbank, LLC, which is a single asset real estate entity owning property for a luxury
condominium project at 151 Milbank Street in Greenwich. Doc. #102 at 4; Doc. #151 at 12; Doc.
#276 to In re 151 Milbank, LLC, No. 15-51485 (Bankr. D. Conn. 2016). Mountbrook was the
general contractor for the condominium project, and the bankruptcy plan treated Mountbrook as
an unsecured creditor. Doc. #151 at 13.
Both Mountbrook and 151 Milbank, LLC, have been named as defendants by the Trustee
in the consolidated proceeding that is now before me. Killilea has submitted an affidavit attesting
that she owns the membership interests in Mountbrook, that she directs counsel for Mountbrook,

4

and that she consulted with Updike during the course of its representation of Mountbrook in the
151 Milbank bankruptcy proceeding. Doc. #128 at 5–6; Doc. #128-1 at 2–3.
Updike represented Mountbrook at a hearing on the debtor’s disclosure statement in that
proceeding, Doc. #151 at 10–11, and Updike was counsel for Mountbrook as the debtor filed a
pair of amended disclosure statements, the latter of which the Bankruptcy Court approved. See
Docs. #281, 284, 294, 299, 310 to In re 151 Milbank, LLC, No. 15-51485 (Bankr. D. Conn.
2016). The disclosure statements discussed Mountbrook’s role as an unsecured insider creditor
of 151 Milbank, LLC, and that determinations of its claims would be handled either through the
claims objection process or by way of a judicial determination in the adversary proceeding that
has been consolidated before me. See Doc. #151 at 13; Doc. #284 at 8, 16 to In re 151 Milbank,
LLC, No. 15-51485 (Bankr. D. Conn. 2016). Ultimately, Updike filed a motion to withdraw as
counsel for Mountbrook in June of 2016, Doc. #294 to In re 151 Milbank, LLC, No. 15-51485
(Bankr. D. Conn. 2016), and the Bankruptcy Court granted that motion in late July 2016, Doc.
#310 to id.
Updike’s prior representation of Newinvest
The Trustee states that Updike “very briefly” represented Newinvest Holding
International Ltd. Doc. #102 at 4. This entity is not a defendant in this action but holds a
mortgage on a property at 22 Stillman Lane in Greenwich, Connecticut, which is owned by
defendant Wahl. Doc. Doc. #187 at 2. The Trustee referenced the Newinvest mortgage in its
complaint in the adversary action in the course of allegations that 22 Stillman Lane has been
another object of fraudulent transfer. Doc. #102 at 4. The Trustee represents that “the Killilea
Adversary does not challenge the validity of said mortgage and, as aforesaid, the mortgagee
[Newinvest] is not a party to the Killilea Adversary,” nor “a creditor of the Dunne estate.” Ibid.

5

By contrast, defendants maintain that the Trustee’s act of filing a lis pendens on the property of
22 Stillman Lane was adverse to Newinvest’s interests as a mortgage holder on the property and
adverse to Wahl’s selling of the property. Doc. #187 at 2.
AMOSS prior representation
In 2014, a consultant for defendant Killilea named James Ryan contacted solicitor Gavin
Simons of AMOSS in Dublin, Ireland, to discuss the possibility of having Simons and AMOSS
represent Killilea or Dunne in Irish bankruptcy and related proceedings there. Doc. #127-1 at 2–3
(¶¶ 2–4). Ryan asserts that he discussed Dunne’s bankruptcies in the United States and Ireland,
claims against Dunne and Killilea in the United States, the potential for future claims against
them, and the transfer of assets from Dunne to Killilea. Id. at 3 (¶¶ 5–8). Ryan’s declaration
states that the meeting lasted for only 45 minutes and does not explicitly describe what he told
Simons or contend that any of the information that he may have disclosed was confidential. Ibid.
An affidavit from Solicitor Simons agrees that he and Ryan discussed Dunne’s bankruptcies and
litigation against Killilea in Ireland, but asserts that nothing confidential was discussed at his
meeting with Ryan. Doc. #142-1 at 1–2 (¶ 6). During the course of this meeting, Simons advised
Ryan that his firm might have a conflict of interest in undertaking the representation, and Simons
followed up a few days later to decline the representation. Doc. #127-1 at 3 (¶¶ 7, 9).1
DISCUSSION
Defendants object to the Trustee’s application to retain Updike and to retain AMOSS on
the ground that doing so is impermissible under the Bankruptcy Code, and in the alternative, that
it would amount to a conflict of interest in violation of the professional conduct rules.

1

Defendants also allege that AMOSS is counsel to the receiver in an Irish lawsuit where the receiver has sued a
company owned and controlled by Killilea. Doc. #127 at 8. But because they altogether fail to explain any more
facts about this relationship or why it requires the disqualification of AMOSS, I reject these grounds as the basis for
relief.

6

§ 327 of the Bankruptcy Code
Section 327(a) of the Bankruptcy Code provides that “the trustee, with the court's
approval, may employ one or more attorneys . . . 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). The provision’s present-tense phrasing
(“hold or represent”) is important, because it operates only to disqualify counsel that presently
holds or represents an adverse interest to the bankruptcy estate, rather than to disqualify counsel
who have represented an adverse interest in the past. See In re AroChem Corp., 176 F.3d 610,
623 (2d Cir. 1999). Defendants acknowledge that Updike’s representation of Mountbrook and
Newinvest took place in the past and has since ended. See Doc. #128 at 8.
Moreover, the Second Circuit has made clear that the “disinterested” prong of § 327(a)
applies only to the personal interests of a professional that a trustee seeks to hire, and it is meant
to be read as distinct from any third-party interest that a professional represents. See AroChem,
176 F.3d at 629. There is no evidence that any individual member of Updike is a creditor of
Dunne, or that any member of Updike has any of the other personal interests in Dunne
enumerated in 11 U.S.C. § 101(14). As such, I will not deny the Trustee’s application to hire
Updike on the basis of § 327(a).
Similarly, AMOSS never actually represented Killilea, certainly does not represent her
now, and no member of AMOSS is alleged to have a personal interest adverse to the bankruptcy
estate. Accordingly, § 327(a) furnishes no basis for the Court to bar the retention of AMOSS.
Updike—former client conflict of interest
Defendants further argue that the retention of Updike would violate the Connecticut
Rules of Professional Conduct that govern when a lawyer may represent a party whose interests

7

are materially adverse to a former client of the lawyer. See D. Conn. L. Civ. R. 83.2(a)(1). Rule
1.9(a) provides that “[a] lawyer who has formerly represented a client in a matter shall not
thereafter represent another person in the same or a substantially related matter in which that
person’s interests are materially adverse to the interests of the former client unless the former
client gives informed consent, confirmed in writing.” See Conn. R. Prof. Cond. R. 1.9(a); see
also Conn. R. Prof. Cond. R. 1.10(a) (imputing obligations to former client under Rule 1.9 to
entire law firm); D. Conn. L. Civ. R. 83.2(a) (adopting the Connecticut Rules of Professional
Conduct with exceptions not relevant here).2
As the words of Rule 1.9(a) make clear, the rule does not categorically extend to any
representation of a new client that is adverse to a former client. Instead, the critical inquiry is
whether the matter involving the former client is “substantially related” to the matter for the
putative new client. The commentary to the rule instructs that “[m]atters are ‘substantially
related’ for purposes of this Rule if they involve the same transaction or legal dispute of if there
is otherwise a substantial risk that confidential factual information as would normally have been
obtained in the prior representation would materially advance the client’s position in the
subsequent matter.” Conn. R. Prof. Cond. R. 1.9 commentary.
Thus, the determination of whether two representations are “substantially related” may
turn on an appraisal of what confidential information “normally” would have been shared, even
absent evidence of what actual sharing of information took place. See United States v. Prevezon
Holdings Ltd., 839 F.3d 227, 239, 241 (2d Cir. 2016) (disqualification warranted if “the attorney
whose disqualification is sought had access to, or was likely to have had access to, relevant

2

The Trustee makes no claim that the imputation principle of Rule 1.10(a) should not apply here, and therefore it is
irrelevant that a different attorney at Updike represented Mountbrook in the 151 Milbank proceeding than the
attorney from Updike whom the Trustee now proposes to retain.

8

privileged information in the course of his prior representation of the client” and noting that
“[t]he substantial relationship test removes the need for courts to make direct inquiry into
whether confidential information was actually transmitted”) (emphasis added). Accordingly, “[a]
former client is not required to reveal the confidential information learned by the lawyer in order
to establish a substantial risk that the lawyer has confidential information to use in the
subsequent matter,” and “[a] conclusion about the possession of such information may be based
on the nature of the services the lawyer provided the former client and information that would in
ordinary practice be learned by a lawyer providing such services.” Conn. R. Prof. Cond. 1.9
commentary.3
Nor does the substantial relationship test require that the dispute or facts at issue in the
two representations have been identical. To the contrary, “[a] ‘substantial relationship’ exists
where facts pertinent to the problems underlying the prior representation are relevant to the
subsequent representation.” Id. at 239 (internal quotations omitted).
I think it is clear that Updike’s prior representation of Mountbrook (with whom it dealt
through Killilea) is substantially related to its proposed representation of the Trustee in this
action. To begin with, Mountbrook is plainly a “former client” of Updike within the scope of
Rule 1.9, and its interests are undoubtedly inimical and adverse to those of the Trustee (and were
at the time that Updike agreed to the representation).
Nor is there any doubt that the bankruptcy proceeding for 151 Milbank is factually
related to the consolidated case that is before me. Indeed, the Trustee is actively pursuing

3

Because the application of the former-client conflict rule may be resolved in this action by way of my evaluation of
what confidential factual matters would normally have been disclosed to one’s counsel, I need not try to piece
together what was actually disclosed to Updike or to take up Killilea’s invitation to submit for in camera review the
materials that she shared with Updike as counsel to Mountbrook in the 151 Milbank bankruptcy proceeding. Doc.
#128 at 5 n.1. See also Analytica, Inc. v. NPD Research, Inc., 708 F.2d 1263, 1269 (7th Cir. 1983) (discussing
hazards of engaging in inquiry of what information was actually disclosed).

9

discovery from the defendants in this case for “[d]ocuments and communications concerning the
source of funds, direct and indirect, used to purchase 151 Milbank, Greenwich, CT.” Coan v.
Dunne, 2018 WL 6616820, at *6 (D. Conn. 2018), on reconsideration in part, 2019 WL 117604
(D. Conn. 2019).
All that leaves for me to consider is whether there is “a substantial risk that confidential
factual information as would normally have been obtained in the prior representation would
materially advance the client’s position in the subsequent matter.” Conn. R. Prof. Cond. 1.9
commentary. Viewing the facts from what would normally be disclosed between counsel and
client, I think it is clear that there is a substantial risk that confidential factual information that
would normally have been disclosed by Mountbrook to Updike would materially advance the
Trustee’s position in this action now before me.
Even accepting the Trustee’s claim that I should confine my inquiry solely to the limited
scope of Updike’s services for Mountbrook, the facts show that Updike was hired by
Mountbrook to protect its interests for purposes of a proceeding involving the adequacy of the
bankrupt 151 Milbank’s disclosure statement. See 11 U.S.C. § 1125(a)(1) (defining how to
evaluate whether there is “adequate information” disclosed to “include information of a kind, and
in sufficient detail, as far as is reasonably practicable in light of the nature and history of the
debtor and the condition of the debtor’s books and records,” as well as providing that “in
determining whether a disclosure statement provides adequate information, the court shall
consider the complexity of the case, the benefit of additional information to creditors and other
parties in interest”).
As the Trustee acknowledges, the disclosure statement explicitly acknowledged the
existence of the Killilea adversary proceeding which is now a part of the consolidated action

10

before me, and proceedings to determine the adequacy of a disclosure statement are meant to
ensure that the debtor’s creditors sufficiently understand a debtor’s plan of reorganization in
order to support or oppose the plan. Doc. #151 at 15–16. In order to decide if notice of the
Killilea adversary proceeding in the disclosure statement—as well as any other factors relevant
to Mountbrook’s potential rights in the 151 Milbank bankruptcy—was adequate to inform
Mountbrook and protect its rights, it would be normal to consider the degree to which the
adversary proceeding would affect Mountbrook’s interests, and this in turn logically entails some
account and assessment of the very nature and merits of the adversary proceeding.
It would be natural for a client in such circumstances to disclose to counsel confidential
facts about the lawsuit that must be evaluated (here, the fraudulent transfer allegations made in
the adversary proceeding), including the basis for a client’s defense against such claims. Indeed,
the importance of the Killilea adversary proceeding to the prior representation of Mountbrook is
highlighted by the Trustee’s acknowledgement that “Mountbrook USA would not receive any
money on account of its contracting work on the luxury condo project unless and until the claims
against in in the Killilea Adversary are resolved in its favor.” Doc. #151 at 13. Having retained
and trusted Updike for purposes factually related in part to the Killilea adversary proceeding, it is
hard to see why Mountbrook should now be burdened with Updike switching sides to join forces
with the Trustee against it.
The Second Circuit has instructed that because of “the serious impact of attorney
disqualification on the client’s right to select counsel of his choice,” an order of disqualification
“should ordinarily be granted only when a violation of the Canons of the Code of Professional
Responsibility poses a significant risk of trial taint,” and it has further noted that a “risk [of trial
taint] is encountered when an attorney represents one client in a suit against another client . . . or

11

might benefit a client in a lawsuit by using confidential information about an adverse party
obtained through prior representation of that party.” Glueck v. Jonathan Logan, Inc., 653 F.2d
746, 748 (2d Cir. 1981); see also Hempstead Video, Inc. v. Inc. Vill. of Valley Stream, 409 F.3d
127, 133 (2d Cir. 2005) (“One recognized form of taint arises when an attorney places himself in
a position where he could use a client's privileged information against that client.”). I conclude
that Updike’s unconsented-to representation of the Trustee would violate Rule 1.9(a) of the
Connecticut Rules of Professional Conduct and correspondingly pose a significant risk of trial
taint to warrant Updike’s disqualification.4
I decline to address the claim of conflict of interest arising from Updike’s prior
representation of Newinvest Holding International Ltd. Although defendants Killilea,
Mountbrook, and Wahl have submitted an opposition along with an email of dubious provenance
from someone named “Sotia Dimosthenous” purporting to be “Legal Consultant to Trust Dept.”
and purporting to state Newinvest’s objection to Updike’s representation of the Trustee,
Newinvest has not filed an appearance through counsel in this action to assert its rights. In the
absence of a proper appearance in this action, Newinvest has no assertable rights to claim here,
and none of the named defendants have otherwise established their own standing to object to
Updike’s participation in this case for reasons relating to its prior representation of non-party
Newinvest. See Feldman v. Feldman, 2013 WL 2501988, at *2 (Conn. Super. Ct. 2013).

4

It is undoubtedly true as the case law suggests that not every violation of the ethics rules warrants disqualification
of counsel. But unlike the conflict-of-interest rules, see Conn. R. Prof. Cond. Rules 1.7 and 1.9, many of the ethics
rules proscribe certain actions by counsel (such as not to make false statements or to engage in communications with
represented parties, see Conn. R. Prof. Cond. R. 4.1 and 4.2), and these rules do not altogether purport to preclude
counsel from representing certain clients under certain circumstances. On the other hand, where there is conduct
involving an ethics rule that outright bars certain representation relationships, it is hard to see why a court would not
conclude that a representation in violation of such an applicable rule does not taint the proceedings to warrant
disqualification. Put differently, it would be odd for me to conclude that Updike’s representation of the Trustee
violates Rule 1.9 but that there is no sufficient risk of trial taint to warrant Updike’s disqualification, such that
Updike could proceed to represent the Trustee in this action, only one day to face the prospect of disciplinary
proceedings by the Statewide Grievance Committee or this Court for violating Rule 1.9.

12

AMOSS—prospective client conflict of interest
Defendants also argue that AMOSS should be disqualified as the Trustee’s counsel. To
the extent that defendants seek relief against the Trustee’s use of AMOSS for purposes of
proceedings in Ireland, my role is not to regulate the conduct of foreign counsel in foreign
proceedings that are not before me. Defendants have not shown that I have some kind of freeranging international authority to enforce the Irish rules of professional conduct against foreign
counsel like AMOSS.
To the extent that defendants otherwise complain that AMOSS’s participation would
amount to a violation of the Connecticut Rules of Professional Conduct, they have failed to
adduce facts to show any violation. Because there is no allegation that AMOSS ever represented
any of the defendants (as distinct from having a conversation about the possibility), defendants
must rely on the “prospective client” disqualification rule (Conn. R. Prof. Cond. R. 1.18(c))
rather than the “former client” disqualification rule (Conn. R. Prof. Cond. R. 1.9(a)). The
prospective-client rule requires disqualification only “if the lawyer received information from the
prospective client that could be significantly harmful to that person in the matter.” Conn. R. Prof.
Cond. R. 1.18(c). Defendants allege a one-time meeting between a consultant for Killilea and
AMOSS Solicitors, but they do not carry their burden to show confidential information that was
actually disclosed and that could be significantly harmful to them if used or disclosed by
AMOSS in subsequent proceedings. Accordingly, there is no basis for the Court to preclude the
Trustee from retaining AMOSS Solicitors for assistance in Ireland and as may be necessary for
the conduct of proceedings before this Court.

13

CONCLUSION
For the foregoing reasons, the Trustee’s motion to retain the law firm of Updike, Kelly, &
Spellacy, P.C. (Doc. #102) is DENIED, and the Trustee’s motion to retain AMOSS Solicitors
(Doc. #104) is GRANTED.
It is so ordered.
Dated at New Haven this 22d day of January 2019.
/s/ Jeffrey Alker Meyer
Jeffrey Alker Meyer
United States District Judge

14