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Coan v. Dunne

United States District Court, D. Connecticut

January 22, 2019

RICHARD M. COAN, Plaintiff - Trustee,
SEAN DUNNE et al., Defendants.



         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.


         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, 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.).

         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 ...

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