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In re Coudert Brothers LLP

United States Court of Appeals, Second Circuit

December 29, 2015

In Re: Coudert Brothers LLP, Debtor.
v.
Development Specialists, Inc., Plan Administrator for Coudert Brothers LLP, Appellee. Statek Corporation, Appellant,

Argued: August 20, 2015

On Appeal from the United States District Court for the Southern District of New York

Appeal from an order of the United States District Court for the Southern District of New York (Swain, J.), affirming orders of the United States Bankruptcy Court for the Southern District of New York (Drain, J.), denying appellant's motions for reconsideration of an order disallowing a claim. On appeal appellant argues that the bankruptcy court's orders do not comply with this Court's mandate in a prior appeal in this case. Because we conclude that the bankruptcy court did not give full effect to our mandate, which impliedly foreclosed the bankruptcy court from relying on its prior alternative holding, we reverse and remand with further instructions.

Anthony W. Clark (Thomas J. Allingham II, Dain A. De Souza, J. Eric Ivester, on the brief), Skadden, Arps, Slate, Meagher & Flom LLP, Wilmington, Delaware, and New York, New York, for Appellant Statek Corporation

David S. Tannenbaum, Stern Tannenbaum & Bell LLP, New York, New York, for Appellee Development Specialists, Inc.

Before: Cabranes, Pooler, and Chin, Circuit Judges.

CHIN, CIRCUIT JUDGE.

This case returns to us after our previous remand in Statek Corp. v. Development Specialists, Inc. (In re Coudert Bros. LLP) ("Coudert I" 673 F.3d 180 (2d Cir. 2012), which in part vacated the bankruptcy court's denial of a motion to reconsider an order disallowing a claim. Appellant Statek Corp. ("Statek") appeals from a September 19, 2014 order of the United States District Court for the Southern District of New York (Swain, J.), which affirmed orders of the United States Bankruptcy Court for the Southern District of New York (Drain, J.), dated August 23, 2013, and October 25, 2013, that again, on remand, denied reconsideration. In denying Statek's latest motions for reconsideration, the bankruptcy court's decisions relied on a prior alternative holding - that Statek's argument was a "new argument" not proper for a motion for reconsideration -which this Court did not explicitly address in Coudert I .

Statek now challenges the bankruptcy court's decisions on the ground that they do not comply with our mandate in Coudert I. For the reasons set forth below, we remand for the district court to instruct the bankruptcy court to reverse its orders denying reconsideration, vacate its claim disallowance order, and reinstate Statek's claim.

BACKGROUND

This dispute arises out of Statek's claim in bankruptcy against Coudert Brothers LLP ("Coudert"), a now-defunct New York law firm and debtor in bankruptcy. See Coudert I, 673 F.3d at 183-84. The underlying facts are set forth in detail in our prior opinion. See id. at 183-85. We briefly restate the allegations in Statek's complaint.

From 1984 until 1996, Statek was controlled by Hans Frederick Johnston, who looted its treasury. In 1990, Johnston caused Statek to retain Coudert as counsel, and thereafter Coudert helped him hide his pilfered assets.

After Statek removed Johnston from power, Coudert failed to turn over files and other materials relating to the Johnston years - information to which Statek was entitled as a former client. Because of this nondisclosure, it was not until 2004 that Statek finally learned of Coudert's role in laundering Johnston's assets. Coudert's malpractice caused Statek to undergo a prolonged, global search for its assets, at a cost of $85 million.

By complaint dated October 28, 2005, Statek sued Coudert for malpractice in Connecticut state court. Coudert soon went bankrupt, and its September 22, 2006 petition for Chapter 11 bankruptcy in the Southern District of New York automatically stayed the Connecticut action. See 11 U.S.C. § 362. On March 23, 2007, Statek removed the Connecticut action to the United States District Court for the District of Connecticut pursuant to 28 U.S.C. § 1452. And on May 10, ...


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