Geron v. Fontana

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
__________________________________________
:
In re: 	: 	Chapter 7
:
THELEN LLP, 	: 	Case No. 09-15631 (ALG)
:
Debtor. 	:
__________________________________________:
:
Yann Geron, Chapter 7 Trustee of the Estate 	:
of Thelen LLP, 	:
Plaintiff, 	:
v. 	: 	Adv. Pro. No. 11-02648 (ALG)
:
GARY L. FONTANA, et al., 	:
Defendants. 	:
__________________________________________:
:
Yann Geron, Chapter 7 Trustee of the Estate 	:
of Thelen LLP, 	:
Plaintiff, 	:
v. 	: 	Adv. Pro. No. 11-02674 (ALG)
:
FREDERICK COHEN, 	:
Defendant. 	:
__________________________________________:
:
Yann Geron, Chapter 7 Trustee of the Estate 	:
of Thelen LLP, 	:
Plaintiff, 	:
v. 	: 	Adv. Pro. No. 11-02690 (ALG)
:
ALLEN J. ROSS, 	:
Defendant. 	:
__________________________________________:
:
Yann Geron, Chapter 7 Trustee of the Estate 	:
of Thelen LLP, 	:
Plaintiff, 	:
v. 	: 	Adv. Pro. No. 13-01444 (ALG)
:
GREGORY P. O’HARA, 	:
Defendant. 	:
__________________________________________:
11-02648-mew Doc 65 Filed 05/23/14 Entered 05/23/14 13:02:05 Main Document
Pg 1 of 15

2
APPEARANCES:
REID COLLINS TSAI LLP
Counsel to Yann Geron, Chapter 7 Trustee
One Penn Plaza, 49th Floor
New York, New York 10119
By: 	Angela J. Sommers, Esq.
Jeffrey E. Gross, Esq.
Anne M. Bahr, Esq.
Yonah Jaffe, Esq.
Frederick L Whitmer, Esq.
Pro se, and for others in Whitmer/Fontana group
c/o Kilpatrick Townsend & Stockton LLP
1114 Avenue of the Americas
New York, New York 10036
Frederick Cohen, Esq.
Pro se, and for Allen J. Ross
1540 Broadway
New York, New York 10036
Gregory P. O’Hara, Esq.
Pro se
c/o Nixon Peabody LLP
3000 El Camino Real, Ste. 500
Palo Alto, California 94306
ALLAN L. GROPPER
UNITED STATES BANKRUPTCY JUDGE
11-02648-mew Doc 65 Filed 05/23/14 Entered 05/23/14 13:02:05 Main Document
Pg 2 of 15

3
MEMORANDUM DECISION CONCERNING TRUSTEE’S
MOTION FOR PARTIAL SUMMARY JUDGMENT
AS TO DATE OF TRANSFER AND REASONABLY EQUIVALENT VALUE
On September 18, 2009, the law firm Thelen LLP (“Thelen”) filed a voluntary petition for
relief under Chapter 7 of the Bankruptcy Code, and Yann Geron (the “Trustee”) was appointed the
chapter 7 trustee. 	The bankruptcy filing occurred almost one year after the partners of Thelen, a
registered limited liability partnership governed by California law, voted to dissolve the
partnership. 	Upon the election to dissolve, taken on October 28, 2008, the partners entered into a
Dissolution Agreement which contemplated that the firm would effectuate the dissolution on a
date between November 26, 2008 and December 15, 2008. 	The dissolution was effectuated on
November 30, 2008.
During the period from December 1, 2006, through October 27, 2008, when the law firm
was primarily known as Thelen Reid Brown Raysman & Steiner LLP (”TRBRS”),1 its business
was governed by The Third Amended and Restated Limited Liability Partnership Agreement of
Thelen Reid Brown Raysman & Steiner LLP (the “Third Partnership Agreement”). 	In August,
2008, the withdrawal of several partners triggered a non-monetary breach of the law firm’s loan
agreement with Citibank, NA; the firm continued to operate and in September 2008 shortened the
firm name to Thelen, LLP. 	On October 28, 2008, however, the partners voted to dissolve the
firm, and to adopt the Fourth Amended and Restated Limited Liability Partnership Agreement of
Thelen LLP (the “Fourth Partnership Agreement), which governed its affairs up to the
1 The name Thelen Reid Brown Raysman & Steiner LLP became effective December 1, 2006, when members of the
law firm Brown Raysman Millstein Felder & Steiner LLP became members of the law firm Thelen Reid & Priest LLP.
In September 2008, the firm became known as Thelen LLP.
11-02648-mew Doc 65 Filed 05/23/14 Entered 05/23/14 13:02:05 Main Document
Pg 3 of 15

4
dissolution.2 Each of the Defendants either was a Partner of Thelen as of December 1, 2006 or
became a Partner thereafter and prior to October 28, 2008; and each signed one or more of the
Partnership Agreements or through conduct manifested an intention and agreement to be bound by
one or more of the Partnership Agreements. 3 Thelen had three tiers of partners: (i) equity partners
without guaranteed compensation (“Equity Partners”), (ii) Equity Partners with guaranteed
compensation, and (iii) income partners (those who received salaries). 	All of the defendants in
the instant adversary proceeding are or were Equity Partners.4 The Trustee does not challenge the
proposition that the Partnership Agreements were entered into by the parties in good faith and on
an arms-length basis.
On September 15, 2011, the Trustee commenced similar adversary proceedings against the
Thelen partners (including the Defendants) seeking, among other things, damages for breach of
contract, avoidance of fraudulent conveyances and turnover of property of the estate. 	In the
complaints, as amended on January 22, 2014, the Trustee alleged that the partners had been
overcompensated in the year 2008 under the terms of the Partnership Agreements. 	Accordingly,
he sought damages against each defendant for breach of contract to recover the overpayments, plus
costs, interest and attorneys’ fees.5 In addition, the Trustee alleged that the overpayments were
avoidable as fraudulent conveyances under 11 U.S.C. § 548(a)(1)(B) (constructive fraudulent
2 The Partnership Agreements provide that the laws of the State of California (other than its conflicts of laws
principles) apply to the construction, interpretation and effect of the agreements.
3 One of the Defendants filed for personal bankruptcy protection, thereby staying any action as against him.
4 Two of the defendants, Cohen and Ross, maintain that they entered into separate letter agreements, dated May 29,
2008 (the "Letter Agreements"), pursuant to which TRBRS confirmed a pre-existing agreement for a set amount of
guaranteed compensation for 2007 and set forth a binding compensation formula for 2008 based upon specified
personal performance targets unrelated to profitability.
5 There were also allegations of breach of contract with respect to the capital contribution requirements of the
Partnership Agreements.
11-02648-mew Doc 65 Filed 05/23/14 Entered 05/23/14 13:02:05 Main Document
Pg 4 of 15

5
conveyance).
At a hearing on January 23, 2014, the Court was informed that the parties to the instant
proceedings had agreed that the issues relating to the fraudulent conveyance claims should be
decided first and that the contract issues would be determined thereafter, and the Court entered a
scheduling order to that effect on January 28, 2014. 	In accord therewith, the Trustee has moved
for partial summary judgment with respect to two aspects of the fraudulent conveyance claims.
At issue are certain draws that the partners received as advances against their entitlement to an
allocation of the eventual net profits of the law firm, which the Trustee alleges were received for
less than reasonably equivalent value (“REV”) at a time when Thelen was insolvent. 	The Trustee
seeks summary judgment declaring (i) the point in time of the alleged constructively fraudulent
transfers, viz, the dates of the alleged overpayments for fraudulent conveyance purposes; and (ii)
that the governing partnership agreements conclusively establish the reasonably equivalent value
of each partner’s services for fraudulent conveyance purposes.
Summary Judgment
Summary judgment under Federal Rule of Civil Procedure 56, made applicable by Federal
Rule of Bankruptcy Procedure 7056, is proper where “the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R.
Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986); Morenz v. Wilson–
Coker, 415 F.3d 230, 234 (2d Cir. 2005). The moving party bears the burden of demonstrating the
absence of any genuine issue of material fact, and all inferences to be drawn from the underlying
facts must be viewed in the light most favorable to the party opposing the motion. Adickes v. S.H.
Kress & Co., 398 U.S. 144, 157 (1970). However, once there is a showing of the absence of an
11-02648-mew Doc 65 Filed 05/23/14 Entered 05/23/14 13:02:05 Main Document
Pg 5 of 15

6
issue of fact, the opposing party must produce specific evidence that raises a genuine issue.
Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). A fact is
“material” if it might affect the outcome of the suit under the governing substantive law, and
“summary judgment will not lie if the dispute about a material fact is ‘genuine,’ that is, if the
evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson
v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
Partial summary judgment may be granted on a discrete issue if the party identifies “each
claim or defense – or the part of each claim or defense – on which summary judgment is sought
. . . [and shows that] there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” 	FED. R. CIV. P. 56(a). 	As noted above, the Trustee seeks summary
judgment as to the date of the transfers and the issue of reasonably equivalent value, both for
fraudulent conveyance purposes. 	On both issues, he relies essentially on the Partnership
Agreements.
The Partnership Agreements
The Partnership Agreements provided that “‘Partner’ means, as of any date, each
individual who on such date is a Partner with the right to share in the Net Income of the Partnership
pursuant to Section 2.1.” 	(Third, § 1.10.11; Fourth § 1.9.11). 	Section 2.1 provided that
The Partners in the Partnership shall be those individuals who have been admitted
as Partners to the Partnership pursuant to the terms of this Agreement and who have
not ceased to be Partners pursuant to Article 6. Each of the Partners who have the
right to share in the Net Income of the Partnership (irrespective of whether such
Partner’s compensation is determined solely based upon the right to share in the
Net Income of the Partnership) and who have an interest in the capital of the
Partnership are parties to this Agreement. Those Partners are identified in
Schedule 1 attached hereto and as amended from time to time in accordance with
Section 8.2 (relating to amendments to this Agreement). The Partnership may from
time to time designate one or more persons as “partners” who are held out to third
11-02648-mew Doc 65 Filed 05/23/14 Entered 05/23/14 13:02:05 Main Document
Pg 6 of 15

7
parties as partners in the Partnership. Such persons shall have only such rights as
are expressly accorded to them by the partners under this Agreement. (emphasis
added).
The Partnership Agreements then provided in Article 4 for the allocation of Net Income to
Partners, with each partner entitled to receive an allocation of the partnership’s “Net Income” for
the calendar year (or relevant portion thereof) in proportion to certain sharing ratios. 	(Section
4.1.1). 6 Section 4.2 of the Partnership Agreement concerns distributions and section 4.2.1,
relating specifically to periodic draws, provided that:
Each Partner shall be entitled to receive a draw as an advance against such
Partner’s share of Net Income of the Partnership on a periodic basis under a policy
determined from time to time by the Office of the Chair. 	Such draws need not be
equal among partners. (emphasis added).
Section 4.2.2 provided that:
The Partnership shall distribute to the Partners from time to time, in proportion to
their Sharing Ratios, all or a portion of the Net Income of the Partnership, reduced
by prior draws or other advances against Net Income paid to such Partners pursuant
to Section 4.2.1, under a policy determined from time to time by the Office of the
Chair. 	Such policy shall take into account, among other matters, the Capital
Policy of the Partnership. 	All Partnership disbursements which are not deductible
in computing Net Income, or which are made for the direct benefit of a Partner,
shall be treated as distributions to the benefited Partners in accordance with a policy
determined from time to time by the Office of the Chair.
In brief, the Partnership Agreements thus provided that the “Partners” would share in the
6 Section 4.1.1 of the Third Partnership Agreement and section 4.1.1.1 of the Fourth Partnership Agreement both
provided that
The Net Income of the Partnership for each calendar year or relevant portion thereof (including each
item of income, gain, loss, deduction and credit, or basis therefor) shall, after taking into account
any allocations of income or similar taxable payments made pursuant to Section 4.1.3 below and
any deductions specially allocated pursuant to Section 4.1.4 below, be allocated to the Partners in
proportion to their Sharing Ratios.
Each partner entering into the Partnership Agreement was assigned a certain number of points that were used to
calculate the partner’s “Sharing Ratio,” and this amount was set forth in Schedule 1 to the Partnership Agreement.
11-02648-mew Doc 65 Filed 05/23/14 Entered 05/23/14 13:02:05 Main Document
Pg 7 of 15

8
Net Income of the Partnership; that the Partners could receive periodic advances as a draw against
Net Income; and that an allocation of net income to a partner would be reduced by “prior draws or
other advances.”7
The Date of Transfer
The Trustee contends that the draws and other distributions were intended to be advances
to be netted against Net Income allocable to a Partner and that since the Defendants were
ultimately entitled only to their allocable share of Net Income for the calendar year 2008 (or
relevant portion thereof) (“Final ASNI”), the date of the “transfer” for fraudulent conveyance
purposes is December 31, 2008. 	On that date, the Trustee argues, draws and other advances could
be calculated as exceeding Final ASNI for the calendar year, and the excess was due to Thelen. 	It
is not contested that in 2008, the Debtor paid Equity Partners semi-monthly draws and that the
draws were $1,000 per equity point per month, with a minimum draw of $21,000 per month for
Full Equity Partners (16 points or higher). These draw payments (“Draw Advances”) were made in
the middle of and at the end of each month, and two additional payments were made in March and
June of 2008.
The Trustee maintains that the use in section 4.2.1 of the term “advance” in reference to the
periodic draws to which each partner was entitled of necessity requires that there be a netting when
calculating a partner’s Final ASNI “for each calendar year or relevant portion thereof” under
section 4.1.1. 	According to the Trustee, the Defendants left the firm after October 30, 2008, and
he thereafter netted Draw Advances against partners’ final ASNI for the partners as of December
31, 2008. 	Using this calculation, the netting resulted in a deficiency because the Draw Advances
7 The record does not disclose whether any policies were issued by the Office of the Chair, as authorized by section
4.2.2.
11-02648-mew Doc 65 Filed 05/23/14 Entered 05/23/14 13:02:05 Main Document
Pg 8 of 15

9
exceeded the defendant’s Final ASNI. 	Based on the above, the Trustee contends, the transfer for
fraudulent conveyance purposes took place only when the putative “true-up” was performed
(calendar year-end). 	He also contends that reasonably equivalent value should be measured by
applying the partnership provisions, and determining the extent to which the Defendants’ draws
exceeded Final ASNI. 	Defendants dispute both assertions.8
Defendants first assert that the provisions of the Partnership agreements are not as clear as
the Trustee argues with respect to the obligation of existing partners to repay over-advances.
There appears to be no dispute that “Former Partners” had such an obligation. 	Article 6 of the
Partnership Agreements delineates the various ways in which a partner could cease to be a partner,
and section 6.6.3 specifically provided for the repayment of over-advances by Former Partners, as
follows:
The Partnership shall be entitled to recover any amount owed to it by a Former
Partner on the date such Partner ceases to be a Partner by offset against amounts
otherwise required to be paid to such Former Partner pursuant to this Section 6.6.
Unless otherwise agreed, the excess, if any, of such amount over the amount
otherwise payable to such Former Partner shall become payable immediately on the
date such Former Partner ceases to be a Partner.
However, Article 7 of both Partnership Agreements, which concerns dissolution and termination
of the partnership, did not deal with the issue of a partner’s obligation to repay in the event of
dissolution. 	This has led some of the Defendants to argue that the Agreements provided that a
Partner’s obligation to repay was dealt with exclusively by an adjustment to the Partner’s capital
account.9
8 Two of the Defendants also argue that they had separate Letter Agreements with the law firm and that these
agreements provided them with guaranteed payments. 	There seems no dispute that any additional rights these
Partners possessed under their contracts with Thelen must be factored in.
9 This assumes that Defendants did not become “Former Partners” upon the firm’s dissolution or when it closed its
11-02648-mew Doc 65 Filed 05/23/14 Entered 05/23/14 13:02:05 Main Document
Pg 9 of 15

10
Whether or not this last assertion has any merit based on the face of the Agreements, the
Trustee’s position has two problems, one procedural and one substantive. 	Procedurally, it would
be unfair for the Court to rule on an issue of contractual construction when the parties agreed that
the contract issues would be determined only after the fraudulent conveyance issues. 	As noted,
some of the Defendants argue that the only way a partner other than a Former Partner was required
to repay Draw Advances was through an adjustment of the partner’s capital account. 	The Trustee
responds that this construction is wrong, but there is no way to determine these competing claims
except by construction of the contract, which would be premature on this record. 	It is also
impossible to determine on this record whether the Defendants are “Former Partners” of Thelen or
could be rendered “Former Partners” by the Trustee at any time.
More substantively, the Partnership Agreements do not explicitly provide for a true-up at
the end of a calendar year. 	This was especially true at year-end 2008, when December 31st was
never reached; the partnership dissolved on November 30, 2008. 	In any event, accepting the
Trustee’s contention that the payment of “advances” to Partners created an obligation on the part
of the Partners to repay those advances when Final ASNI could be calculated, a transfer was
undoubtedly made on the date the funds were paid, subject to the condition that the payment would
be returned if Final ASNI did not reach a certain level. 	Transfer is defined in the Bankruptcy
Code as including “each mode, direct or indirect, absolute or conditional, voluntary or involuntary,
of disposing of or parting with – (i) property; or (ii) an interest in property.” 	11 U.S.C.
§ 101(54)(D) (emphasis added). 	The fact that the advances to the Defendants were conditional
does not mean that they were not transfers for fraudulent conveyance purposes. 	See Casa de
Cambio Majapara v. Wachovia Bank (In re Casa de Cambio Majapara), 390 B.R. 595, 599
doors. 	This is a disputed issue.
11-02648-mew Doc 65 Filed 05/23/14 Entered 05/23/14 13:02:05 Main Document
Pg 10 of 15

11
(Bankr. N.D. Ill. 2008) (concluding that even though a prejudgment attachment is conditional, as it
is subject to final adjudication in the case, it falls within the broad definition of transfer under the
Bankruptcy Code).
It is possible that there may be more than one actionable transfer in a fraudulent
conveyance case involving the disposition of a debtor’s interest in certain property. 	In re
McKeever, 132 B.R. 996, 1008 (Bankr. N.D. Ill. 1991). 	In theory, release of a partner from an
obligation to repay an advance could be a transfer representing a fraudulent conveyance.10
However, the record does not disclose there was a release, and the Trustee certainly does not claim
that one took place. 	Assuming that the Trustee is correct as to a repayment obligation that came
due when Final ASNI could be calculated, the record more fairly discloses a conditional payment
and an alleged obligation of the Partner to repay. 	The Trustee in fact argues exactly this in his
claim for breach of contract, but a claim for damages for breach of contract is distinct from a claim
to recover property conveyed out of an estate for less than REV at a time when the transferor was
insolvent. 	See 1 Glenn, FRAUDULENT CONVEYANCES AND PREFERENCES § 56 (2001). 	In this
case, the conveyances to be redressed by the fraudulent conveyance laws are the advances paid
prior to the dissolution of Thelen in 2008.
Indeed, under the facts of this case, it would be particularly inappropriate to deem year-end
2008 as the relevant date for fraudulent conveyance purposes because that would become the date
for determining solvency or insolvency. 	BFP v. Resolution Trust Corp., 511 U.S. 531, 546
(1994). 	By December 31, 2008, Thelen was in dissolution and may well have been insolvent.
10 There is no question that a reconciliation of accounts and a “netting” can result in a fraudulent conveyance. 	See
Official Committee of Unsecured Creditors v. Lozinski (In re High Strength Steel, Inc.), 269 B.R. 560, 567-68 (Bankr.
D. Del. 2001); Angell v. Montague Farms, Inc. (In re Tanglewood Farms, Inc.), 2013 WL 1619390 at *4 (Bankr.
E.D.N.C. 2013).
11-02648-mew Doc 65 Filed 05/23/14 Entered 05/23/14 13:02:05 Main Document
Pg 11 of 15

12
However, the Defendants did not pay themselves advances at year-end 2008 when the end of the
game was known. 	They contend that they received advances earlier in the year when they were
still (i) performing legal services for Thelen’s clients, (ii) earning fees from their clients and
(iii) trying to hold a faltering law firm together. 	It may be that the firm was insolvent and that the
end was inevitable or known to be inevitable when the advances or some of them were made, but
the Trustee cannot be relieved of his obligation to prove insolvency on the date of the fraudulent
transfer by moving that date to the end of the year. 	On the record of this case, the Trustee’s
motion for summary judgment concerning the date of the transfer is denied.
Reasonably Equivalent Value
The Trustee has also moved for summary judgment on the issue of reasonably equivalent
value (REV), arguing that the contract is determinative as to the issue of the value of the services
provided by the Defendants to Thelen. 	The Trustee cites a number of cases to support his position
that a contract freely entered into, at arms-length, can establish REV. 	In re R.M.L., Inc., 92 F.3d
139, 149 (3d Cir.1996)); see also, Pereira v. WWRD US LLC (In re Waterford Wedgwood USA,
Inc.), 500 B.R. 371, 382-83 (Bankr. S.D.N.Y. 2013); Pereira v. Wells Fargo Bank, NA (In re
Gonzalez), 342 B.R. 165, 173 (Bankr. S.D.N.Y. 2006). 	This is consistent with the Supreme
Court’s decision in BFP v. Resolution Trust Corp., 511 U.S. at 545, that a foreclosure sale held
openly and in accordance with state law is ordinarily determinative on the issue of reasonably
equivalent value.
The Trustee’s position could be viewed as a concession because it accepts the proposition
that the Defendants were entitled to their net payments under the Partnership Agreements even
though the payments were equity interests in the Partnership. 	Moreover, the Trustee does not
11-02648-mew Doc 65 Filed 05/23/14 Entered 05/23/14 13:02:05 Main Document
Pg 12 of 15

13
claim that the Fourth Partnership Agreement improperly released any obligations owed by the
Partners who adopted it, to the detriment of creditors. 	Compare, In re Brobeck, Phleger &
Harrison LLP, 408 B.R. 318 (Bankr. N.D. Cal. 2010). 	The Defendants nevertheless assert that
they are entitled to present additional evidence of the services they performed to show that they
provided reasonably equivalent value for the payments they received. 	Some of the Defendants
argue that they provided additional services to the firm because of its precarious position. 	They
contend that, as partners who stayed until the bitter end, they kept the ship afloat and accomplished
a transition for many partners and employees, for their benefit and the benefit of the creditors. 	As
a matter of contract law, such evidence would seemingly be irrelevant on the issue of each
partner’s obligation to repay 2008 advances that exceeded the partner’s share of Final ASNI.
Nevertheless, as noted above, fraudulent conveyance law is different from contract law. 	The
cases are clear that a defendant is not entitled to retain fraudulent conveyances merely because
they were provided pursuant to a contract. 	See e.g., TSIC, Inc. v. Thalheimer (In re TSCI, Inc.),
428 B.R. 103, 114-115 (Bankr. D. Del. 2010) (concluding that a severance payment to a CEO
pursuant to terms of an employment contract was a fraudulent conveyance where the debtor only
benefitted to the extent of the services provided by CEO, who already received an $850,000 base
salary in exchange for those services). 	This case is the opposite. 	Nevertheless, as a matter of
principle, on the limited record before the Court, Defendants should not be bound by the contract
for purposes of proof of REV. 	This is especially true because the contract was never fully
performed. 	The law firm dissolved before year-end, and the Defendants were called upon to
perform under extraordinary circumstances.
11-02648-mew Doc 65 Filed 05/23/14 Entered 05/23/14 13:02:05 Main Document
Pg 13 of 15

14
Next Steps
As noted above, the motions currently before the Court were filed pursuant to a scheduling
order entered on January 28, 2014, which provided that the fraudulent conveyance issues should
proceed first and the contract issues second. 	It is clear that this priority should be reconsidered.
The Trustee has in effect taken the position that he should be awarded judgment on the contract
issues, asserting that they are determinative of the fraudulent conveyance issues. 	Although this is
not entirely correct, for the reasons set forth above, it appears that the Trustee views his case as
dependent on a finding that the Defendants breached their contracts by failing to repay advances in
excess of Final ASNI.
Since it is clear that the contract issues predominate, the decision to proceed first with the
fraudulent issues should be reconsidered. 	This also requires reconsideration of the question of the
Defendants’ right to arbitrate the contract issues based on an arbitration clause in the Partnership
Agreements.
In 2012, one of the Defendants moved to compel arbitration; and in an oral decision read
into the record on April 17, 2012, this Court denied the motion, primarily on the ground that the
fraudulent conveyance issues predominated and that a bankruptcy trustee cannot be compelled to
arbitrate a statutory fraudulent conveyance claim. 	The Court’s order, entered April 30, 2012, was
affirmed by the District Court. Geron v. Cohen (In re Thelen LLP), Slip. Op., 12 Civ. 4790 (ALC)
(S.D.N.Y. March 21, 2013).
Now that it appears that the contract issues predominate, this determination should be
reconsidered. 	Moreover, another of the Defendants has recently moved to compel arbitration of
the claims against him, asserting that he never filed a proof of claim and attempting to distinguish
11-02648-mew Doc 65 Filed 05/23/14 Entered 05/23/14 13:02:05 Main Document
Pg 14 of 15

15
his right to arbitrate from the right of the Partner whose motion was denied. 	Whether or not this
proposition is correct, it is clearly appropriate to consider (i) whether the appropriate resolution of
these cases would be to decide the contract issues immediately, reserving the fraudulent
conveyance issues for later court determination, if necessary; and (ii) whether the Defendants have
a right to arbitrate the contract issues. 	The parties are directed to schedule a hearing promptly to
consider these issues and are invited to file brief submissions explaining their positions. 	In the
meantime, Defendants should jointly settle an order consistent with this decision denying the
Trustee’s motion for partial summary judgment.
Dated: New York, New York
May 23, 2014
s/Allan L. Gropper
UNITED STATES BANKRUPTCY JUDGE
11-02648-mew Doc 65 Filed 05/23/14 Entered 05/23/14 13:02:05 Main Document
Pg 15 of 15