Corinne Ball, as Chapter 11 Trustee of Soundview E v. Soundview Composite Ltd.

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UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
ee ee a ee xX

Inre : Chapter 11
SOUNDVIEW ELITE LTD., etal., : Case No. 13-13098 (REG)
Debtors. (Jointly Administered)

2---------- ee - - - - - - xX

CORINNE BALL, as Chapter 11 Trustee of
SOUNDVIEW ELITE LTD.,

Plaintiff Adv. Proc. No. 14-01923 (REG)
V.

SOUNDVIEW COMPOSITE LTD.,

2---------- ee - - - - - - xX

DECISION ON MOTIONS FOR SUMMARY JUDGMENT
AND ASSET FREEZING PRELIMINARY INJUNCTION

APPEARANCES:

JONES DAY
Counsel for Plaintiff Corinne Ball, as Chapter 11
Trustee of Debtor Soundview Elite Ltd.
222 East 41st Street
New Y ork, New Y ork 10017
By: WilliamJ. Hine, Esq. (argued)
Veen Roovers, Esq.

LAW OFFICE OF PETER M. LEVINE

Former! Counsel for Defendant Soundview Composite Ltd.
99 Park Avenue, Suite 330

New Y ork, New Y ork 10016

By: Peter M. Levine, Esq. (argued)

1 After the filing of his brief and oral argument on the summary judgment elements of this decision,
Mr. Levine sought permission to withdraw from his representation of defendant Soundview
Composite Ltd. His motion was granted.

SHER TREMONTE LLP
Successor Counsel for Defendant Soundview Composite Ltd.
80 Broad Street, Suite 1301
New York, New York 10004
By: 	Robert Knuts, Esq.2
2 	Mr. Knuts filed a brief on the asset-freezing injunction elements of this decision. The Court did
not need, nor hold, oral argument as to these.
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ROBERT E. GERBER
UNITED STATES BANKRUPTCY JUDGE:
In the chapter 11 cases of debtors Soundview Elite Ltd. (“Elite”) and its affiliates
(collectively, and with Elite, the “Soundview Debtors”), plaintiff Corinne Ball (the
“Trustee”) was appointed chapter 11 trustee for the Soundview Debtors after this Court
removed Alphonse Fletcher (“Fletcher”) and others under Mr. Fletcher’s control from
possession.3 Until the Soundview Debtors needed to be liquidated (in the Cayman
Islands, under which they were organized, and the United States, where they were
headquartered), the Soundview Debtors were investment companies—“open ended
mutual funds”4—taking investor money and placing that money in other investments.
One such investment (in this case, by debtor Elite, one of the six companies that
are debtors in this chapter 11 case) was in another investment company, defendant
Soundview Composite Ltd. (“Composite”), which is not a debtor in this Court. As of the
time of the events relevant here, Composite was also under Mr. Fletcher’s control, and it
remains under Mr. Fletcher’s control.
In this adversary proceeding under the umbrella of the Soundview Debtors’
chapter 11 cases, the Trustee, on behalf of debtor Elite, sues to recover the “Owed
Amount,” i.e., the net asset value of Elite’s investment—which effectively is everything
3 	See In re Soundview Elite, Ltd., 503 B.R. 571 (Bankr. S.D.N.Y. 2014) (Gerber, J.) (the “Trustee
Decision”) (addressing a number of issues in this case, including the appointment of a chapter 11
trustee).
Earlier, in a distinct, but related, chapter 11 case involving another investment fund controlled and
managed by Mr. Fletcher, In re Fletcher Int’l Ltd of Bermuda., No. 12-12796 (Bankr. S.D.N.Y.
case filed June 29, 2012), referred to by the parties, and eventually this Court, as “FILB,” the
Court likewise appointed a trustee—in that case, Richard Davis, Esq. (the “FILB Trustee). For
further background with respect to some of FILB matters, see In re Fletcher Int’l Ltd, 2014 Bankr.
LEXIS 2558, 2014 WL 2619690 (Bankr. S.D.N.Y. June 11, 2014) (Gerber, J.).
4 	Decl. of Alphonse Fletcher, Jr. Pursuant to Local Rule 1007-2, filed 9/24/2013 (Main Case
ECF No. 2) (“Fletcher Rule 1007-02 Decl.”), ¶ 4.
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Composite would have after the payment of Composite’s creditor liabilities,5 since Elite
is the only shareholder with an economic interest in Composite6—after Elite made a
redemption request that Composite repeatedly acknowledged but now refuses to honor.
The Trustee also seeks a preliminary injunction (replacing a consensual hold on Elite’s
assets that was put into place when this controversy first came up) freezing Composite’s
assets to avoid their dissipation.
More specifically, the Trustee seeks (i) turnover, under sections 541 and 542 of
the Bankruptcy Code, of the net asset value of Elite’s holdings; (ii) an accounting;
(iii) attorneys’ fees, costs, and litigation expenses, and (iv) other relief that the Court
considers proper.
The Trustee now moves, pursuant to Fed.R.Bankr.P. 7056 and Fed.R.Civ.P. 56,
for summary judgment—though this might better be regarded as partial summary
judgment, because (as the Trustee readily acknowledges) the Debtor’s redemption
entitlement—while to the entirety of Composite’s remaining assets—is to those assets
after the payment of any senior third-party creditor claims, which are not yet known with
precision.
5 	As discussed below, Elite’s contractual entitlement is to the net asset value (“NAV”) as of the
close of business on the relevant quarterly redemption date, not the time of any payment or of any
judicial determination. And because the value of Composite’s assets has gone down since the
redemption request was made, the amount Composite now could pay, net of its expenses, would
be less than Elite’s entitlement at the earlier time. Obviously, Composite cannot pay more than it
has. Thus the Trustee’s entitlement on behalf of Elite, Composite’s only shareholder, is
effectively to everything Composite would still have left after Composite’s payment of any more
senior creditor claims.
6 	Composite has shareholders of two types—those with voting rights (Mr. Fletcher, and/or people or
entities Mr. Fletcher controls), and those who, like the average holder of shares in a mutual fund,
might contribute money or property into Composite (e.g., Elite), but have no voting power. Only
the shareholders in the latter category have the right to redeem their investments, and Elite is the
only one of them. Hereafter, instead of accompanying “shareholder” with the qualifier “with an
economic interest” every time, the Court will simply refer to Elite as Composite’s only
shareholder.
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Composite’s position—i.e., Mr. Fletcher’s position—is inexplicable, and
offensive to the Court. It is obvious that once any existing senior Composite liabilities
have been satisfied, the entire remaining balance of Composite’s assets rightfully belongs
to Elite. That Elite made a redemption request has been repeatedly acknowledged by
persons and entities acting for Mr. Fletcher, or entities under Mr. Fletcher’s control. Mr.
Fletcher, acting through companies he controlled, was on both sides of the redemption
request at the time it was made. But Mr. Fletcher (who, as noted, still controls
Composite) nevertheless refuses to return Elite’s investment—or what is left of it.
On behalf of Composite, Mr. Fletcher contends that almost all of the evidence
supporting the redemption request is inadmissible, and that what is admissible is
“ambiguous”; that he can find no record of the redemption request and (though he and his
staff were on both sides of the transaction at the time, and repeatedly acknowledged it
before) cannot remember it; and that he isn’t sure whether, assuming any redemption
request was made, the request complied with necessary formalities. Mr. Fletcher also
contends that Composite has the right, under “gating”7 provisions in the investment
documents, to “gate” Elite’s redemption request—even though there are no other
Composite shareholders to protect; gating here would serve no purpose; and he offers no
evidence to support the notion that Composite took any action to gate this redemption
request.
Sooner or later, the Trustee will win. But Mr. Fletcher’s resistance to meeting his
obligations to his investors, and constraints on the statutory and constitutional authority
7 	“Gating” or “gate” provisions authorize managers of investment funds to limit the amount of
withdrawals on shareholders’ requested redemptions as a means of protecting the fund, to avoid a
run on the bank and protect other shareholders.
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of a bankruptcy judge to enter a final order bringing the resistance to an end, have tied
this case up in knots.
To minimize the delay Fletcher’s resistance has occasioned, and given how
obvious her entitlement (at least in overall terms) is, the Trustee has sought to recover her
entitlement by the Bankruptcy Code’s “Turnover” provision, section 542 of the Code.
But for reasons discussed below, the Trustee’s entitlement is not one that section 542 can
enforce, and her main entitlements are to declaratory relief, an accounting, and a related
judgment—as to which a bankruptcy judge cannot enter a final order. And the Court also
needs to quantify Composite’s creditor claims before it can fix the amount of the
inevitable judgment. The most the Court can grant at this point is partial summary
judgment (though this, because it is not a final order, is fully within the Court’s statutory
and constitutional authority) and an injunction freezing Composite’s assets until the
issues are fully determined and (as is certain) the Trustee ultimately wins.
The Court grants each, for the reasons described below.
Facts
Under familiar principles, the Court relies solely on undisputed facts.
A. 	The Composite Articles of Association and
Private Placement Memorandum
Composite was formed in May 2007 under the “Articles of Association of
Soundview Composite, Ltd.” (the “Composite Articles”).8 That same month, Composite
issued a Confidential Private Placement Memorandum (the “Placement Memorandum”)
8 	Affidavit of Alphonse Fletcher, Jr. ¶ 4, dated June 16, 2014 (ECF No. 19) (“Fletcher Aff.”).
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setting forth the terms and conditions of a stock offering by which Composite would offer
six classes of non-voting shares.9
Among other things, the Placement Memorandum described shareholders’
entitlement to redeem their shares. As described in the Placement Memorandum, a
shareholder has the right to redeem some or all of its Composite shares on any quarterly
redemption date by sending a facsimile request for redemption to Composite’s
subadministrator.10 The Composite Articles prescribe that any redemption request:
“[(i)] shall be in writing,
[(ii)]shall specify the number and Class of Participating Shares to which it
relates or indicate the manner in which the number of Participating Shares to be
redeemed is to be determined and
[(iii)]shall be signed by the holder thereof…”11
The Placement Memorandum established that redemptions may only be made on
the last business day of each calendar quarter (each, a “Redemption Date”), and that a
redemption request must be received at least 45 days prior to a Redemption Date in order
for the redemption to be honored on that date.12 Unless waived by the directors of
9 	Trustee’s Statement of Undisputed Material Facts ¶ 1, dated May 19, 2014 (ECF No. 12)
(“Trustee’s Undisputed Facts”); Response of Defendant to the Trustee’s Statement of
Undisputed Material Facts ¶ 1, dated June 16, 2014 (ECF No. 20) (“Def. Response to Undisputed
Facts”).
10 	Def. Response to Undisputed Facts ¶ 8; Private Placement Memorandum of Soundview
Composite Ltd., dated May 14, 2007, at 30, attached as Exh. D to the Declaration of Michael J.
Dailey, dated May 19, 2014 (ECF # 14) (“Dailey Decl.”).
11 	Composite Articles ¶ 29(c), attached to the Fletcher Aff. as Exh. 1.
12 	Placement Memorandum at 31-32, attached to the Dailey Decl. as Exh. D.
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Composite, a redemption request received within 45 days of a Redemption Date would be
deferred until the subsequent Redemption Date.13
The Placement Memorandum also provided that redemption of shares is
“contingent upon the Fund having sufficient assets to discharge its liabilities on the
Redemption Date,” and that the “maximum Net Asset Value of Shares that may be
redeemed on any Redemption Date is 10% of the Net Asset Value of the Fund, unless
such limitation is waived by the Directors in their sole discretion.”14 The Composite
Articles also included a limitation of this kind as follows:
If one or more Redemptions Requests are received
in respect of any one Redemption Day that would, if
satisfied, result in the redemptions of an amount
equal to more than 10% of the total net asset value
of the Company or any Master Fund, the Directors
may determine in their absolute discretion to reduce
the amount of each Redemption Request so that
Redemption Requests represent in aggregate an
amount equal to no more than 10% of the total net
asset value of the Company or any Master Fund.15
The Placement Memorandum also stated that Composite’s directors could suspend
redemptions and the determination of Net Asset Value under certain circumstances.16
Absent such restrictions on redemptions, the Placement Memorandum required
payment of “not less than 90% of the estimated value of the Shares requested to be
redeemed” to be made within 40 days following the Redemption Date of redeemed
13 	Id.
14 	Id. at 32.
15 	Composite Articles at ¶ 29(j).
16 	Placement Memorandum at 34. While it has not been asserted that Composite ever suspended its
redemptions, Fletcher has indicated that Composite suspended its determination of Net Asset
Value in March 2011 without providing any evidence of that suspension. See Fletcher Aff. ¶ 24.
As discussed below, see infra pages 56-57, the determination of the Net Asset Value of
Composite’s shares by audit is not essential to determining the amount that must be returned to
Elite, or any other issues decided by Court in this opinion.
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shares, with “the remaining balance of the net redemption proceeds” being paid “within
ten Business Days after the official Net Asset value of the applicable Class is
published.”17 The Placement Memorandum granted Composite the right to make
redemptions “in kind”—i.e., by providing securities it owned instead of cash.18 And the
Placement Memorandum also provided that “[s]hares also may be redeemed at such other
times on such terms and conditions as the Directors, acting in their sole discretion, may
decide.”19
In August 2009, Elite subscribed to Composite shares issued under the Placement
Memorandum, purchasing 15,311 Class H Shares for approximately $12.87 million (the
“Composite Shares”).20 Since it purchased the Composite Shares, Elite has been the
only holder of Composite shares, holding 100% of the nonvoting interest in Composite--
or, putting it another way, the entirety of Composite’s net asset value.21
B. 	Ownership and Control of Elite, Composite
and Soundview Capital Management
As described in the Placement Memorandum, the investment manager of
Composite was (and so far as the record reflects, still is) Soundview Capital Management
(the “Management Company”).22 Until it was at least effectively displaced upon the
appointment of a chapter 11 trustee, the Management Company was also the investment
manager for Elite and the other Soundview Debtors. In addition to serving as investment
17 	Placement Memorandum at 31.
18 	Id. at 31.
19 	Id. at 30.
20 	Trustee’s Undisputed Facts ¶¶ 2, 19; Fletcher Aff. ¶ 6.
21 	Trustee’s Undisputed Facts ¶ 21; Def. Response to Undisputed Facts ¶ 21.
22 	Placement Memorandum at 1.
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manager for each of Elite and Composite, the Management Company also owned all the
voting shares (which it will be recalled were non-economic) of Composite.23
The Management Company is owned by Richcourt Holding, Inc. (“Richcourt”),
at least 85% of which has been owned since June 2008 (through several parent entities)
by Fletcher Asset Management, wholly owned by Mr. Fletcher.24 Since September 4,
2013, Mr. Fletcher has served as a director of the Management Company, Composite,
and (though this would have little meaning after the appointment of the Trustee) Elite.25
The Management Company—“Soundview Capital Management”—is a company
distinct from “Fletcher Asset Management,” whose activities were a focus of the FILB
chapter 11 case. But both are under the control of Mr. Fletcher, and on the first day of
the umbrella chapter 11 cases here, Mr. Fletcher made reference to the Soundview
Debtors’ ownership structure “following the acquisition of the [Soundview] Debtors by
Fletcher Asset Management and affiliates.”26 The organizational chart Mr. Fletcher
attached to his declaration showed Fletcher Asset Management at the top of the
ownership structure, owning (directly and through an entity of which it was general
23 	Def. Response to Undisputed Facts ¶¶ 4, 18.
24 	Fletcher Aff. ¶ 4. On June 12, 2008, Fletcher Asset Management (the same entity that, until it was
displaced by a trustee, managed FILB) and affiliates purchased 85% of the Management Shares of
the “Limited Debtors” (three of the Soundview Debtors, of which one was Elite) and certain other
entities. Fletcher Rule 1007-Decl. ¶ 9.
25 	Fletcher Aff. ¶ 1.
26 	Fletcher Rule 1007-2 Decl. ¶ 10 (“Attached hereto as Exhibit C, is a copy of an organizational
chart as it exists today following the acquisition of the Debtors by Fletcher Asset Management and
affiliates.”). A copy of that organizational chart is attached as Appendix A.
Fletcher Asset Management was frequently referred to as “FAM”. Mr. Fletcher’s Rule 1007-2
Declaration in the umbrella case here showed as assets of Elite and other debtors in the umbrella
chapter 11 case approximately $5.2 million in “FAM Related Investments.” See id. Schedule 3,
“Assets.”
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partner) 100% (or in one case, 85%) of the entities below it, including the Management
Company, and (with “100% Voting Control of Each”) each of the Soundview Debtors.
In June 2008, two of Mr. Fletcher’s associates, Messrs. Denis Kiely (“Kiely”) and
Stewart Turner (“Turner”), were appointed directors of each of Composite and Elite.
Messrs. Kiely and Turner were also directors of the Management Company in July
2011,27 although their dates of appointment are not in the record. Mr. Kiely resigned as
director of each of Elite and Composite in November 2011, and Mr. Turner resigned as
director of each of Elite and Composite in June 2012. In June 2013, Mr. Kiely was
replaced by Floyd Saunders (“Saunders”), and Mr. Turner was replaced by George
Ladner (“Ladner”)—each also an associate of Mr. Fletcher’s.28 For a three-month
period from March 26, 2013 through June 12 (or 19), 2013, Deborah Hicks Midanek, of
the Solon Group Inc., served as a “non-management” director of Elite, Composite, and
the other Richcourt funds.29 As stated by Mr. Fletcher, Ms. Midanek “resigned from the
Debtors on June 19, 2013. Midanek’s resignation came after the Debtors’ Boards had
removed her as a Director on June 12, 2013.”30
C. 	Requests for Redemption of Composite Shares
Composite has confirmed that it redeemed all shares owned by Composite’s
original shareholder on March 31, 2009 after that investor delivered a redemption request
on February 12, 2009.31 In July 2010, Elite delivered a redemption request for
27 	Fletcher Aff. ¶ 8.
28 	Trustee’s Undisputed Facts ¶ 24; Fletcher Aff. ¶ 4; Def. Response to Undisputed Facts ¶¶ 23, 24,
28
29 	Def. Response to Undisputed Facts ¶ 26.
30 	Fletcher Rule 1007-2 Decl. ¶ 14.
31 	Fletcher Aff. ¶ 6.
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approximately half of its Composite holdings at the time. That request was honored, and
Elite thereby reduced its holdings in Composite to 7,191.06 shares.32
The Trustee asserts (and the Court ultimately finds, though with less precision as
to the exact date) that a redemption request (the “Redemption Request”) for Elite’s
remaining holdings was sent “[o]n or around July 2011” to HSBC Bank (Cayman)
Limited (“HSBC”), the fund administrator for Composite at the time.33 HSBC resigned
as Composite’s administrator on July 25, 2011.34 Pinnacle Fund Administration LLC
(“Pinnacle”) became the successor administrator for Composite and Elite as of January
1, 2013.35
The Trustee—who had not yet been appointed by 2011, and, once appointed,
needed to obtain the Soundview Debtors’ documents from Fletcher-controlled entities—
could not, and did not, present a copy of the Redemption Request to the Court. Mr.
Fletcher has stated in an affidavit on this motion that he searched the files of Composite
and the Management Company (though not those of HSBC) and his search did not yield a
copy of the Redemption Request.36 	The Redemption Request has not been found in the
records of Pinnacle Fund Administration LLC, to whom all relevant files were said to
have been sent by HSBC.37 The record does not reflect whether or not HSBC—the entity
most likely to have been the recipient of the redemption request—now has a copy.
32 	Def. Response to Undisputed Facts ¶¶ 31-32.
33 	Trustee’s Undisputed Facts ¶ 36.
34 	Fletcher Aff. ¶ 5.
35 	Id. (and sic.). The Court notes the substantial gap period.
36 	Fletcher Aff. ¶ 10.
37 	Fletcher Aff. ¶ 14.
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To date, Composite has declined to honor, and has not honored, the Redemption
Request.38
D. 	Asserted Admissions re
Elite’s Redemption Request
In support of her motion for summary judgment, the Trustee relies on eight
separate communications (by letter, e-mail, affidavit, or statements in court on the record)
from 2012 to 2014 (all but one preceding the appointment of the Trustee) acknowledging
the Redemption Request, discussing the gating of redemptions of Composite shares, or
both. The Court’s review of exhibits submitted on this motion, but addressed less
extensively by either side, revealed three more. Composite argues that all but two of
them must be ignored by the Court, as inadmissible in evidence. The Court addresses the
evidentiary issues, and thus the extent to which they may be considered on the motions
here, in the Discussion to follow. For now, it sets forth the content of each of them.
1. 	May 2012 Loeb E-Mail
On May 10, 2012, Ann Loeb, an employee of Richcourt USA—which provided
administrative services for the Richcourt Funds, including Elite and Composite—sent an
e-mail (the “May 2012 Loeb E-Mail”) to Alan de Saram (Cayman Islands counsel for
Elite; for at least several other Soundview Debtors; and, most importantly, for
Composite), along with Messrs. Turner, Saunders, and other employees of the Richcourt
or Fletcher entities.39 E-mails and a letter surrounding it, also submitted to the Court,
confirm that the May 2012 Loeb E-Mail was transmitted incident to a group effort to
formulate responses to a May 2, 2012 request by the Cayman Islands Monetary Authority
38 	Trustee’s Undisputed Facts ¶¶ 66-67.
39 	E-Mail Chain from de Saram to Loeb Discussing and Attaching Draft of Letter to Cayman Islands
Monetary Authority, May 10, 2012, attached to the Dailey Decl. as Exh. F.
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(often referred to in correspondence and elsewhere as “CIMA”) for information as to
several matters, including the Fletcher Funds’ processing of redemptions.40
The May 2012 Loeb E-Mail stated that
Soundview Composite was never suspended or
gated. There was no reason to since it only has no
[sic.] outside investor. It’s [sic.] only investor is
Soundview Elite, which requested a full
redemption.
Mike can you please provide Alan with the date that
Elite submitted its full redemption request to
Soundview Composite.
2. 	May 2012 de Saram Letter
On the next day, May 11, 2012, Mr. de Saram sent a letter (the “May 2012
de Saram Letter”) to CIMA delivering the information that was the subject of the May
2012 Loeb E-Mail on the day before. Mr. de Saram stated:
This letter concerns Soundview Composite Ltd.
We have been asked by the Board of Directors of
the Fund [Composite] to respond on its behalf to
your letter dated 2 May 2012.
In the time available it has not been possible to deal
with all of your queries in detail requested, but we
have endeavoured to answer your questions
(repeated below) to the best of our ability.
We will deal with your queries to each question
with our answers in bold type below the question.41
In response to CIMA’s fourth inquiry,42 Mr. de Saram wrote:
40 	See the May 12 de Saram Letter, sent the next day, which quoted CIMA’s questions, and then,
following each, provided Composite’s response.
41 	See Dailey Decl. Exh. G. at 1.
42 	The fourth inquiry said:
4. Please submit a copy of each redemption request that
remains outstanding, including any subsequent or additional
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The Fund is unable to submit a copy of each
redemption request, as these redemption requests
were made directly to the administrator in
accordance with standard operating procedure.
However note that the sole investor in the Fund
[Composite] is Soundview Elite, which has put in a
redemption request which is outstanding.43
In response to CIMA’s fifth inquiry,44 Mr. de Saram wrote:
With respect to the Fund [Composite], it has not
been gated or suspended. It has one investor,
Soundview Elite Ltd.45
3. 	May 2013 Midanek Letter
Solon Group, Inc. (“Solon”) was appointed by each of the Richcourt Funds,
including Composite, as a “non-management director” in March 2013 (about 10 months
after the communications just quoted), and Ms. Deborah Midanek represented Solon in
its director role.46
redemption requests by each redeeming investors [sic.] of the
Funds.
Id.
43 	Id.
44 	The fifth inquiry said:
5. We refer to 2008 Audited Financial Statements for the
Funds whereby it is noted that the respective Board of
Directors suspended the calculation of Net Asset value,
subscription and redemptions. We note further that certain
redemptions were fulfilled by way of redemption in-kind
through shares in special purpose vehicles, namely Elite
Designated Ltd., Star Designated Ltd. and Premium
Designated Ltd.
Please confirm whether or not the suspensions for each Funds
[sic.] have been terminated and if not, please confirm how the
Directors intend to fulfill their obligations to redeeming
investors.
Id.
45 	Id. at 2.
46 	See Dailey Decl. Exh. H at 1; Fletcher Aff. ¶ 25.
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On May 28, 2013 (now about a year after the communications just quoted, at a
time when she was still a director of Composite and had not yet either “resigned” or
“been removed”), Ms. Midanek sent an eight-page single-spaced letter (the “May 2013
Midanek Letter”) to CIMA, with respect to six investment funds, including Elite and
Composite,47 of which she and Mr. Fletcher were directors. Expressing concerns as to
“the condition of the Funds I serve,” Ms. Midanek asked CIMA to consider removing
Mr. Fletcher, to allow the funds “to perform their obligations to their shareholders and
redemption creditors.”48
For the most part, Ms. Midanek’s statements as to Mr. Fletcher and his
management of the six funds that were the subject of Ms. Midanek’s letter are not
relevant to this controversy, and the Court makes no findings with respect to them. They
are relevant here only with respect to Ms. Midanek’s statements as to pending
redemptions and gating. In that connection, Ms. Midanek stated, in a section captioned
“Funds’ Condition,” that:
Following my appointment, as I then learned more
about the status of the Funds, I learned that most of
the Funds had not been able to calculate a net asset
value report (“NAV”) since December 31, 2010 and
none later than March 31, 2011; that many
redemption requests received since then had not
been honored, that redemptions had not been
suspended even after it had been determined that
NAVs had not or could not be calculated and
redemption obligations continued to crystallize….49
In the next section, “Current Situation,” Ms. Midanek stated that she had
“attempted to compile, on a Fund by Fund basis, all available information on assets,
47 	Dailey Decl. Exh. H at 1.
48 	Id.
49 	Id. at 2.
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shareholders, directors, governing documents, valuation dates, most recent NAV and
minute books and registers,”50 and she followed that with a table providing some of that
information. For each of the six funds, she listed “Last NAV,” “Last Audited Accounts,”
and “Redemptions (Holders).” For Composite (the fourth fund she showed), she listed
dates in the boxes for “Last NAV” and “Last Audited Accounts,” respectively, of “31
March 2011” and “2008.” More importantly, in the box for “Redemptions (Holders),”
she entered:
100% shareholder placed a full redemption request
for trade date September 30, 2011.51
4. 	June 2013 Siedlecki E-Mail
The May 2013 Midanek Letter triggered a response from CIMA, dated June 6,
2013, seeking more information. CIMA desired a response within a week.52 The same
day the CIMA letter was received, Michael Padarin, at the Walkers law firm in the
British Virgin Islands, sent CIMA’s letter to Ms. Midanek (who was still a director at the
time) and Mr. Fletcher with a view to compiling the information CIMA had requested.53
The CIMA letter then went from Mr. Fletcher to Mr. Saunders, who sent it on to Michael
Siedlecki, a Richcourt employee working with them, on the following Monday.
By e-mail dated June 10, 2013 (the “June 2013 Siedlecki E-Mail”), Mr.
Siedlecki circulated draft responses. Two, with respect to CIMA’s Inquiries #4 and #5,
dealt with redemptions and gating. Mr. Siedlecki stated:
4. Only Soundview Elite, Soundview Premium, and
Soundview Star have gated redemptions. However,
50 	Id. at 3.
51 	Id. at 4.
52 	Attached to the Dailey Decl. as Exh. J. at 13.
53 	Id.
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none of the Funds has a recent NAV or has paid out
redemption proceeds for quite some time … The
latest final NAV for Soundview Composite and
New Wave Fund is as of March 31, 2011 and
neither fund has paid out any redemption proceeds
since that date.
5. I’m not sure how the Directors intend to address
the pending redemption requests.54
5. 	June 2013 Fletcher E-Mail
The May 2013 Midanek Letter also triggered a desire on the part of Mr. Fletcher
and Composite’s remaining leadership to address it. On June 26, 2013, Mr. Fletcher sent
an e-mail (the “June 2013 Fletcher E-Mail”) to his fellow director Mr. Turner—it being
remembered that by this time, Solon and Ms. Midanek had either resigned or been
dismissed from that directorship. Mr. Fletcher asked Mr. Turner to draft a letter, on
behalf of the Cayman Richcourt funds (which included Composite) to be sent to CIMA,
“to address the derogatory letter that Deborah sent to CIMA.”55 The letter Turner was
instructed to draft was to “incorporate the information from Michael’s earlier email
below”56—i.e., the June 2013 Siedlecki E-Mail, which included Michael Siedlecki’s
statements that only Elite, Premium and Star had gated redemptions—significantly
leaving out Composite.
6. 	July 2013 Turner E-Mail
The work by Mr. Fletcher and his colleagues to submit a response to CIMA
continued after the June 2013 Fletcher E-Mail. On July 1, 2013, Mr. Turner sent an
e-mail (the “July 2013 Turner E-Mail”) reporting that “after following up with Michael
54 	Id. at 12.
55 	Dailey Decl. Exh. J. at 11.
56 	Id.
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Siedlecki, I have made some factual changes and inserted two tables” into the letter that
would be sent to CIMA. Mr. Turner’s revised letter stated, among other things, that
“Soundview Capital Management Ltd. (“SCM”) [is] the Investment Manger to
Soundview Composite Ltd., Soundview Elite Ltd., Soundview Premium Ltd. and
Soundview Star, Ltd.….”57 Mr. Turner then included a table:58
# of Outstanding Redemption
Requests
Estimated Value of
Outstanding Redemption
Requests
…
Soundview Composite Ltd. 	1 	$5,000,000
…
The July 2013 Turner E-Mail then stated that each of Elite, Premium and Star had
gated redemptions, but once again did not include Composite in that list. Mr. Turner
continued that “[n]one of the Funds have suspended redemptions but due to the delays
caused by the outgoing administrator, HSBC, to forward materials to Pinnacle,
redemptions are not currently being processed at this time.”59
Finally, as relevant here, the July 2013 Turner E-Mail included another table in
which Mr. Turner stated that the estimated value of Composite’s portfolio was
$5.155 million.60
57 	Id. at 4.
58 	Id. at 4.
59 	Id. at 5.
60 	Id.
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7. 	June 2013 Midanek Letter
Meanwhile, Ms. Midanek responded by the deadline CIMA had set. On June 13,
2013 (which, as noted above,61 was after Mr. Fletcher states that Solon was removed as a
director, though before it resigned), Ms. Midanek sent a second letter to CIMA (the
“June 2013 Midanek Letter”) which, among other things, responded to CIMA’s letter
of June 6.62
In the June 2013 Midanek Letter, Ms. Midanek still referred to Solon (“via its
President, Deborah Hicks Midanek”) as a director, though the June 13, 2013 date
appearing on the letter is the day after Mr. Fletcher says that Solon was removed. (It is
not clear whether Ms. Midanek was unaware of the other directors’ actions in attempting
to remove Solon as a director, or simply disputed their power to do so; later in the letter,
she stated that Mr. Fletcher “indicated his desire to terminate the directorship of the
Solon Group,” but she expressed the view that any such effort would be invalid.)63
In any event, the June 2013 Midanek Letter provided a table of redemption
requests received by each fund since the last redemption was paid,64 which showed, for
Composite, “Estimated Net Assets” of $6.36 million; “Estimated Redemptions Pending”
of $6.36 million; and “Estimated Remaining Net Assets” of zero.
Mr. Fletcher admits that this amount is also shown within the shareholder register,
but contends that it is merely an estimate.65
61 	See page 9 supra.
62 	Dailey Decl. Exh. K at 5.
63 	Id.
64 	Attached to the June 2013 Midanek Letter at p. 58 as Exhibit A4.
65 	Fletcher Aff. ¶ 24.
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8. 	July 2013 Richcourt Funds Letter
By letter dated June 10, 2013 (but which all agree should read July 10, 2013,
when it was actually sent), six Richcourt Funds, including Elite and Composite,66 sent the
letter to CIMA (the “July 2013 Richcourt Funds Letter”) upon which they had been
working since June 10.67 In accordance with instructions that Mr. Fletcher had given
during the preparation of July 2013 Richcourt Funds Letter drafts,68 the July 2013
Richcourt Funds Letter was not signed by named human beings, but simply by the six
funds. One of the signatories was Elite, and another was Composite.69
At least in respects relevant here, the July 2013 Richcourt Funds Letter was not
materially different than Turner’s July 1 draft. It stated that, as of the date of that letter,
Composite had one “pending” or “outstanding” redemption request with an estimated
value of $5 million,70 and that the directors of the Richcourt Funds intended to “complete
the Richcourt Funds’ financials and then appropriately satisfy the pending redemptions in
accordance with the governing documents.”71
66 	Elite, Composite, Soundview Star Ltd., Soundview Premium Ltd., Pitagora Fund Ltd., and New
Wave Fund SPC (collectively, the “Richcourt Funds”).
67 	Letter to Cayman Islands Monetary Authority, June 10, 2013, attached to the Dailey Decl. as Exh.
J. at 15-16.
68 	See id. at 2 (“We’re sending it signed by the funds rather than directors.”).
69 	Id. at 16.
70 	The reason for showing only $5 million, as contrasted to the $6.36 million Ms. Midanek had
shown four weeks earlier, was not stated. Necessarily, the difference must be attributed to
different perceptions of the value of the assets then at Composite; of liabilities of Composite; or
some combination of the two.
71 	Dailey Decl. Exh. J. at 15-16.
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The July 2013 Richcourt Funds Letter also stated that “[e]ach of Soundview Elite
Ltd., Soundview Premium Ltd., and Soundview Star Ltd. [but once more, not Composite]
has gated redemptions. None of the Richcourt Funds has suspended redemptions.”72
9. 	December 2013 Katz Affidavit
Under an order entered in November 2013, CohnReznick Advisory Group
(“CohnReznick”) was retained as financial advisor for Elite.73 Bernard A. Katz, a
partner at CohnReznick, told this Court, in an affidavit dated December 2, 2013 (“Katz
Affidavit”), that the value of Elite’s redemption receivable owed to it by Composite was
approximately $3.875 million as of July 31, 2013.74 The Katz Affidavit was submitted
on behalf of Elite in connection with the evidentiary hearing on the motion to appoint a
chapter 11 trustee for Elite.75
10. 	January 2014 Martin Letter
On January 21, 2014, Warren Martin, Jr. (a partner of Porzio Bromberg &
Newman P.C. (“Porzio”), counsel for Soundview Debtors before the Trustee was
appointed) sent a letter (the “January 2014 Martin Letter”) to this Court.76 Responding
to an “Emergency Motion” by the Cayman Liquidators (referred to in the letter, and thus
here, as the “JOLs”), that letter stated:
The Soundview Debtors-in-possession did not
receive a phone call or any advance notice of the
request by the purported JOLs which has now been
made via the above-referenced “Emergency
Motion” filed last evening. Had such a phone call
72 	Id. at 16.
73 	Main Case ECF No. 96, attached to the Dailey Decl. as Exh. E.
74 	Id. at 6.
75 	Id.
76 	Main Case ECF No. 151, attached to the Dailey Decl. as Exh. B.
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been made, consent would have been provided
immediately. The Soundview Debtors support
preserving and protecting non-debtor affiliate
Soundview Composite’s funds of approximately
$3.874 million, particularly given the fact that the
Soundview Debtors presented evidence at trial that
Soundview Composite owes Soundview Elite that
amount (Katz Affidavit, Doc. No. 96 at page 8 of
10, at row 8 of 9) and particularly given the fact
that both the Debtors and non-Debtor Soundview
Composite are managed by the same entity,
Soundview Capital Management.77
After another paragraph, in which Mr. Martin advised this Court that the Soundview
Debtors supported a more durable “freeze” of the funds than was suggested in the
Cayman Liquidators’ motion,78 the January 2014 Martin Letter continued:
Third, the Soundview Debtors, together with non-
Debtor Soundview Composite, which again is
managed by the same manager as the Soundview
Debtors, would prefer to embody the freeze and the
two tweaks addressed above via a consensual
amendment to the Wilmington Trust Order
previously entered by this Court, which non-debtor
Soundview Composite has agreed it will sign onto.
Mr. Martin continued:
The Soundview Debtors wish to avoid entry of any
TRO under these circumstances out of concerns
over continued damage they might suffer among
creditors and investors as a result of the entry of a
TRO. The repetition of loose allegations, found for
example in this Emergency Motion, e.g., see
paragraph 7, where it is stated that “The JOLs
proved that the Fletcher Team is untrustworthy,
committed fraud, and mismanaged the funds of the
Debtors,” if such allegations are immediately
followed by the entry of a TRO, could be used as
evidence against the Debtor and its affiliates in
77 	Id. at 1 (emphasis added).
78 	Id. at 2. The Soundview Debtors suggested, instead, that “Composite’s funds be preserved ‘until
further order of the Court specifically addressing use of the Soundview Composite Funds.’” Id.
(internal quotation marks in original).
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other jurisdictions to establish that this Court
sanctioned Soundview Composite and these Debtors
for some unspecified improper conduct.79
11. 	March 2014 Martin Statements
At a March 19, 2014 hearing before this Court in Elite’s underlying chapter 11
case (shortly after the Trustee had been appointed), the Court considered a motion filed
on February 21, 2014, about a month earlier (the “Administrative Expense Motion”),80
for payment of administrative expenses assertedly incurred while the Soundview Debtors
were still in possession—including fee requests by Porzio, Mr. Fletcher, Mr. Ladner, Mr.
Saunders, and the Management Company. The motion explained that:
As each of the Debtors is structured, and is common
in the investment fund industry, none of the Debtors
ever had any direct employees. Rather, services
were provided to the Debtors by associated
management companies and unassociated service
providers, as well as by the Debtors’ officers and
directors.81
The motion continued that although the former Debtors in Possession (who now called
themselves “Debtors Out-of-Possession”82) considered bringing a “comfort order”
application for authority to make the requested payments while they were still in
possession, they chose not to do so. They made that decision, Mr. Martin explained,
because with the exception of one expert witness, “each of the third-party contractors,
who were essentially serving as the Debtors’ “employees”, were insiders….”83
79 	Id. at 2 (emphasis added).
80 	Main Case ECF No. 192.
81 	Id. ¶ 5.
82 	Id. at p. 1.
83 	Id. ¶ 7.
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The motion listed the people “behind the entities, so to speak,”84 including
Messrs. Fletcher and Ladner—who
served as the captains of the ship during the four-
month period that these Debtors were debtors-in-
possession. This included frequent and continued
participation in lengthy daily conference calls with
the Debtors’ counsel and financial advisors, making
determinations as to the direction of the case,
directing the Debtors’ counsel and financial
advisors and addressing all of the day to day
problems that arose during the case.85
Further on, the Administrative Expense Motion—which it will be recalled was filed on
behalf of Messrs Fletcher, Ladner, Saunders and the Management Company—stated that:
In general terms, Soundview Management [i.e., the
Management Company] directed the efforts of the
Debtors’ counsel and financial advisors on all
matters pertaining to the estate’s investments, which
stated differently, means estate assets.86
The “estate’s investments” included, of course, Elite’s investment in Composite.
When speaking to the assets that would be available to pay the requested fees, Mr.
Martin made statements relevant to this controversy on the record and in open court.87 In
those statements (the “March 2014 Martin Statements”), Mr. Martin stated:
I neglected to [address] one of Your Honor’s
questions, which was about seeing the full extent of
the table being set as to administrative claims.
There's 22 million in unencumbered cash; a 10- or
11 million dollar claim against FILB, which
remains to be worked out, and Ms. Ball is obviously
working on that; and 9 million dollars of third-party
securities. None of the assets are encumbered.
84 	Id. ¶ 10.
85 	Id. ¶ 10, first bullet point.
86 	Id. ¶ 17.
87 	See Tr. of Hrg. of 3/19/2014 (Main Case ECF No. 242).
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And so I would sincerely—and in addition to that,
there’s another—there’s a 3.8-million-dollar
receivable from a related entity, which Your Honor
will recall my last act in the case before Your
Honor's ruling was to get the consent of that entity
to freeze that 3.8 million dollars so that the trustee
can pursue that receivable.88
Although the hearing was attended by Messrs. Fletcher, Ladner, and Turner (each
of whom was seeking to be paid under the Administrative Expense Motion), none of
them corrected or supplemented anything Mr. Martin said. The “related entity” described
in the last-quoted paragraph of Mr. Martin’s remarks was of course Composite. But
Composite contends that Mr. Martin’s statement is inadmissible—a contention addressed
in the discussion to follow.
E. 	Prior Proceedings in Chapter 11 Case
and Here
The Soundview Debtors’ chapter 11 case was filed on September 24, 2013,89 just
prior to a previously-scheduled hearing to be held on the same day in the Grand Court of
the Cayman Islands with respect to winding up proceedings filed by creditors of each of
the Soundview Debtors. At the hearing in the Cayman Islands, the Cayman Grand Court
entered winding up orders appointing Joint Official Liquidators—the JOLs—with respect
to each of Debtors Elite, Soundview Premium, Ltd. and Soundview Star, Ltd.
Early in the chapter 11 cases, the Soundview Debtors sought to use the
Bankruptcy Code’s automatic stay to prevent the Cayman winding up proceedings from
88 	Id. at 54 (transcription error corrected; written-out numbers changed to Arabic form for
readability; emphasis added).
89 	See Petition, filed 9/24/2013 (Main Case ECF No. 1).
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moving forward.90 In response, the JOLs sought to dismiss the chapter 11 cases so that
the Cayman proceedings could continue down there. After litigation on the issues, this
Court ruled, among other things, that it should not dismiss the chapter 11 cases, but that it
should direct the appointment of a chapter 11 trustee.91
The Trustee commenced this adversary proceeding on April 1, 2014, with the
filing of a complaint here in the bankruptcy court. On May 2, 2014, Composite filed an
answer to the complaint, and a motion to withdraw the reference.92 On May 19, 2014
(before the motion to withdraw the reference had been decided), the Trustee filed her
motion for summary judgment.
On July 3, 2014, Judge Scheindlin of the district court denied Composite’s motion
to withdraw the reference, without prejudice.93 She observed, among other things, that a
summary judgment determination, which would decide purely questions of law, would be
subject to de novo review in any event, and that judicial economy and efficiency favored
determination of the issues here in the bankruptcy court.94
90 	See Fletcher Rule 1007-2 Decl. ¶ 24 (“This proceeding is filed firstly, in order to obtain the benefit
of the automatic stay and provide the enhanced procedural and substantive protections that U.S.
Courts provide to creditors and all parties of interest.”).
91 	See Trustee Decision, supra n.3, 503 B.R. at 581-83.
92 	ECF # 8.
93 	See Ball v. Soundview Composite Ltd. (In re Soundview Elite Ltd.), 2014 U.S. Dist. LEXIS 91267,
*1, 2014 WL 2998529, *1 (S.D.N.Y. July 3, 2014) (Scheindlin, J).
94 	2014 U.S. Dist. LEXIS 91267 at *20-21, 2014 WL 2998529 at *4.
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Discussion
I.
Authority of a Bankruptcy Judge to Rule Here
Without dispute, this Court has subject matter jurisdiction over this adversary
proceeding under 28 U.S.C. § 1334.95 But a second provision of the Judicial Code,
28 U.S.C. § 157, addresses the extent to which bankruptcy judges (who are appointed
under Article I of the Constitution, in contradistinction to district judges, who are
appointed under Article III) are empowered to “hear and determine”—i.e., to issue final
judgments and orders in—proceedings that fall under the subject matter jurisdiction of
the district and bankruptcy courts. There are limits to the authority of bankruptcy judges
to enter final judgments and orders in the matters over which they have subject matter
jurisdiction, under the Constitution96 and by statute.
95 	District courts and bankruptcy courts exercise jurisdiction in bankruptcy-related matters—
including those in this adversary proceeding—under one of the several provisions of the Judicial
Code (title 28 of the U.S. Code) in which federal trial courts are granted subject matter
jurisdiction. The Judicial Code’s provision conferring subject matter jurisdiction for consideration
of bankruptcy-related matters, 28 U.S.C. § 1334 (which directly follows like-provisions granting
subject matter jurisdiction in federal question, diversity and admiralty cases), confers original
subject matter jurisdiction on district courts (and, accordingly, on bankruptcy courts, which are
units of the district court under 28 U.S.C. § 151) with respect to bankruptcy cases and
proceedings. Section 1334(e) gives courts sitting in bankruptcy exclusive jurisdiction over
property of debtors’ bankruptcy estates, while section 1334(b) grants such courts with “original
but not exclusive” jurisdiction over “civil proceedings arising under title 11, or arising in or
related to cases under title 11”—which include, in addition to contested matters in cases, adversary
proceedings like this one. Accordingly, there are three types of original jurisdiction that district
(and hence bankruptcy) courts may exercise under § 1334, colloquially referred to as “arising
under,” “arising in,” and “related to” jurisdiction.
At the least, this Court has “related to” jurisdiction, because a result favorable to Elite would
benefit the Elite estate and Elite’s creditors, easily satisfying the broad test for such jurisdiction
articulated by the Third Circuit in In re Pacor, Inc. v. Higgins, 743 F.2d 984 (3d Cir. 1984) and
applied in this circuit in Publicker Industries Inc. v. U.S.A. (In re Cuyahoga Equip. Corp.), 980
F.2d 110, 114 (2d Cir. 1992).
96 	See Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982) (“Marathon”);
Stern v. Marshall, 564 U.S. ___, 131 S.Ct. 2594 (2011) (“Stern”). Those limits do not require
further discussion here.
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That same 28 U.S.C. § 157, addressing bankruptcy judges’ statutory authority,
grants authority to bankruptcy judges to hear and determine matters in “cases under title
11” (e.g., the Elite chapter 11 case) and in proceedings arising under title 11 or arising in
a case under title 11—e.g., this adversary proceeding—if they are “core.” “Core
proceedings “include, but are not limited to” 16 enumerated categories of proceedings,97
which nearly entirely relate to bankruptcy courts’ historic core functions.
A. 	Limits on Use of the Turnover Power
The limits on bankruptcy judges’ powers to decide disputes when estates seek to
augment their assets and bring claims arising under state or other nonbankruptcy law can
delay litigation. In an effort to shortcut such litigation delays, the Trustee relies on the
Bankruptcy Code’s “Turnover” provision, Bankruptcy Code section 542. That section,
captioned “Turnover of property to the estate,” provides, in relevant part (with exceptions
not relevant here):
(a) … [A]n entity, other than a custodian, in
possession, custody, or control, during the case, of
property that the trustee may use, sell, or lease
under section 363 of this title … shall deliver to the
trustee, and account for, such property or the value
of such property, unless such property is of
inconsequential value or benefit to the estate.
(b) … [A]n entity that owes a debt that is property
of the estate and that is matured, payable on
demand, or payable on order, shall pay such debt to,
or on the order of, the trustee, except to the extent
that such debt may be offset under section 553 of
this title against a claim against the debtor.
97 	28 U.S.C. § 157(b).
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And 28 U.S.C. § 157, in recognition of bankruptcy courts’ historic in rem jurisdiction,
and bankruptcy courts need to bring in and administer property of the estate, lists “orders
to turn over property of the estate” as included within core proceedings.98
But “mere characterization of an action as a complaint for turnover does not mean
that it is a turnover action pursuant to 28 U.S.C. § 157(b)(2)(E)).”99 To have the statutory
and constitutional power to issue a final order that the Turnover Power provides,100 a
bankruptcy judge does not need to conclude that the estate will prevail, either in full or in
any particular respect. But the bankruptcy judge does need to be comfortable that the
Turnover Power has been properly invoked. This presents a threshold issue that doesn’t
impede the Trustee’s ability to ultimately win, but may require this Court to make a
Report and Recommendation before a final order can be entered by the district court.
This Court addressed the conceptual underpinnings of turnover actions in its
opinion in Pali Holdings,101 and that discussion need not be repeated in comparable
length here. As explained more fully in Pali Holdings, turnover actions assist the
bankruptcy court in the exercise of its in rem jurisdiction by enabling trustees to marshal
the existing assets of an estate for the benefit of the estate’s creditors.102 Under section
542’s first subsection, section 542(a), turnover of property may be sought and obtained
by what is in substance a federal right of replevin—a right to recover the estate’s property
98 	See 28 U.S.C. § 157(b)(2)(E).
99 	Shea & Gould v. Red Apples Companies, Inc. (In re Shea & Gould), 198 B.R. 861, 865 (Bankr.
S.D.N.Y. 1996) (Garrity, J.) (“Shea & Gould”).
100 	Stern makes clear that the constitutional and statutory limits are not necessarily the same, and that
a claim that is a core matter under 28 U.S.C. § 157 may nevertheless be beyond a bankruptcy
judge’s constitutional power to issue a final order. But the distinction does not matter here.
101 	Geron v. Peebler (In re Pali Holdings, Inc.), 488 B.R. 841 (Bankr. S.D.N.Y. 2013) (Gerber, J.)
(“Pali Holdings”).
102 	See id. at 851-53.
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in kind, with the ability to get the value of the property as a substitute.103 Section 542’s
second subsection, section 542(b), provides what is in substance a mechanism for
monetizing a receivable that is property of the estate.104 “Each, importantly, provides a
means for the estate to secure the benefits of property that already is property of the
estate.”105
Where the turnover power is properly invoked, it is simply an effort to recover
property—or on property—that is already property of the estate. That invokes the court's
in rem jurisdiction over the bankruptcy res.106
But as this Court explained in Pali Holdings, “the turnover power can be
improperly invoked, especially when it is used as a Trojan Horse for bringing garden
variety contract claims; when the property in question is not already property of the
estate; or when the turnover statute is used to recover assets with disputed title when the
estate's claim of ownership is legitimately debatable. It is well established that the
turnover power may not be used for such purposes.”107
Though the matter is close—as the Court finds Composite’s defenses here to be
largely frivolous, and the Court cannot even find that they are bona fide—the Court
nevertheless is not in a position to determine that the cash or property to be delivered to
103 	Id. at 849.
104 	Id.
105 	Id. Thus, section 542(b) can be used to monetize estate assets such as notes or accounts receivable
that are already property of the estate. Id. Pali Holdings was a garden-variety example of that.
106 	See id. at 851-52.
107 	Id. at 851 n.39. See also In re Fairfield Sentry Ltd., 458 B.R. 665, 683 (S.D.N.Y. 2011) (Preska,
C.J.) (“Numerous courts have therefore held that an action is non-core when property which is the
subject of a significant dispute between the parties is sought to be recovered through a turnover
action.... These actions are subject to significant dispute, resolution of which will determine
whether the funds redeemed are in fact property of the Funds' estates.”) (citations and internal
quotations omitted).
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Elite is already estate property. And though (as discussed above and below), Elite’s
redemption request has repeatedly been acknowledged to be pending and unpaid, and has
been quantified in concept, the uncertainties as to the amount to be turned over make use
of the turnover power inappropriate.108 Unlike the entitlement to payment on an account
receivable or a promissory note, which is simply to be converted into cash, Elite does not
yet own the redemption proceeds, and its entitlement here is not yet equivalent to
recovery of a fixed sum, or tantamount to substituting one kind of asset for another.
As tempting as it is to push the statutory and constitutional envelope here given
the conduct of Fletcher, the Management Company and others acting for Composite, the
Court does not believe that it should stretch the turnover power that far. Prudence
suggests that bankruptcy judges be wary of pushing the limits of their statutory and
constitutional authority to avoid more problems of the type occasioned by Stern.
The Trustee may pursue her claims by a host of alternative means, but she cannot
do so by means of the Turnover Power. Construing its turnover authority to avoid the
Constitutional issue, the Court determines that her claims are non-core matters. And for
that reason, the Court cannot enter the final judgment that 28 U.S.C. § 157(b)(2)(E))
would permit a bankruptcy judge to enter if the Turnover Power were appropriately
invoked.
108 	See Savage & Assocs., P.C. v. Mandl (In re Teligent, Inc.), 325 B.R. 134, 137–38 (Bankr.
S.D.N.Y. 2005) (Bernstein, C.J.) (citing law holding, among other things, that an action should be
regarded as a turnover “only when there is no legitimate dispute over what is owed to the debtor”)
(citations omitted); Shea & Gould, 198 B.R. at 867 (issuing report and recommendation, instead of
final judgment, in debtor's action to recover fees for legal services rendered to the debtor, where
court was doubtful that claim was sufficiently “specific in its terms as to amount due and date
payable,” and observing that “[a] turnover action may be inappropriate where the debtor's claim
lacks such certainty”).
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B. 	What a Bankruptcy Judge May Nevertheless Do
Though the Trustee is unable to invoke the Turnover Power, that does not mean
that Composite can stymie, especially for more than a short time, her efforts to enforce
Composite’s obligations. The Court can still issue a Report and Recommendation.109
Additionally, the limits on bankruptcy judges’ ability to enter final orders and
judgments do not apply in situations where (as here, for reasons discussed below) a
bankruptcy judge is issuing an order granting only partial summary judgment.110 Even
after Marathon, Stern and their progeny, a bankruptcy judge can still issue interlocutory
orders, even in proceedings in which a bankruptcy judge does not have authority to issue
a final judgment.111
A partial summary judgment that is not dispositive of claims is an interlocutory
order, and doesn’t implicate the constitutional limitations on the Court's authority to enter
final judgments.112 As explained in Kane & Kane:
In this order, the Court grants partial summary
judgment in favor of the Trustee…. Because this
order is not dispositive with regard to all of the
claims addressed in this adversary proceeding, and
the Court will not enter partial judgment as a result
109 	See 28 U.S.C. § 157(c)(1) (“A bankruptcy judge may hear a proceeding that is not a core
proceeding but that is otherwise related to a case under title 11. In such proceeding, the
bankruptcy judge shall submit proposed findings of fact and conclusions of law to the district
court, and any final order or judgment shall be entered by the district judge after considering the
bankruptcy judge's proposed findings and conclusions and after reviewing de novo those matters
to which any party has timely and specifically objected.”).
110 	Bakst v. U.S.A. (In re Kane & Kane), 479 B.R. 617, 633-34 (Bankr. S.D. Fla. 2012) (Kimball, J.)
(“Kane & Kane”); West v. Peterson (In re Noram Res., Inc.), 2012 Bankr. LEXIS 2991, *3-4,
2012 WL 2571154, *1 (Bankr. S.D. Tex. July 2, 2012) (Isgur, J.) (“Noram Resources”).
111 	Noram Resources, 2012 Bankr. LEXIS 2991, at *3-4, 2012 WL 2571154, at *1.
112 	Id.; Kane & Kane, 479 B.R. at 633-34 (a partial summary judgment order was not a final order for
purposes of Stern v. Marshall analysis). See also West v. WRH Energy Partners LLC (In re
Noram, Inc.), 2011 Bankr. LEXIS 5183, *3, 2011 WL 6936361, *1 (Bankr. S.D. Tex. Dec. 30,
2011) (Isgur, J.) (same, vis-à-vis a motion to dismiss under Rule 12(b)(6), where less than all
claims were dismissed).
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of this ruling, this order “does not end the action as
to any of the claims or parties and may be revised at
any time before the entry of a judgment
adjudicating all the claims and all the parties' rights
and liabilities.” Fed.R.Civ.P. 54(b), made
applicable to this adversary proceeding by Fed. R.
Bankr.P. 7054(a). This order is not a final order.…
Thus, even if the causes of action presented here
would not be subject to entry of final judgment in
this Court, the present order is not a “final
judgment” subject to the Article III concerns
addressed by the Supreme Court in Stern.113
For reasons discussed below, the Court is not now in a position to award a money
judgment in a fixed amount in favor of the Trustee. The more limited relief the Court
now grants does “not end the action as to any of the claims or parties....”114 Thus, any
partial summary judgment order this Court might enter would not be a “final judgment,”
subject to the Article III concerns addressed in Stern.115
II.
Summary Judgment
Composite’s defense to summary judgment here effectively rests on two things.
First, Composite argues that of the eight (and, the Court finds, now eleven) separate
communications acknowledging Elite’s redemption request; the absence of gating; the
approximate amount owed to Elite; or some combination of those things, only two are
admissible in evidence—and that those two are too ambiguous to support Elite’s
entitlement.
113 	Kane & Kane, 479 B.R. at 633-34.
114 	Id.
115 	See Stern, 131 S.Ct. at 2615, 2620 (specifically limiting the Supreme Court's analysis to “final
judgments”).
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Second, Composite submits an affidavit by Mr. Fletcher (who individually and
through the Management Company, controls Composite, as he previously controlled
Elite), saying that he does not recall making the Redemption Request, and that he has
looked for it and now cannot find it—though significantly (especially since Fletcher and
companies and personnel he controlled were on both sides of the Redemption Request,
and the request was made to the prior administrator HSBC, whose files Mr. Fletcher
failed to check and repeatedly stated had not been fully turned over), he never says that
the Redemption Request was not in fact made. Then, based on Fletcher’s artful affidavit
and its efforts to exclude the Trustee’s evidence, Composite argues that the Trustee has
not proven her case, or that there remain material disputed issues of fact. The Court
disagrees.
The Court determines first that of the 11 items, 8 are admissible. The Court
further determines that Mr. Fletcher’s crafty responses do not raise issues of fact as to
Elite’s entitlement, except as to the exact amount that Elite is owed. Partial summary
judgment in the Trustee’s favor is appropriate now.
A. 	Evidentiary Issues
Preliminarily, the Court must address Composite’s contentions that the Trustee
has moved for summary judgment “[r]elying on inadmissible documents and hearsay
statements,”116 and that only two of the eleven admissions supporting the Trustee’s
motion can be considered by the Court.117 Composite argues that documents have not
116 	Composite Memorandum of Law In Opposition to Trustee's Motion for Summary Judgment (ECF
No. 21) (“Composite SJ Br.”) at 1.
117 	Composite then goes on to argue that the remaining record — “three sentences in two letters
written well after the alleged transaction,” id. — is “ambiguous.” But the Trustee’s showing is
supported by a great deal more than “three sentences in two letters,” and even if it were (given
what those letters said), the Court sees no ambiguity at all. See page 45 below.
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been satisfactorily authenticated,118 though Composite is vague as to which, and never
says that any particular document is not authentic. Composite also contends that six of
the communications on which the Trustee relies are hearsay.
It is clear, of course, that on a motion for summary judgment, parties may rely
only on evidence that would be admissible at trial.119 But on the merits of the evidentiary
objections, the Court overrules the authentication contention in its entirety. The Court
sustains the hearsay objection with respect to two of the challenged communications (and
excludes a third document on relevance grounds), and overrules it with respect to the
remainder.
1. 	Authentication
As one of the predicates for its assertions that most of the evidence offered against
it is inadmissible, Composite argues that in order to be considered on this motion, each of
the documents upon which the Trustee relies had to be authenticated through an affidavit
or declaration made upon personal knowledge.120 The Court disagrees.
To address this, a court must focus on what Civil Rule 56(c)(2), quoted above,121
actually says. It provides for the exclusion of matter that cannot be presented in a form
that would be admissible in evidence—not that it is not so presented. Collier’s chapter
118 	Composite SJ Br. at 11.
119 	Fed.R.Civ.P. 56(c)(2) (“A party may object that the material cited to support or dispute a fact
cannot be presented in a form that would be admissible in evidence.”). Fed.R.Civ.P. 56 is
applicable in bankruptcy adversary proceedings under Fed.R.Bankr.P. 7056. Hereafter the Court
refers only to Civil Rule 56 or other Civil Rules, without additional reference to Bankruptcy
Rules, like Bankruptcy Rule 7056, that make the Federal Rules of Civil Procedure applicable in
adversary proceedings.
120 	See Composite SJ Br. at 16-17.
121 	See n.119 supra.
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on dealing with summary judgment in bankruptcy adversary proceedings makes this
exact point, in so many words.122 Collier then continues:
It has been held, properly, that authentication of a
document is not required at the summary judgment
stage, and that is particularly proper in bankruptcy
litigation. A different rule would result in often
unnecessary expense for creditors and other
stakeholders, and impose requirements inconsistent
with efficient bankruptcy administration, in which
relevant contractual documents are frequently
submitted with no more than an attorney's affidavit
or declaration attaching them to present them to the
court. But other evidentiary objections (such as
those that a document cannot ever be authenticated
or is hearsay, and could not, under any
circumstances, be admissible) can provide bases for
a court's determination not to consider them under
Civil Rule 56(c)(2).
Composite understandably does not argue that the matter on which the Trustee
relies could never be authenticated. While bona fide evidentiary objections can and
should be considered at the summary judgment stage (which is why the Court considers
each of the hearsay objections below), as to authenticity there is no basis for concluding
that any of the documents is anything other than what it purports to be. And the fact that
documents were attached to an attorney declaration without a supplemental affidavit by a
document custodian or another with knowledge does not make them inadmissible for that
reason.123 To the extent the authenticity of the matter here presented to the Court is not
obvious (as it is with respect to the January 2014 Martin Letter sent to the Court, and the
122 	10 Collier on Bankruptcy (“Collier”) ¶ 7056.05 (16th ed. 2015) (“[I]t is important to note that
Civil Rule 56(c)(2) provides that a party ‘may object that the material cited to support or dispute a
fact cannot be presented in a form that would be inadmissible in evidence,’ not that it is not so
presented.”) (emphasis in original).
123 	See Lebewohl v. Heart Attack Grill LLC, 890 F. Supp. 2d 278, 297-99 (S.D.N.Y. 2012)
(Engelmayer, J.) (“Lebewohl”) (admitting documents downloaded from the Internet without an
accompanying affidavit from document custodians).
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transcripts of proceedings in this Court), there is no reasonable basis for concluding that
the evidentiary material could never be authenticated; it simply would be time-consuming
and expensive to do so.
And even at trial, under Federal Rule of Evidence 901(b), a document may be
authenticated based on its “appearance, contents, substance, internal patterns, or other
distinctive characteristics of the item, taken together with all the circumstances,” the issue
being whether a reasonable juror could find the evidence in question authentic.124 A
similar analysis can and should be performed at the summary judgment stage when a
party raises a colorable authentication objection, but here such an objection is frivolous.
By declaration,125 Jones Day associate Michael J. Dailey described in great detail
the process by which the documents upon which the Trustee relied were obtained from
Mr. Fletcher; Fletcher Asset Management; personnel working for each; Pinnacle (the
funds’ Administrator); and the Porzio firm, which had received documents from each.126
Mr. Dailey then stated that the documents attached to his declaration, having been
received by that means, were “true and correct”127—which effectively means “unaltered.”
Having considered that declaration—which states, among other things, that the Trustee
presented documents obtained from the very people now raising issues as to the
documents’ authenticity—the Court has no doubts whatever that they are authentic.
124 	See, e.g., Lebewohl, 890 F. Supp. 2d at 298 (admitting documents attached to the declaration of a
party’s attorney, after discussing each of Rules 901(a) and 901(b) and noting that “[t]he bar for
authentication of evidence is not particularly high”).
125 	ECF #14.
126 	Id. ¶¶ 3-11.
127 	Id. ¶ 13.
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2. Hearsay
The Court then considers the 11 individual documents and other forms of
evidentiary matter to determine the extent to which any is inadmissible under the Hearsay
Rule.
1. 	May 2012 Loeb E-Mail
Ms. Loeb was an employee of Richcourt USA at the time she sent the e-mail, and
the employees of Richcourt USA provided administrative services to Composite,
reporting to the directors of Soundview Capital Management, the investment manager for
Composite. More fundamentally, Ms. Loeb and the others with whom she was
communicating (including Composite directors Turner and Saunders, Mr. de Saram,
counsel for Composite and other Soundview funds, and her Richcourt colleague, Michael
Siedlecki) were working together to formulate responses to CIMA—including with
respect to redemption requests, which were among Richcourt’s areas of responsibility.
The May 2012 Loeb E-Mail plainly reflects the role of Ms. Loeb and Mr.
Siedlecki as team members (and agents) in that collective effort. As a Richcourt
employee with at least partial responsibility for advising the directors of the Management
Company about redemption requests,128 Ms. Loeb’s statements were well within the
scope of her role at Richcourt USA.129
128 	See Pappas v. Middle Earth Condo. Ass'n, 963 F.2d 534, 537 (2d Cir. 1992).
129 	See id. at 538 (“The authority granted in the agency relationship need not include authority to
make” the specific statement at issue, “but simply the authority to take action about which the
statements relate.”); Union Mut. Life Ins. Co. v. Chrysler Corp., 793 F.2d 1, 8 (1st Cir. 1986)
(There is nothing in Rule 801(d)(2)(D) that requires an admission be made by a management level
employee. A lower level employee, may make admissions under Rule 801(d)(2)(D) based on
information he acquired through his employment, so long as the employee doesn’t lack the
authority to make the routine admission.).
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The Court flatly disagrees with Composite’s contention that the e-mails
comprising Exhibit F to the Dailey Declaration, including the May 2012 Loeb E-Mail,
“are not party admissions, because they contain statements made on behalf of Elite, not
Composite.”130 The e-mail chain was part of the collective effort to prepare the
“Soundview letters,” relating to Elite, Premium, Star and Composite, that were to be sent
to CIMA on behalf of all of the Richcourt Funds, and the May 2012 Loeb E-Mail directly
addressed issues with respect to the Composite response.
The Court especially disagrees with Composite’s contention insofar as it covers
the May 2012 Loeb E-Mail itself—whose last two paragraphs expressly make reference
to Composite; state facts with respect to Composite; and seek more information with
respect to Composite—all for the purpose of the response to CIMA that was the subject
of the team’s joint effort, on behalf of Composite and other Fletcher Funds.
The Court therefore rejects Composite’s arguments that the May 2012 Loeb E-
Mail is inadmissible. The May 2012 Loeb E-Mail is not hearsay because it satisfies the
requirements under Fed. R. Evid. 801(d)(2)(D) that a party must establish "(1) the
existence of the agency relationship, (2) that the statement was made during the course of
the relationship, and (3) that [the statement] relates to a matter within the scope of the
agency.”
The May 2012 Loeb E-Mail is admissible, and will be considered on this motion.
130 	See Composite SJ Br. at 4.
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2. 	May 2012 Letter de Saram Letter
Mr. de Saram was an attorney for Composite; his response concerned his client
Composite; he was asked by Composite’s Board to respond to the Cayman Authorities
earlier letter; and he was doing so on Composite’s behalf.
Understandably, Composite does not object to the admissibility of the May 2012
de Saram Letter.131 Having been written by Composite’s counsel, on Composite’s
behalf, to respond to CIMA’s inquiry to Composite, it is a classic admission, falling
squarely under Fed. R. Evid. 801(d).132 It is not hearsay for that reason. 	The May 2012
de Saram Letter is admissible, and will be considered on this motion.
3. 	May 2013 Midanek Letter
Ms. Midanek was a director of, among other funds, Composite. In that role, Ms.
Midanek had a legal obligation to serve the company and its shareholders, with which she
was attempting to comply. The May 2013 Midanek Letter provided information to the
Cayman Authority in furtherance of what Ms. Midanek perceived as her and Composite’s
obligations to its stakeholders.
The May 2013 Midanek Letter clearly related to matters of legitimate concern to
any corporate director; Mr. Fletcher’s disapproval of her whistle-blowing does not
change that fact. She was a director with the right, if not also the duty, to act in good
faith to protect stakeholder interests.
And it does not matter that Ms. Midanek did not personally issue redemption
requests, or handle other administrative matters. She had a legitimate concern as to
131 	See Composite SJ Br. at 1.
132 	See in particular Fed. R. Evid. 801(d)(2)(C) (excluding from hearsay a statement “made by a
person whom the party [against whom the statement is offered] authorized to make a statement on
the subject”) and 801(d)(2)(D) (excluding from hearsay a statement “made by a party’s agent or
employee on a matter within the scope of that relationship and while it existed”).
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whether Composite and the other funds were meeting their obligations to their
investors—if for no reason other than CIMA could be anticipated to expect as much.
The May 2013 Midanek Letter is an admission. It is admissible, and will be
considered on this motion.
4. 	June 2013 Siedlecki E-Mail
The hearsay analysis with respect to the June 2013 Siedlecki E-Mail is very much
the same as with respect to the May 2012 Loeb E-Mail. At the time he sent the June
2013 Siedlecki E-Mail, Mr. Siedlecki (like Ms. Loeb) was a Richcourt employee, dealing
with the administrative end of Composite’s business. And here too, more fundamentally,
Mr. Siedlecki was communicating incident to the team effort to formulate a submission to
CIMA—including with respect to redemption requests, which were among Richcourt’s
areas of responsibility. 	The June 2013 Siedlecki E-Mail plainly reflects his role as team
member in that collective effort. His discussion of facts to be incorporated into the letter
then being drafted was well within the scope of his responsibilities.
The June 2013 Siedlecki E-Mail is an admission. It is admissible, and will be
considered on this motion.
5. 	June 2013 Fletcher E-Mail
Mr. Fletcher made the statements in the June 2013 Fletcher E-Mail in the scope of
his own employment, for each of the funds (including Composite) for whom he was
acting. Mr. Fletcher’s statements also confirm that Mr. Siedlecki, when he made the
statements in the June 2013 Siedlecki E-Mail, was acting within the scope of Mr.
Siedlecki’s employment as well.
The June 2013 Fletcher E-Mail is an admission. It is admissible, and will be
considered on this motion.
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6. 	July 2013 Turner E-Mail
The hearsay analysis with respect to the July 2013 Turner E-Mail is closely
similar to that with respect to the June 2013 Fletcher E-Mail, and especially the June
2013 Siedlecki E-Mail and the earlier May 2012 Loeb E-Mail. At the time he sent the
July 2013 Turner E-Mail, Mr. Turner was a Composite director and working on
Composite business. And more fundamentally, here too, Mr. Turner was communicating
incident to the team effort to formulate a submission to CIMA—including with respect to
redemption requests. The July 2013 Turner E-Mail plainly reflects his role as team
member in that collective effort. His discussion of facts to be incorporated into the letter
then being drafted was well within the scope of his responsibilities.
The June 2013 Turner E-Mail is an admission. It is admissible, and will be
considered on this motion.
7. June 2013 Midanek Letter
The Court is mindful of Solon’s—and hence Ms. Midanek’s—status as a
Composite director at the time of many of the key events in question here, and is likewise
mindful of its ruling that her earlier May 2013 Midanek Letter, written in her capacity as
such and to advance the welfare of Composite stakeholders, was well within her authority
and admissible as an admission.
But the hearsay issue here is more difficult, because while Ms. Midanek once
more wrote CIMA as the Solon director of Composite (among other funds), the
Composite Board, at least purportedly, had terminated Solon’s status as such the
preceding day. And while Ms. Midanek knew of Mr. Fletcher’s intent to remove Solon
from its directorship, and while she said any such effort would be improper, the Court is
reluctant to allow the admission of a document premised on Solon’s status as a director at
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the time that she wrote it when the Court would first have to find either that Mr.
Fletcher’s statement that Solon had been removed the preceding day was false, or that its
removal was legally invalid—a determination that presumably would have to be made
under Cayman law, with no help from either side on what Cayman law provides with
respect to that issue.
Some hearsay exceptions rely on considerations of reliability, but this one does
not; it rests on status—as an agent of a corporate party. It appears that rightly or
wrongly, Mr. Fletcher and his fellow director Mr. Saunders determined to take away Ms.
Midanek’s status as a director-agent who could speak for Composite. Whether that firing
of a troublesome whistleblower was a breach of fiduciary duty (or an additional breach of
fiduciary duty) does not appear to be relevant to the evidentiary issue. In light of Solon’s
change in status, the June 2013 Midanek Letter cannot qualify as an admission, and it
will be excluded and not relied upon by the Court on this motion.
8. 	July 2013 Richcourt Funds Letter
Understandably, Composite does not challenge the admissibility of the July 2013
Richcourt Funds Letter.133 The Court determines that it is not hearsay, since it is a party
admission,134 and it is admissible here.
9. 	December 2013 Katz Affidavit
Mr. Katz was an accounting professional retained by the Elite estate back when it
was a debtor-in-possession. The Katz Affidavit was submitted by Elite in opposition to
the ultimately successful motion to appoint a chapter 11 trustee. In contrast to the
133 	Composite SJ Br. at 1.
134 	See Fed. R. Evid. 801(d)(2)(A) (excluding from hearsay a statement made by the party against
whom the statement is offered).
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circumstances surrounding most of the other documents, it does not appear that Mr.
Katz’s services were enlisted as part of a team effort to benefit Composite. 	Rather, it
appears that in fact as well as in law, he was serving only Elite—the entity for whom he
had been retained to serve.
Under these circumstances, the Court cannot find that Mr. Katz was an agent for
Composite, or that what he said was an admission of Composite. And as a professional
brought in after the events at issue here, Mr. Katz lacked firsthand knowledge of the facts
relating to Elite’s redemption request.
There being no other potential hearsay exception shown to be applicable (as a
predicate was not laid for admitting the underlying financial information as a business
record, for example), the Katz Affidavit must be excluded, and it will not be considered
on this motion.
10. 	January 2014 Martin Letter
The Court need not, and does not, determine whether Mr. Martin’s remarks
should be admitted as admissions bearing on summary judgment. It will not be relying
on them in its summary judgment determination anyway, as they are insufficiently
relevant to that inquiry. The Court can, and will, consider the January 2014 Martin Letter
as containing admissions relevant to the asset freezing injunction request, considered
separately below.
11. 	March 2014 Martin Statements
Mr. Martin’s remarks—and especially the motion that he had filed occasioning
those remarks—support, and ultimately justify, the admissibility of the March 2014
Martin Statements.
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As noted above, Mr. Martin’s remarks in court on March 19, 2014 were made
while prosecuting a motion filed, as relevant here, on behalf of Mr. Fletcher, Mr. Ladner,
Mr. Saunders, Mr. Turner, and the Management Company. The motion filed on their
behalf (which thus was an admission of each of them) stated that none of the Soundview
Debtors had any “direct employees,” and that services were provided to them by
“associated management companies and unassociated service providers.” The motion
stated that “Soundview Management [i.e., the Management Company] directed the
efforts of the Debtors’ counsel and financial advisors on all matters pertaining to the
estate’s investments, which stated differently, means estate assets.”135 And the
Management Company was likewise the manager for Composite. The same company—
run by the same Mr. Fletcher—was directing both. Under these circumstances, the Court
is unwilling to find, as Composite argues, that Mr. Martin was speaking only for Elite,
and not Composite. He was taking directions from the same Mr. Fletcher, who until
displaced by the Trustee on the Soundview Debtors’ side, was managing both.
Wholly apart from that, the Court is mindful of what Mr. Martin was trying to
accomplish by the motion and the remarks he made in court supporting it. He was
appearing on behalf of Mr. Fletcher, Mr. Ladner, Mr. Turner, and Fletcher Asset
Management, among others, to get them paid. He was acting for their benefit—not, at
this time, for Elite, Premium or Star. They cannot now be heard to say that Mr. Martin
was not really speaking for them.136
135 	See page 23 supra.
136 	See United States v. McKeon, 738 F.2d 26, 30 (2d Cir. 1984) (it is “well established” that
“[s]tatements made by an attorney concerning a matter within his employment may be admissible
against the party retaining the attorney”) (internal citation omitted).
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The March 2014 Martin Statements are admissions, and thus not hearsay. They
are admissible and will be considered on this motion.
* * *
For the reasons stated, the hearsay objections to the June 2013 Midanek Letter
and the Katz Affidavit on summary judgment are sustained. The Court will not consider
the January 2014 Martin Letter for summary judgment purposes, as the Court regards that
letter to be insufficiently relevant to summary judgment. All other evidentiary objections
are overruled.
B. 	Merits of Summary Judgment Motion
Having considered the admissible evidence put forward by the Trustee on her
summary judgment motion, and Mr. Fletcher’s affidavit in opposition, the Court
determines that it does not yet have enough information to fix the exact amount due from
Composite to Elite. But the Trustee has satisfactorily shown everything else. Mr.
Fletcher’s responsive affidavit, discussed below, is notable for its evasiveness and
indirection, and its efforts to disavow what Composite told CIMA when CIMA was
investigating, among other things, issues of the very type present here—the extent to
which Composite and other funds under Mr. Fletcher’s control were failing to honor
redemption obligations to their customers. More fundamentally, Mr. Fletcher’s affidavit
is notable for its failure to put forth any evidence to contradict, by actual evidence, the
many earlier admissions on which the Trustee relies, addressed above and below.
Mr. Fletcher’s responses fail to create issues of fact. Partial summary judgment
will be granted on all but the amount due, and, incident to that, the Court will issue the
particular determinations set forth below.
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1. 	Summary Judgment Standards
Summary judgment is appropriate “if 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.”137 The moving party bears the initial burden of showing that the undisputed facts
entitle it to judgment as a matter of law.138 Then, if the movant carries this initial burden,
the non-moving party must set forth specific facts to show that there are triable issues of
fact, and cannot rely on pleadings containing mere allegations or denials.139
In deciding a summary judgment motion, it is well settled that the Court should
not weigh the evidence or determine the truth of any matter, and must resolve all
ambiguities and draw all reasonable inferences against the moving party.140 	A fact is
material if it “might affect the outcome of the suit under the governing law.”141 An issue
of fact is genuine if “the evidence is such that a reasonable jury could return a verdict for
the nonmoving party.”142
137 	Fed. R. Civ. P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986).
138 	See Rodriguez v. City of New York, 72 F.3d 1051, 1060–61 (2d Cir. 1995); Ferrostaal, Inc. v.
Union Pacific R.R. Co., 109 F. Supp. 2d 146, 148 (S.D.N.Y. 2000) (“The initial burden rests on
the moving party to demonstrate the absence of a genuine issue of material fact....”); Pali
Holdings, 488 B.R. at 845.
139 	See Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586–87, 106 S. Ct.
1348, 1355-56 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S. Ct. 2548, 2553 (1986);
Jeffreys v. City of New York, 427 F.3d 549, 554 (2d Cir. 2005); Kittay v. Peter D. Leibowits Co.,
Inc. (In re Duke & Benedict, Inc.), 265 B.R. 524, 529 (Bankr. S.D.N.Y. 2001) (“[T]he nonmoving
party must set forth specific facts that show triable issues, and cannot rely on pleadings containing
mere allegations or denials.”).
140 	See Matsushita, 475 U.S. at 587, 106 S. Ct. at 1356 (summary judgment is appropriate “[w]here
the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party”);
Virgin Atlantic Airways Ltd. v. British Airways PLC, 257 F.3d 256, 262 (2d Cir. 2001); Lovejoy–
Wilson v. NOCO Motor Fuel, Inc., 263 F.3d 208, 212 (2d Cir. 2001) (“We ... constru[e] the
evidence in the light most favorable to the non-moving party.”).
141 	See Anderson, 477 U.S. at 248, 106 S.Ct. at 2510.
142 	Id.
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2. 	The Trustee’s Showing
For reasons discussed above, the great bulk of Composite’s evidentiary objections
to the Trustee’s showing have been overruled. By Composite’s own admissions—
including some that Mr. Fletcher himself endorsed143—the Trustee put forward
admissible evidence establishing:
(1) 	Composite’s only outside investor during the relevant period has
been Elite;144
(2) 	Elite requested a full redemption,145 by no later than May 2012;146
and even more clearly by July 2013;147
(3) 	The trade date for Elite’s redemption was September 30, 2011;148
(4) 	Composite’s redemptions have never been suspended;149
(5) 	Composite’s redemptions have never been gated;150
(6) 	There has been no reason for Composite to gate redemptions, since
Composite has only one investor;151
143 	See June 2013 Fletcher E-Mail (telling Mr. Turner to incorporate the matter stated by Michael
Siedlecki into what became the July 2013 Richcourt Funds Letter, which included Mr. Siedlecki’s
observations, among others, that only Elite, Premium and Star had gated redemptions, and thus
that Composite had not).
144 	See May 2012 Loeb E-Mail; May 2012 de Saram Letter; May 2013 Midanek Letter.
145 	See May 2012 Loeb E-Mail; May 2012 de Saram Letter; May 2013 Midanek Letter; July 2013
Richcourt Funds Letter.
146 	See May 2012 Loeb E-Mail; May 2012 de Saram Letter.
147 	See May 2013 Midanek 2013 Letter (confirming that Elite’s redemption request was pending as of
May 2013); July 2013 Turner E-Mail (same, as of July 2013); July 2013 Richcourt Funds Letter
(same, as of July 2013).
148 	See May 2013 Midanek Letter.
149 	See 2012 Loeb E-Mail; May 2012 de Saram Letter; May 2013 Midanek Letter.
150 	See 2012 Loeb E-Mail; May 2012 de Saram Letter; May 2013 Siedlecki E-Mail; July 2013 Turner
E-Mail; July 2013 Richcourt Funds Letter
151 	May 2012 Loeb E-Mail.
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(7) 	Elite’s redemption request was outstanding as early as May 2012,152
and remains outstanding today;
(8) 	The value of Elite’s redemption request, as estimated by Composite,
ranges from $5 million153 to $3.8 million,154 and thus is no less than
$3.8 million;155 and
(9) 	The estimated value of Composite’s portfolio as of July 2013 was
$5.155 million.156
3. 	Composite’s Response—The Redemption Request
Apart from its contentions that most of the Trustee’s showing was inadmissible
(which, except with respect to the June 2013 Midanek E-Mail and Katz Affidavit, the
Court now has rejected), that the Trustee’s evidence is “ambiguous,” and that the above
facts are still not enough, Composite relies solely on an affidavit by Mr. Fletcher in
opposition to the Trustee’ summary judgment motion. That affidavit is insufficient to
rebut the Trustee’s showing, or even to create issues of material fact.
Mr. Fletcher’s affidavit consists of 39 paragraphs. In none of them does Mr.
Fletcher ever say that the redemption request was not made. Nor does he say that the
redemption request—directly acknowledged four times,157 including by the Richcourt
152 	May 2012 de Saram Letter. It was also said to be outstanding as of May 2013, see May 2013
Midanek Letter; June 2013, see June 2013 Siedlecki E-Mail; and July 2013, see July 2013 Turner
E-Mail and July 2014 Richcourt Letter.
153 	July 2013 Turner E-Mail; July 2013 Richcourt Letter.
154 	March 2014 Martin Statements.
155 	Elite, as Composite’s only shareholder, was entitled to the entirety of Composite’s net assets. But
declines in the value of those assets could (and likely would) result in the differences between the
$5 million and $3.8 million figures. This could be confirmed or disproved in the trial to follow
when Elite’s exact entitlement will be determined.
156 	July 2013 Turner E-Mail.
157 	See page 47 & n.145 supra.
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team whom he personally directed,158 and whose submission to CIMA he personally
edited159—does not exist.
Rather, Mr. Fletcher says a variety of other things—presumably to imply, though
without saying, that the admitted redemption request was not made—which fall well
short of refuting Composite’s earlier admissions. Thus, Mr. Fletcher says that the Trustee
(who got what documents she could from Mr. Fletcher, companies Mr. Fletcher
controlled, and their counsel) “does not present the actual redemption request.”160 He
says “[t]he Trustee does not provide direct proof that any of this happened.”161 But
“direct proof” (assuming that means producing the document embodying the request
itself) is not the point. The Trustee has adduced eight separate admissions that it did,
indeed, happen.162
158 	See e-mails from Mr. Fletcher of June 26, 2013 (2:53 p.m.), June 27, 2013 (2:43 and 2:59 p.m.),
June 28, 2013 (5:27 p.m.), June 30, 2013 (9:28 p.m.), July 9, 2013 (1:53 p.m., 3:31 p.m. and 6:50
p.m.), all parts of Dailey Decl. Exh. J. For example, as appearing in those e-mails, Mr. Fletcher
wrote on June 26, “Stewart, Please draft a letter, on behalf of the Cayman Richcourt funds to the
Cayman Islands Monetary Authority, that incorporate the information from Michael’s earlier
email below and the following suggestions which address the derogatory letter that Deborah sent
to CIMA the after [sic.] she was removed as a director. After the four of us review it and finalize
edits, Floyd can share it with Cayman counsel.” On the next day, Mr. Fletcher asked “When
might a draft be ready?” and 16 minutes later, “Please try to provide a first draft today.”
Finally, in the July 9, 2013 (3:31 p.m.) e-mail, Mr. Fletcher wrote “Thank you very much. Floyd,
I think the letter is ready.”
159 	See id. For example, on July 10, 2013 (9:18 a.m.), Mr. Fletcher directed his team: “We’re
sending it signed by the funds rather than directors.” Thus the signatories on the July 2013
Richcourt Funds Letter were not Mr. Fletcher or any of the others on the team he directed, but
rather “Soundview Composite Ltd.” and other Richcourt funds.
160 	Fletcher Aff. ¶ 2.
161 	Id. ¶ 3 (emphasis added).
162 	Additionally, Mr. Fletcher submits two more—in Ex. 6 to his affidavit, reflecting “Trade
Instructions” showing a trade for Composite, dated June 5, 2011, for the “Full Amount” of a
redemption with a “Dealing Date” of 9/30/2011, for a “Redemption,” with Notes stating “Full
Position Redemption. Approx $5.66mm,” followed, two pages later, by “Projected Payout
Schedules” showing a payout for Composite of $5.663 million in Oct. 2011.
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Mr. Fletcher goes on to say that “I have searched both Composite’s files and [the
Management Company’s] files and I have not found the redemption request….”163 But
he does not say that he searched the files of HSBC, Composite’s administrator at the
time—to whom the request would have been sent. And merely saying that he had not
found the Redemption Request (apart from his failure to address the fact that he failed to
look in the most likely place where it would be) says nothing about whether the
previously acknowledged redemption request ever existed.
In fact, Mr. Fletcher acknowledges this very problem. Recognizing that he and
his colleagues expressly acknowledged the Redemption Request in the July 2013
Richcourt Funds Letter, he seeks relief from the admission by saying that it “was
prepared at a time of great turmoil.”164 He notes that after resigning as fund
administrator in July 2011, HSBC held the documents pertaining to the funds that the
Management Company managed (including Composite),165 and that without those
documents, it would be “impossible to ascertain the exact status of the transactions for
the [Management Company]-managed funds”166—which included Elite and Composite.
Yet as noted, Mr. Fletcher does not say that he searched HSBC’s files. And he does not
say that documents Composite received from HSBC were complete. Thus Mr. Fletcher’s
assertions as to what he could not find—especially given the places that he searched and
did not search—cannot rebut what people with actual knowledge of the facts said at the
time.
163 	Id. ¶ 10. He also says that Elite “presumably” kept a copy of the request, and “the Trustee has all
of Elite’s files.”
164 	Fletcher Aff. ¶ 22.
165 	Id.
166 	Id.
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Nor do Mr. Fletcher’s other responses give the Court anything substantive. He
says, once again (this time with respect to Elite’s other two directors, Messrs. Turner and
Kiely), that he has “seen no evidence” that either of the other directors “knew of or
ratified the alleged request in 2011,” but ignores the fact that Mr. Turner, the original
drafter of the July 2013 Richcourt Funds Letter, knew of the Elite Redemption Request
when the letter Mr. Turner drafted in June and July 2013 expressly made mention of it
(and Mr. Fletcher obviously knew of it then as well), and Mr. Fletcher is notably silent
about ever having talked to anyone else at Elite about it.
In fact, Mr. Fletcher says cryptically, that “I have, however, found a proposal for
a similar request that was never approved.”167 And he admits that on June 6, 2011, Dean
Rubino, a Richcourt employee, sent “a group of proposed redemptions” to his fellow
director Mr. Kiely, and that “[t]he group included a redemption of Elite’s remaining
position in Composite with a ‘dealing date’ of September 30, 2011.”168 Mr. Fletcher
claims that the request was not approved by anyone with authority to honor it.169 But his
denial does not negate the fact that the request was made.
Then, further to his “I have found no evidence” defenses, Mr. Fletcher says that “I
have found no evidence that a redemption request from Elite to Composite ever went
through a full formal review and was approved by authorized executives.”170 But Mr.
Fletcher never details the review that was required, what that review might determine, or
why it would be an impediment to honoring the redemption. It will be recalled that the
167 	Id. ¶ 15.
168 	Id. ¶ 16.
169 	Id.
170 	Id. ¶ 10.
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Composite Articles merely prescribed that any redemption request “be in writing”; that it
specify the number and class of shares to be redeemed; and that it be “signed by the
holder thereof.”171 No “full formal review” and approval was required.
Then Mr. Fletcher explains that the July 2013 Richcourt Funds Letter (which he
acknowledges he “helped write”172), rather than giving “an assurance of payment” of a
redemption request, was no more than a statement of an intent to “appropriately satisfy
the pending redemptions in accordance with the governing documents.”173 This, he
explains, was not really a statement of an intent to honor the redemption (despite its
natural interpretation), but rather of an intent to parse the documents for the ability to
decline the request. Thus he says:
Though a redemption request to Composite may
have been made, the request had to be reviewed and
would have to abide a vetting in accordance with
the governing documents, including Composite’s
Articles of Association (which requires the
redemption request to be signed by an authorized
representative), and the Private Placement
Memorandum (which requires delivery to the fund
administrator). There is no statement in the letter
that the purported request met the requirements of
those documents, was valid, and was due and
owing.”174
But these qualifications grossly overstate the requirements of the approval process—
which, as just noted, required nothing more for a redemption than a writing, a statement
of the amount to be redeemed, and a signature. If there were an unstated requirement for
more, what was told to CIMA was a half-truth at best. But there was no requirement for
171 	See page 5 supra.
172 	Fletcher Aff. ¶ 21.
173 	Id.
174 	Id.
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more. Mr. Fletcher has failed to raise a valid defense to the existence of the repeatedly
acknowledged redemption demand, or even to create an issue of fact with respect to it.
Finally, with respect to a redemption request having been made, Mr. Fletcher says
“Well, if I wanted the redemption done and controlled all the participants, then the
redemption should have been done when I gave the order, but there never was a
redemption.”175 But apart from its reliance on inference and not facts, this says nothing
upon which the Court can base a finding other than that there never was a redemption,
and that after the request was made, Mr. Fletcher did not want the redemption made.
Thus, nothing Mr. Fletcher said is sufficient to contradict the admissions, which
squarely acknowledged the redemption requests, and stated that the redemption requests
were still pending.
4. 	Composite’s Response—Gating
Composite likewise relies on Mr. Fletcher’s affidavit with respect to its Gating
defense.176 Mr. Fletcher contends, in substance, that Composite’s documents had always
given it the right to gate redemption requests177 (unless that right was waived by
Composite’s directors, which he says had not happened),178 and implies (without quite
saying) that the fact that Composite had never gated redemptions in the past didn’t mean
that it couldn’t do so in the future. Mr. Fletcher further says Mr. de Saram was wrong
when he said that Composite had never been gated,179 and disputes Ms. Loeb’s statement
that there would be no reason to gate redemptions when Composite had only one
175 	Fletcher Aff. ¶ 11.
176 	See Fletcher Aff. ¶¶ 30-34.
177 	See id. ¶ 30-31
178 	Id. ¶ 31.
179 	Id.
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investor—as this, Mr. Fletcher asserts in his affidavit, “would give Composite additional
time to maximize the value of its holdings and earn a profit while the redemption paid
gradually [sic.].”180 He also contends that there was a reason that an asserted Composite
right to gate redemptions was not mentioned in the July 2013 Richcourt Funds Letter
responding to CIMA—because there had been no redemptions since May 2012, and that
this was the only thing that CIMA asked Composite about.
The Court agrees with Mr. Fletcher that Composite’s documents gave it the right
to gate redemptions, and that (putting aside what would have been fully honest responses
to CIMA), there would be a distinction between Composite’s having the right to gate
redemptions and its actually exercising that right—a distinction that Composite, if it
really wanted to make that distinction, blurred in its several communications internally,
and more importantly to CIMA. But the Court disagrees with Composite in every other
respect. And it finds Mr. Fletcher’s gating contentions to be insufficient to provide a
defense to the Trustee’s claims now.
The Court rejects Composite’s gating defense for three separate reasons.
First, assuming that Composite had the right under its documents to gate
redemptions, the record is devoid of any indication that Composite did so. Mr. Fletcher
proffers no board minutes or other contemporaneous indications of any action on his part,
or his associates’, to make or communicate a gating determination, even after this
controversy blew up.181 And even in his affidavit on this motion, Mr. Fletcher does not
say when and how any determinations to exercise the right to gate were ever made.
180 	Id. ¶ 32.
181 	Ms. Loeb stated in the May 2012 Loeb E-Mail that redemptions from Composite had never been
gated, and that was passed on to CIMA by Mr. de Saram in the May 2012 de Saram Letter the
next day. Those statements were accurate; Composite had never invoked gating to deny an
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Second, Ms. Loeb was right that gating would serve no purpose when Composite
had only a single investor. It now is sophistry for Mr. Fletcher to contend that he could
withhold the full redemption requested by his only investor to try to make a bigger profit.
A bigger profit for whom? The profit (or loss182) would go to Composite’s single
investor Elite in any event—and Composite’s single investor had stated that it wanted its
money back then. Mr. Fletcher could not appropriately withhold the redemption for any
other kind of gain or profit, e.g., to achieve continued management fees for the
Management Company or himself.
Third, there is an additional problem with Composite’s gating excuse here.
Assuming that Composite had the right to gate (and putting aside Fletcher’s lack of
candor to CIMA if he intended to invoke a gating right without saying so), that right only
gave Composite the authority to defer, not refuse, redemptions. Composite still had to
pay out 10% of the NAV per quarter—i.e., 40% per year. With the redemption request
having been made no later than May 2012, at least 12 quarters now have passed,
obligating Composite to have returned to Elite, by June 2015, the entirety of Elite’s
redemption request. Even assuming the right to gate when the Redemption Request came
in, the time to pay Elite in full has now come and gone.
The gating right is a red herring. The Court rejects it as a defense.
investor the right to the prompt return of its NAV. But if, as Mr. Fletcher now says, Composite
reserved the right to gate redemptions without having yet exercised that right (and gating justified
Composite’s failure, prior to May 2012, to honor Elite’s 2011 redemption request to Composite),
Composite told CIMA a half-truth—not because Mr. de Saram was less than candid, but because
(assuming Mr. Fletcher’s gating contentions to be true) Composite had not told Mr. de Saram of
the asserted right that purportedly had been reserved. In any event, gating was not the reason for
Composite’s failure to honor Elite’s redemption request in the period from June 2011 to May
2012, if, in fact, it ever was.
182 	As of March 31, 2011, Composite records valued Elite’s remaining shares at $6.358 million. By
the time of Composite’s various admissions, July 2013, the value had dropped to $5 million. By
the time of the March 2014 Statements, the value dropped further to $3.8 million.
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5. 	Composite’s Response—Redemption Amount
Composite further disputes the Trustee’s showing of the amount of Elite’s claim.
Composite contends that the May 2013 Midanek Latter, the June 2013 Midanek Letter,
and the Katz Affidavit are all inadmissible in evidence183 (thus assertedly resulting in a
failure of proof on the amount of Elite’s entitlement), and that Elite’s entitlement is only
to the Composite NAV at the time of redemption—which, Composite says, could not be
determined, because Composite had ceased to be audited. The Court agrees that only the
approximate amount of Composite’s claim is established on the existing record, but
rejects all of Composite’s remaining contentions.
As an evidentiary matter, the Court has excluded the June 2013 Midanek Letter
and the Katz Affidavit, but the May 2013 Midanek letter has been admitted, and is part of
the record. Moreover, Composite fails to address the July 2013 Turner E-Mail (noting
not just the redemption request, but that it was in the estimated amount of $5 million); the
July 2013 Richcourt Funds Letter (stating, once again, that the one pending redemption
had an estimated value of $5 million); and the March 2014 Martin Statements (making
reference to the redemption request, but quantifying it as only $3.8 million). They all are
effectively saying the same thing, merely pegging a then-existing redemption request to
the communicator’s belief as to the value of Composite’s net assets at that time.
The Court can and does quantify the Trustee’s claim as “at least” $3.8 million, but
is not otherwise in a position to now fix it in amount. But the Court rejects Composite’s
implication that the amount due to Elite can never be fixed. Further proceedings can
clarify whether Elite’s redemption entitlement is to $5 million, $3.8 million, or something
183 	See Fletcher Aff. ¶¶ 25-26.
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in between. And an audit (which was never identified as a reason for failing to honor
Elite’s redemption request) is not essential to determining the amount that must be
returned to Elite. Elite’s entitlement can be ascertained by all of the traditional means by
which plaintiffs prove up their damages and similar entitlements when their
counterparties have failed to honor contractual obligations, or by an accounting.
The parties have not sufficiently briefed the issues surrounding the amount of
other creditors’ claims; whether Elite’s claim would be junior to, or pari passu with,
those other creditors’ claims; and whether claims against Composite by insiders (such as
the Management Company, Fletcher, Saunders and Ladner) would be senior to (or even
pari passu with) Elite’s entitlement.184 These matters typify why the Court, as convinced
as it is that Composite’s defenses to honoring its redemption argument are frivolous,
cannot enter a full judgment--or, more precisely, makes a full Report and
Recommendation--now.
C. 	Judicial and Equitable Estoppel
Apart from the merits of the Trustee’s request for summary judgment, the Trustee
makes a further argument as well—that summary judgment is warranted under the
doctrines of equitable and judicial estoppel, based on prior positions taken in the
underlying chapter 11 case—first, in the January 2014 Martin Letter; second, in
statements by Mr. Martin in open court later on that same day, January 21; and third,
when trying to recover fees for Mr. Fletcher and other Soundview Debtors’ directors and
the Management Company in March. The Court cannot, and does not, rely on the first
two communications; they are inadmissible hearsay. But the third communication, while
184 	Depending on the answers to these questions, determining where, in the spectrum between
$5 million and $3.8 million, Elite’s entitlement falls may not matter, if even the lowest amount
exceeds the assets Composite would have left. At this point, however, it is too soon to say.
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it does not support equitable estoppel, is admissible, providing a potential second basis
for the Court’s award of partial summary judgment here.
Ultimately, however, the Court determines that judicial estoppel is applicable only
to the Trustee’s request for the continued asset freeze, and not to her request for summary
judgment.
1. 	Evidentiary Matters
Preliminarily, as a factual matter, the record on which the estoppel claims rest
cannot include statements in the first two communications. In the January 2014 Martin
Letter, Mr. Martin acknowledged that Elite and other Soundview Debtors had “presented
evidence at trial that Soundview Composite owned Soundview Elite that amount,”185 but
his statement fell short of saying that amount was actually owed. And at the time, he was
speaking for Elite alone, and Elite’s interests at the time were adverse to Composite’s.186
Later in court the same day, Mr. Martin’s remarks were made in the same context
as his letter. And though this time Mr. Martin expressly recognized the existence of
Composite’s debt, the interests of the Soundview Debtors and others (e.g., the
Management Company and Mr. Fletcher), while aligned in opposing the asset freezing
TRO, were still adverse with respect to the issues here on summary judgment. Thus the
Court can consider Mr. Martin’s statements then to be an admission only on the issue as
to which their interests were aligned—i.e., the asset freeze, discussed below.
Matters stated in the third of the communications on which the Trustee relies—the
March 2014 Martin Statements—are, however, admissible for purposes of judicial
185 	January 2014 Martin Letter at 1 (emphasis added).
186 	By contrast, in March 2014, Mr. Martin was speaking for the Management Company, Fletcher,
Ladner, Saunders and Turner, directing and controlling both entities, which is why the Court is
unwilling to hold that he was speaking for Elite alone, and regards the March 2014 Warren
Statements as an admission.
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estoppel, just as they were on summary judgment itself. At this time, as previously
noted,187 when seeking approval to get among others, Messrs. Fletcher, Ladner and
Turner paid, Mr. Martin was acting for those individuals’ benefit—with Mr. Fletcher
present telephonically, and Messrs. Ladner and Turner present in court. They were
benefitting from what Mr. Martin told the Court. But if they were benefitting from
anything false that Mr. Martin might have said, they could have, and should have, said so.
The Court finds unpersuasive their arguments that they could properly remain silent if a
false statement was being made to the Court. Just as the March 2014 Martin Statements
were ordinary admissions, the silence of Messrs. Fletcher, Ladner and Turner constituted
adoptive ones.
2. 	Equitable Estoppel
The Trustee then argues that equitable estoppel “principles” bar Composite from
“walking away from its obligations.”188 The Trustee goes on to say that the Fletcher
team “operated on and controlled both sides of the redemption request”189—and “should
not be heard to raise objections about the mechanics of how the redemption request was
placed and processed, the state of its own records, or its own lack of valuation data,”190 or
to renounce admissions made by people working on the Fletcher team’s behalf.191
The Court understands the Trustee’s frustration. But it is compelled to agree with
points Composite makes in opposition to the Trustee’s equitable estoppel argument.
With the inability to make credibility determinations on a summary judgment motion, the
187 	See page 44 supra.
188 	Trustee Opening Br. at 25; see also id. at 26.
189 	Id. at 26.
190 	Id.
191 	See id.
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Court cannot rely on this yet. And the Court cannot see the requisite reliance by Elite,
and resulting injury, resulting from statements made by Mr. Fletcher and those acting on
Mr. Fletcher’s behalf.
What the Trustee is really saying, in substance, is that Mr. Fletcher’s excuses
now, after controlling both sides of the redemption transaction, are highly offensive.
That is true, but the Trustee’s showing falls short of an equitable estoppel.192
3. 	Judicial Estoppel
Judicial estoppel presents different issues. As explained by the Supreme Court in
New Hampshire v. Maine,193 and by the Second Circuit in Adelphia Recovery Trust v.
Goldman Sachs & Co.,194 the exact criteria for invoking judicial estoppel varies based on
specific factual contexts. But “courts have uniformly recognized that its purpose is to
protect the integrity of the judicial process by prohibiting parties from deliberately
changing positions according to the exigencies of the moment.”195 Courts invoke judicial
estoppel when litigants “play ‘fast and loose with the courts’ by taking inconsistent
positions in related proceedings.”196 In deciding whether judicial estoppel is warranted,
courts in this circuit consider whether:
(i) the party’s later position is clearly inconsistent with its earlier position,
(ii) the party succeeded in persuading a court to accept the party’s earlier
position, so that judicial acceptance of the inconsistent position in a later
192 	The Trustee also mentions, in passing, promissory estoppel. That doctrine is inapplicable here, as
Elite’s claim is premised on an actually existing contract, well supported by consideration.
193 	532 U.S. 742, 121 S.Ct. 1808 (2001) (“New Hampshire”).
194 	748 F.3d 110, 116 (2d Cir. 2014) (“Adelphia-Goldman Sachs”).
195 	New Hampshire, 532 U.S. at 749-51; Adelphia-Goldman Sachs, 748 F.3d at 116.
196 	Sperling v. U.S., 692 F.2d 223, 227 (2d Cir. 1997) (Van Graafeiland, J., concurring), superseded
by statute on other grounds, as recognized by Triestman v. United States, 124 F.3d 361, 368-69
(2d Cir. 1997).
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proceeding would create the perception that either the first or the second court
was misled, and
(iii) the party seeking to assert an inconsistent position would derive an
unfair advantage, or impose an unfair detriment on the opposing party, if not
estopped.197
Here, the position taken by Mr. Fletcher is plainly inconsistent with the statements
made by Mr. Martin—and by Mr. Fletcher himself, in adoptive admissions when he
remained silent if, as Mr. Fletcher now contends, Mr. Martin was wrong. And the
reversal in position would give rise to both an unfair advantage and impose an unfair
detriment on the opposing party—i.e., the Trustee. But insofar as judicial estoppel is
argued to support summary judgment itself, the second element is lacking. In March
2014, the Court assumed that the $3.8 million could be recovered by Elite from
Composite (and thus that the Soundview Debtors’ estates would have the funds to pay the
requested fees), but made no findings on the existence of the redemption debt at that
time.198 Rather, the Court rejected the fee requests at that time for a host of other
reasons—one of which was “claims going in the other direction [i.e., by Elite and other
Soundview Debtors against Mr. Fletcher and others] that might have to be addressed.”199
As judicial reliance on the March 2014 Martin Statements is lacking, judicial
estoppel based on them on this summary judgment motion is not warranted.
197 	Adelphia-Goldman Sachs, 748 F.3d at 116 (citing New Hampshire, 532 U.S. at 750-51).
198 	See Tr. of Hrg. of 3/19/2014 at 31-32.
199 	Id. at 32.
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III.
Preliminary Injunction Freezing Composite’s Assets
Though the Court can grant the Trustee’s summary judgment motion only in part
at this time, it can, and does, issue the requested preliminary injunction freezing the
disposition of Composite’s assets pending the completion of this case—which effectively
means no more than determining the amount of Elite’s monetary entitlement, and the
entry of a final judgment by the district court embodying Composite’s duty to pay it. The
Court does so under each of Fed. R. Civ. P. 65(a) and Bankruptcy Code section 105(a),
each of which provides separate authority for such measures.
A. 	Traditional Civil Rule 65(a) Doctrine
Civil Rule 65(a), made applicable to adversary proceedings by virtue of
Bankruptcy Rule 7065, provides that a court may issue a preliminary injunction after
notice to the party against whom the injunction will be enforced. The issuance of a
preliminary injunction is an equitable remedy and within the discretion of the court.200
The purpose is “to maintain the status quo pending the trial and determination of the
action.”201 The Court can and does grant a preliminary injunction freezing the
disposition of Composite’s assets—until the Trustee’s monetary entitlement is computed,
and the district court issues a final judgment—under traditional preliminary injunction
standards, applicable in nonbankruptcy as well as bankruptcy-related matters.
200 	See, e.g., Collier ¶ 7065.02.
201 	Id.; see also Deckert v. Independence Shares Corp., 311 U.S. 282, 290, 61 S. Ct. 229, 234 (1940)
(preliminary injunction approved as “a reasonable measure to preserve the status quo pending a
final determination of the questions raised”).
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The standards for entry of a preliminary injunction in the Second Circuit, as set
out in its well-known decision in Jackson Dairy202 and its progeny,203 are well
established. As stated in Jackson Dairy, “the standard in the Second Circuit for injunctive
relief clearly calls for a showing of (a) irreparable harm and (b) either (1) likelihood of
success on the merits or (2) sufficiently serious questions going to the merits to make
them a fair ground for litigation and a balance of hardships tipping decidedly toward the
party requesting the preliminary relief.”204 Those requirements are easily met here.
1. 	Irreparable Injury
If this Court allows Composite to dispose of its remaining assets now—especially
after the Court’s summary judgment ruling, making Composite’s ultimate loss a
certainty—Elite will be irreparably injured. Composite will be judgment-proof. And
while a disposition of assets after this ruling would be a slam-dunk intentional fraudulent
conveyance, recovering Composite assets from diverse transferees may well be
impossible—and plainly extraordinarily burdensome and expensive.
Moreover, the risk of the dissipation of Composite’s assets in the absence of an
injunction barring such is very real. As more fully explained in an opinion of Judge
Woods of the district court205 (in which Judge Woods, on standing grounds, dismissed
Mr. Fletcher’s appeal from a 2014 order of this Court which, among other things,
202 	Jackson Dairy, Inc. v. H.P. Hood & Sons, Inc., 596 F.2d 70 (2d Cir. 1979) (“Jackson Dairy”).
203 	See, e.g., Christian Louboutin S.A. v. Yves Saint Laurent Am. Holdings, Inc., 696 F.3d 206, 215
(2d Cir. 2012) (applying the Jackson Dairy standard, though not citing Jackson Dairy directly);
UBS Fin. Servs., Inc. v. W. Va. Univ. Hosps., Inc., 660 F.3d 643, 648 (2d Cir. 2011) (citing
Jackson Dairy); Citigroup Global Mkts., Inc. v. VCG Special Opportunities Master Fund Ltd.,
598 F.3d 30, 35 (2d Cir. 2010) (same); In re Motors Liquidation Co., 513 B.R. 467, 479 (Bankr.
S.D.N.Y. 2014) (Gerber, J.) (same).
204 	See Jackson Dairy, 596 F.2d at 72.
205 	See Fletcher v. Ball (In re Soundview Elite Ltd.), 2015 U.S. Dist. LEXIS 60942, 2015 WL
2166023 (S.D.N.Y. May 8, 2015) (Woods, J.).
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preserved the consensual restraints on Composite’s assets206), Mr. Fletcher caused funds
to be withdrawn from Composite’s Wilmington Trust account under an order authorizing
only a lesser amount of funds to be withdrawn, and for different purposes. Mr. Fletcher
used frozen funds not just for the purposes of paying counsel for Composite to defend it
on these motions and in an investigation by the SEC (as this Court had authorized), but
for a host of impermissible purposes. As Judge Woods stated, Mr. Fletcher and the
Richcourt funds:
eventually provided a more detailed accounting of
the disbursed funds, which confirmed that they had
been used to pay various fees to Fletcher and his
associates and attorney, to post bonds in a separate
appeal in this Court, and to pay debts owed by other
entities owned by Fletcher.207
Because Mr. Fletcher’s prior actions were discovered quickly, it was possible,
incident to the contempt proceedings that followed, to secure the return of the
unauthorized withdrawals from Wilmington Trust, and the Trustee’s injury turned out not
to be irreparable. But she may not be as lucky the next time. Mr. Fletcher’s past
actions208 underscore this Court’s view that Mr. Fletcher cannot be allowed to do this
again.209 And if, as Composite contends, it is free to draw funds from the Wilmington
206 	Id. at *13-14; 2015 WL 2166023 at *4-5.
207 	Id. at *9-10 n.4, 2015 WL 2166023 at *4 n.4.
208 	The Court considers these to be more than sufficient to explain its concerns. It declines, on
hearsay grounds, to accept the Trustee’s suggestion that the Court additionally rely on the findings
of the FILB Trustee.
209 	In its response to the preliminary injunction motion, and the Trustee’s understandable concern that
Composite reneged on assurances to the Court that funds at Wilmington Trust would not be
dissipated, Composite justifies its actions on the contention that “none of the ‘assurances’…were
made by anyone with authority to act on behalf of Soundview Composite.” Composite PI Br. at 22
(ECF # 78). The Court disagrees.
In providing an alternative to an immediate TRO, Mr. Martin was speaking to advance the
interests not just of the Soundview Debtors, but also their affiliates—including, as Mr. Martin
expressly stated, Composite. Statements in the January 2014 Martin Letter and at the January 21,
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Trust account because it was not bound by the earlier promises to keep the funds safe, the
risk of injury to Elite unless this Court enters an order that unmistakably binds Composite
to the protection of those funds is even clearer.
2. 	Likelihood of Success
Here the Trustee has shown much more than a likelihood of success. Except for
ascertaining her monetary entitlement, and securing a district court judgment
implementing her recovery, the Trustee has already fully won. The question now is not
whether Elite will be entitled to the return of its investment (or what is left of it), but
when.
2014 hearing are admissible, as admissions, with respect to the preliminary injunction prong of the
Trustee’s motions, even though not admissible with respect to the summary judgment prong,
because of what Mr. Martin said and their obvious purpose. Those statements were expressly
made for the benefit of the Management Company and Mr. Fletcher personally, who were then
hoping to preserve their reputations. Mr. Fletcher and the Management Company then had a joint
interest in avoiding the entry of a TRO and subsequent preliminary injunction that could destroy
the remainder of their business. As Mr. Martin stated:
The Soundview Debtors wish to avoid entry of any TRO
under these circumstances out of concerns over continued
damage they might suffer among creditors and investors as a
result of the entry of a TRO. The repetition of loose
allegations, found for example in this Emergency Motion, e.g.,
see paragraph 7, where it is stated that “The JOLs proved that
the Fletcher Team is untrustworthy, committed fraud, and
mismanaged the funds of the Debtors,” if such allegations are
immediately followed by the entry of a TRO, could be used as
evidence against the Debtor and its affiliates in other
jurisdictions to establish that this Court sanctioned Soundview
Composite and these Debtors for some unspecified improper
conduct.
January 2014 Martin Ltr. at 2 (emphasis added).
Composite further tries to minimize the danger to Elite in the absence of a preliminary injunction
by saying that the Trustee does not allege that the purpose of taking money out of the Wilmington
Trust account was to defraud creditors in collecting on their debts or to frustrate the enforcement
of any future judgment that could be obtained by the Trustee. See Composite PI Br. at 22. Even if
an intentional fraudulent conveyance was not the purpose of that transfer, that was its effect. And
it gives the Court little solace in knowing that the prior actions were taken solely to achieve
personal gain.
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3. 	Serious Issues and Tipping of Equities
An alternative basis for relief—serious issues going to the merits, coupled with a
tipping of the equities in favor of the injunction—need not be considered to grant an
asset-freezing preliminary injunction here, because of the Trustee’s overwhelming
showing on the merits. But if it were, it would easily be satisfied. The Trustee has
shown much more than serious issues in her favor. And her showing is equally strong on
the tipping of the equities. Elite will suffer grievously if Composite’s funds are
dissipated, especially since the residual ownership of the funds effectively already
belongs to Elite. And Composite would not be prejudiced in the least; Composite has no
claim to the funds whatever. Anything in the Wilmington Trust account belongs to either
Elite or Composite’s creditors.210
B. Section 105(a) Doctrine
Additionally, where, as here, the plaintiff is a bankruptcy estate trying to recover
its assets for funding a reorganization—even under a liquidating plan—there is an
additional basis for injunctive relief preserving the property to be recovered. Section 105
of the Bankruptcy Code provides bankruptcy courts with a broad range of equitable
powers in proceedings within its jurisdiction, including the power to issue any order
“necessary or appropriate to carry out the provisions of this title.” Among the actions
that may be taken pursuant to this authority is an injunction freezing the assets of a
defendant when the plaintiff is seeking equitable relief, such as the recovery of property
210 	Normally the public interest is not a factor on preliminary injunction applications involving
private disputes. If it were, it would likewise strongly support issuance of injunctive relief as well.
There is a strong public interest in avoiding the dissipation of corporate assets that rightfully
should go to creditors or other stakeholders.
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or an accounting, both of which are requested here.211 Such relief may also be awarded
when it facilitates a reorganization plan. Here the Trustee is unlikely to confirm a plan
calling for an operational reorganization, but a reorganization plan can also include an
orderly liquidation—the most likely scenario here.
The applicable law relating to the exercise of the section 105(a) injunction power
was restated in the Calpine decisions.212 As noted in Calpine–District, courts have
applied the “traditional preliminary injunction standard as modified to fit the bankruptcy
context.”213 The Calpine–District court engaged in its analysis using the following
factors: (1) whether there is a likelihood of successful reorganization; (2) whether there is
an imminent irreparable harm to the estate in the absence of an injunction;214 (3) whether
the balance of harms tips in favor of the moving party; and (4) whether the public interest
weighs in favor of an injunction.215
211 	See Adelphia Commc'ns Corp. v. Rigas (In re Adelphia Commc’ns Corp.), 2003 U.S. Dist. LEXIS
9349, at *12, 2003 WL 21297258, at *4 (S.D.N.Y. June 4, 2003) (Daniels, J.) (“Adelphia-Rigas”)
(bankruptcy court has authority to issue preliminary injunction when plaintiff seeks equitable
remedy); In re Keene Corp., 168 B.R. 285, 292 (Bankr. S.D.N.Y. 1994) (“[T]he court can enjoin
activities that threaten the reorganization process or impair its jurisdiction.”).
212 	See Calpine Corp. v. Nevada Power Co. (In re Calpine Corp.), 354 B.R. 45 (Bankr. S.D.N.Y.
2006) (Lifland, C.J.) (“Calpine–Bankruptcy”), aff’d 365 B.R. 401 (S.D.N.Y. 2007) (Scheindlin,
J.) (“Calpine–District”).
213 	365 B.R. at 409 & n. 25, citing Hawaii Structural Ironworkers Pension Trust Fund v. Calpine
Corp., Inc. (In re Calpine Corp.), 2006 U.S. Dist. LEXIS 92499, 2006 WL 3755175, *4 (S.D.N.Y.
Dec. 20, 2006) (Castel, J.).
214 	However, it has been repeatedly held in this district that the usual grounds for injunctive relief,
such as irreparable injury, need not be shown in a proceeding for an injunction under section
105(a). See LTV Steel Co. v. Board of Educ. (In re Chateaugay Corp.), 93 B.R. 26, 29 (S.D.N.Y.
1988) (Leval, J., then a District Judge); Garrity v. Leffler (In re Neuman), 71 B.R. 567, 571
(S.D.N.Y. 1987) (Sweet, J.); C & J Clark America, Inc. v. Carol Ruth, Inc. (In re Wingspread
Corp.), 92 B.R. 87, 92 (Bankr. S.D.N.Y.1988) (Brozman, C.J.); Adelphia Communications Corp.
v. The American Channel, LLC (In re Adelphia Communications Corp.), 345 B.R. 69, 85 (Bankr.
S.D.N.Y. 2006). In this case, irreparable injury to the Debtors’ estate plainly is threatened
anyway, as Elite has an undisputed interest in the funds held by Composite and there is a
significant risk that Elite will be deprived of those funds (or a portion of them) in the absence of
an injunction.
215 	Calpine-District at 409.
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Here too the circumstances strongly favor imposing a freezing injunction on
Composite’s assets. The four factors favor the Trustee in every respect.
1. 	Likelihood of Success
Although any reorganization plan the Trustee might propose would almost
certainly be a liquidating plan, that does not foreclose this Court from finding the
requisite likelihood of success.216 The Trustee has had the support of the Soundview
Debtors’ creditors in her efforts to manage this chapter 11 case, and, as especially
relevant here, to recover assets to benefit the estate. Any chapter 11 plan she might
propose is unlikely to be controversial; after payments for expenses of reorganization, it
is likely to conform to traditional bankruptcy obligations for pari passu treatment after
satisfying any statutory priorities. Courts do not demand certainty of a successful
reorganization; they expect only reasonable prospects of such.217
2. 	Irreparable Harm
The Court has already addressed irreparable harm in the discussion above.
Additionally, courts in the Second Circuit have determined that irreparable harm need not
be shown as a requirement for issuance of a preliminary injunction in the bankruptcy
216 	Myerson & Kuhn v. Brunscwick Assocs. Limited Partnership (In re Myerson & Kuhn), 121 B.R.
145, 154 (Bankr. S.D.N.Y. 1990) (Abram, J.) (“Section 105 grants bankruptcy courts ample power
to enjoin actions excepted from the automatic stay which might interfere in the rehabilitative
process, whether in a liquidation or in a reorganization case.”) (citations omitted); The Lautenberg
Foundation v. Picard (In re Bernard L. Madoff Inv. Sec., LLC), 512 F. App'x 18, 20 (2d Cir. 2013)
(granting preliminary injunction under section 105(a) in liquidation under SIPA); McHale v.
Alvarez (In re The 1031 Tax Grp., LLC), 397 B.R. 670, 686 (Bankr. S.D.N.Y. 2008) (Glenn, J.)
(issuing preliminary injunction under section 105(a) to aid chapter 11 process even though chapter
11 trustee was pursuing chapter 11 liquidation plan)
217 	See Lyondell Chem. Co. v. Centerpoint Energy Servs Inc. (In re Lyondell Chemical Co.), 402 B.R.
571, 590 (2009) (Gerber, J.) (“Lyondell Chemical”) (“While if there are reasons to conclude that
the debtor(s) could not reorganize, that plainly should affect debtors' ability to invoke this factor,
where debtors are proceeding "on track" and have met the challenges they have faced so far, that is
sufficient. The ‘Likelihood of Successful Reorganization’ factor has been satisfied here.”)
(emphasis in original, internal citation omitted).
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context where the action to be enjoined is one that threatens the reorganization process or
which would impair the court’s jurisdiction with respect to the case before it.218 Thus,
where the movant shows “that the action sought to be enjoined would embarrass, burden,
delay or otherwise impede” the bankruptcy proceedings, or “if the stay is necessary to
preserve or protect the debtor’s estate,” a bankruptcy court may issue injunctive relief.219
3. 	Balance of Harms
The Court has likewise already addressed the balance of harms in the discussion
above. For reasons there stated, Composite would not be harmed in the slightest by the
preservation of the status quo, and Elite would be grievously injured if the investment it
is about to recover is dissipated first.
4. 	Public Interest
Here too, the Public Interest factor favors the Trustee. It is in the public interest
that entities meet obligations to creditors and other stakeholders, and it is in the public
interest that commercial obligors not dissipate their assets--or, when they have already
done so, that they not do it again.
For these reasons too, the Court finds issuance of an asset-freezing injunction
appropriate.
218 	See id. (“Courts in the Second Circuit have recognized a limited exception to the irreparable harm
requirement for issuance of a preliminary injunction in the bankruptcy context where the action to
be enjoined is one that threatens the reorganization process or which would impair the court's
jurisdiction with respect to the case before it. Thus, where the movant shows ‘that the action
sought to be enjoined would embarrass, burden, delay or otherwise impede the reorganization
proceedings or if the stay is necessary to preserve or protect the debtor's estate or reorganization
prospects, the Bankruptcy Court may issue injunctive relief.’”) (citing Alert Holdings, Inc. v.
Interstate Protective Servs., Inc. (In re Alert Holdings, Inc.,), 148 B.R. 194, 200 (Bankr. S.D.N.Y.
1992) (Brozman, C.J.)).
219 	Id. at 591.
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C. 	Grupo Mexicano Concerns
Additionally, Composite contends that the Court cannot preserve the status quo by
reason of limits imposed under the Supreme Court’s decision in Grupo Mexicano.220
Once more, the Court disagrees.
Composite’s Grupo Mexicano defense is unsupported for two reasons. First, it
has been repeatedly held, in this District and elsewhere, and even at the Circuit Court of
Appeals level,221 that Grupo Mexicano does not constrain the powers to freeze the
disposition of assets held by bankruptcy courts, whose equitable authority is not derived
from generally applicable, pre-1789 authority. As the Third Circuit, speaking through
Judge Ambro, stated in Owens Corning:
In short, the Court's opinion in Grupo Mexicano
acknowledged that bankruptcy courts do have the
authority to deal with the problems presented by
that case. One way to conceptualize this idea is to
recognize that, had the company in Grupo
Mexicano been in bankruptcy, the bankruptcy court
would have had the authority to implement the
remedy the district court lacked authority to order
under general equity power outside the bankruptcy
context.222
220 	Grupo Mexicano de Desarrollo, S.A. v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999) (“Grupo
Mexicano”).
221 	See In re Owens Corning, 419 F.3d 195 (3rd Cir. 2005) (“Owens Corning”) (quoted in main text);
Adelphia-Rigas, 2003 U.S. Dist. LEXIS 9349 at *12, 2003 WL 21297258 at *4 (“Grupo
Mexicano’s holding specifically applied to the district courts, and therefore is inapplicable in the
bankruptcy court context.”); Shubert v. Premier Paper Prods., LLC, (In re American Tissue, Inc.,),
2006 Bankr. LEXIS 3266, *10-11, 2006 WL 3498065, *3 (Bankr. D. Del. Dec. 4, 2006) (Gross, J.)
(“American Tissue”) (“The duty of the Court is to preserve the relative positions of the parties
pending a trial on the merits.… In the bankruptcy setting, the Court should be especially sensitive
to situations which could result in the dissipation of estate assets…and the Court's responsibility to
prevent a wrongful taking of the bankrupt's assets provides it with a broader equitable power.”)
(citations, including a quotation from the portion of Owens Corning that distinguished Grupo
Mexicano, omitted).
222 	419 F.3d at 209 n.14 (emphasis in original).
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Here, where the Trustee is attempting to marshal the Elite estate’s assets for the benefit of
its creditors, and to protect those creditors from efforts to dissipate property that may
technically not yet be estate property but will be imminently, the Third Circuit’s analysis
in Owens Corning makes for a perfect fit.
Second, the Court here would have the authority to issue an asset freezing
injunction against Composite even if Grupo Mexicano applied to bankruptcy courts.
Courts have routinely held that when equitable claims have been asserted, the Grupo
Mexicano rule barring issuance of a preliminary injunction freezing assets does not
apply.223 The fact that a plaintiff may also have valid claims for damages does not result
in a forfeiture of the asset-freezing power.224
223 	See, e.g. Rubin v. Pringle (In re Focus Media, Inc.), 387 F.3d 1077, 1085 (9th Cir. 2004) (“Focus
Media”), cert. denied, 544 U.S. 923 (2005) (“we hold that where, as here, a party in an adversary
bankruptcy proceeding alleges fraudulent conveyance or other equitable causes of action, Grupo
Mexicano does not bar the issuance of a preliminary injunction freezing assets”); CSC Holdings,
Inc. v. Redisi, 309 F.3d 988, 996 (7th Cir. 2002) (“(CSC Holdings”) (Grupo Mexicano “held that a
district court may not issue an injunction freezing assets in an action for money damages where no
equitable interest is claimed”; where equitable relief—for an accounting and resulting profits—
was sought, in the alternative to claims for money damages, Grupo Mexicano was inapplicable,
and asset-freezing injunction was proper); United States ex rel. Rahman v. Oncology Assocs.,
P.C., 198 F.3d 489, 496-97 (4th Cir. 1999) (“Rahman”) (observing, in Civil Rule 64 context, that
“when the plaintiff creditor asserts a cognizable claim to specific assets of the defendant or seeks a
remedy involving those assets, a court may in the interim invoke equity to preserve the status quo
pending judgment where the legal remedy might prove inadequate and the preliminary relief
furthers the court's ability to grant the final relief requested”); Paradigm Biodevices, Inc. v.
Centinel Spine, Inc., 2013 U.S. Dist. LEXIS 66858, at *5-7, 2013 WL 1915330, at *2-3 (S.D.N.Y.
May 9, 2013) (Furman, J.) (same, citing, inter alia, Rahman, and noting that “as many courts have
held, ‘where plaintiffs seek both equitable and legal relief in relation to specific funds, a court
retains its equitable power to freeze assets’”); Tiffany (NJ) LLC v. Forbse, 2012 U.S. Dist. LEXIS
72148, at *37 & n.12, 2012 WL 1918866, at *12 n.12 (S.D.N.Y. May 23, 2012) (Buchwald, J.)
(“Tiffany”) (claim for accounting for profits under the Lanham Act constituted discretionary
equitable relief sufficient to give court the equitable power to issue a prejudgment restraint on the
defendants' assets), reconsideration with respect to other issues denied, 2012 U.S. Dist. LEXIS
121361 (S.D.N.Y. Aug. 23, 2012), aff'd in part, vacated in part on other grounds, Tiffany (NJ)
LLC, Tiffany & Co. v. China Merchants Bank, 589 F. App'x 550 (2d Cir. 2014); United States v.
Keyspan Corp., 763 F. Supp. 2d 633, 638-39 & n.3 (S.D.N.Y. 2011) (Pauley, J.) (claim for
disgorgement of revenues earned under a swap allegedly executed for the purpose of restraining
trade was equitable in nature, making Grupo Mexicano inapplicable). See also Collier ¶ 7065.01
(citing those and many other cases).
224 	See, e.g., Adelphia-Rigas, 2003 U.S. Dist. LEXIS 9349, at *12-14, 2003 WL 21297258 at *5
(where plaintiff estate sought not only money damages, but also equitable relief—imposition of a
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Here, the Trustee has asked for an accounting, which is a classic basis for an
asset-freezing order,225 and which, as recognized by the First Department in Kaminsky v.
Kahn,226 “is a well-recognized form of equitable relief.”227 Here—especially given
Composite’s position with respect to all of the things that need to be done in order to
compute Elite’s entitlement—the Court considers an accounting to be a perfectly
appropriate remedy.
Composite disputes that, however, arguing that under New York law, a plaintiff
seeking an accounting must show “relations of a mutual and confidential nature.”228
From that, Composite contends (1) that this standard requires the existence of a fiduciary
relationship between Elite and Composite, and (2) that “no [confidential or fiduciary]
relationship exists between the sellers and buyers of corporate stock when dealing at arms’
length.”229 But neither contention supports Composite’s position here.
Composite’s contention that a fiduciary relationship is essential to an accounting
was expressly rejected by the Appellate Division in Kaminsky. There the First
Department reversed a trial court ruling that had dismissed a claim for an accounting when
constructive trust and a demand for an accounting—Grupo Mexicano was inapplicable); Motorola
Credit Corp. v. Uzan, 202 F. Supp. 2d 239, 250 (S.D.N.Y. 2002) (Rakoff, J.) , rev'd with respect
to other issues, 322 F.3d 130 (2d Cir. 2003) (Grupo Mexicano did not bar plaintiffs' request for a
preliminary injunction since, in addition to asserting money damages, plaintiffs there also asserted
a demand for a constructive trust, and other equitable remedies); Wishnatzki & Nathel, Inc. v. H.P.
Island-Wide, Inc., 2000 U.S. Dist. LEXIS 15664, at *3-5, 2000 WL 1610790, *1 (S.D.N.Y. Oct.
26, 2000) (Martin, J.) (“courts since Grupo Mexicano have found that where plaintiffs seek both
equitable and legal relief in relation to specific funds, a court retains it[s] equitable power to freeze
assets”).
225 	See Focus Media, 387 F.3d at 1085; CSC Holdings, 309 F.3d at 996; Tiffany, 2012 U.S. Dist.
LEXIS 72148 at *37 & n.12, 2012 WL 1918866 at *12 n.12; Adelphia-Rigas, 2003 U.S. Dist.
LEXIS 9349 at #12-14, 2003 WL 21297258 at *5.
226 	23 A.D.2d 231, 259 N.Y.S.2d 716 (1st Dept. 1965) (“Kaminsky”).
227 	23 A.D.2d at 240, 259 N.Y.S.2d at 726.
228 	Composite PI Br. at 33.
229 	Id. (brackets in original).
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the trial court believed that the plaintiff’s allegations “did not establish such a relationship
between the parties, fiduciary or otherwise, as would entitle the plaintiff to an
accounting.”230 In Kaminsky, the plaintiff had entrusted stock with the defendant,231 with
an interest in the dividends received on the stock and any proceeds from its sale, after the
payment of stated obligations.232 The plaintiff had a right of “first option” to get the stock
back if the defendant received an offer for it,233 which the defendant did not honor. In
rejecting the contention that a fiduciary relationship was required in order to justify an
accounting, the First Department stated:
[T[he right of the plaintiff to judgment [for an
accounting] is not to be foreclosed upon the narrow
ground, urged by the defendant, that the agreement
between the parties did not create a fiduciary
relationship and that, therefore, the plaintiff is not
entitled to an accounting. The question instead is,
did the plaintiff, on the basis of the allegations of
his pleadings, establish a right to any relief at the
hands of the court, and, if so, were the directions for
an accounting and the other provisions of the
judgment proper.234
Then, obviously, Composite cannot rely on a general rule that “no [confidential or
fiduciary] relationship exists between the sellers and buyers of corporate stock when
dealing at arms length.” Here the relationship between Elite and Composite—with Mr.
Fletcher, his colleagues, and the Management Company on both sides of the
relationship—was most decidedly not at arms’ length. And it is at least arguable, if not
obvious, that Mr. Fletcher’s failure to complete the redemption when he was still at the
230 	23 A.D.2d at 235, 259 N.Y.S.2d at 721.
231 	23 A.D.2d at 234, 259 N.Y.S.2d at 720.
232 	Id.
233 	23 A.D.2d at 235, 259 N.Y.S.2d at 721.
234 	23 A.D.2d at 236, 259 N.Y.S.2d at 721-22.
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helm of Elite was a breach of the fiduciary duties he owed to Elite. Under these
circumstances, the Court is unwilling to regard cases dealing with ordinary buyer and
seller relationships in the securities market to be controlling.
Additionally, Composite disregards another basis for an accounting under New
York law: “The fact that a case involves the consideration and adjudication of issues
relating to an account of a complicated character, even in the absence of any element of
mutuality or of trust relationship, is ordinarily a sufficient reason for a court of equity to
assume jurisdiction thereof, upon the ground of its superior equipment to handle and
dispose of such issues.”235
Here the Trustee has sought both equitable and legal remedies in this adversary
proceeding, including an equitable remedy—for an accounting, to which the Court
believes, if the Trustee’s entitlement cannot more easily be determined,236 the Trustee
235 	1 N.Y. Jur. 2d Accounts and Accounting § 34 (citing Townsend v. John B. Carter Co., 165 A.D.
973, 150 N.Y.S. 757 (1st Dep’t 1914); Chase v. Knickerbocker Phosphate Co., 32 A.D. 400, 53
N.Y.S. 220 (2d Dep’t 1898)). These authorities are old, but none has been overruled. And this
same principle has been articulated in courts in other jurisdictions very recently. Under Florida
law, for example, to be entitled to an equitable accounting, “a party must show either (1) a
sufficiently complicated transaction and an inadequate remedy at law or (2) the existence of a
fiduciary relationship.” Zaki Kulaibee Establishment v. McFliker, 771 F.3d 1301, 1310 & n.21
(11th Cir. 2014) (“Zaki Kulaibee”) (emphasis added); Blitz Telecom Consulting, LLC v. Peerless
Network, Inc., 2015 U.S. Dist. LEXIS 170093, 2015 WL 9269413, at *8 (M.D. Fla. Dec. 21,
2015) (“Blitz Telecom”) (same, quoting Zaki Kuaibee). In Zaki Kulaibee, the Eleventh Circuit
found an accounting to be the appropriate remedy where “without the foundational information
that an accounting would have provided, [the plaintiff] was incapable of quantifying its damages,
and was thereby precluded from obtaining any meaningful relief.” 771 F.3d at 1314.
While an equity court can “exercise its discretion in the matter and deny the accounting where it
appears that the complexity is not of such extent or degree as to render legal remedies inadequate,
or that the accounting would result in a great inconvenience and possible oppression to the
defendant,” 1 N.Y. Jur. 2d Accounts and Accounting § 34, it is too soon for this Court to make
such a determination in this case. Composite contends that the Trustee has failed so far to
establish her damages. The reason for that, in whole or substantial part, is that Composite, which
has much better information than the Trustee, has failed to provide an NAV or otherwise provide
the information from which the Trustee’s redemption entitlement can be ascertained. This is the
kind of situation in which authority like Zaki Kulaibee authorizes an accounting.
236 	It sometimes is the case that before a court tries to fix damages by more traditional means, it
cannot determine whether an accounting will ultimately be necessary. The Kaminsky court,
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should be entitled. For this reason too, Grupo Mexicano is not a bar to an asset-freezing
injunction here.
D. Judicial Estoppel
Finally, the Trustee relies not just on traditional asset-freezing doctrine, discussed
above, but also judicial estoppel. She is right in this respect as well. Though judicial
estoppel did not apply to her request for summary judgment, it applies to her request for
the continued asset freeze.
recognizing that, held that the possibility that traditional means of fixing damages would be
sufficient did not destroy the potential right to an accounting. The Kaminsky court stated:
At this stage of the action, it is immaterial that the relief
eventually to be accorded to the plaintiff by a final judgment
herein may be limited to a monetary recovery. … The court,
within the framework of the pleadings in any case, may draw
upon its broad reservoir of powers established by law or
formulated under the principles of equity, and utilize any of
them to afford complete relief to a party. … And, in a proper
case, an accounting may be directed for the purpose of fixing
the amount of such damages.
23 A.D.2d at 236-37, 259 N.Y.S.2d. at 721-22 (emphasis added).
Some courts have criticized Kaminsky, see Nero v. RCA, 1982 U.S. Dist. LEXIS 11848 (S.D.N.Y.
Mar. 22, 1982) (Conner, J.), or regarded its very direct statement that a fiduciary relationship is
not required to be dictum or overtaken by time. See Chambers v. Weinstein, 44 Misc. 1224(A),
997 N.Y.S.2d 668 (Table) (Supr. Ct. N.Y. Co. 2014) (Unreported Disposition). By the same
token, Kaminsky has been relied on in this District, for the broader principle that plainly emerges
from it: “The remedy of an accounting as provided under New York law is available where
special circumstances are present warranting equitable relief in the interest of justice.” Shimer v.
Fugazy (In re Fugazy Express), 114 B.R. 865, 876 (Bankr. S.D.N.Y. 1990) (Lifland, C.J.), aff’d
124 B.R. 426 (S.D.N.Y. 1991) (Duffy, J.), appeal dismissed, 982 F.2d 769 (2d Cir. 1992).
Respectfully, this Court has difficulty seeing how Kaminsky, especially in all the respects it is
relevant here, can be regarded merely as dictum. It conveys a very strong message that when
necessary to provide adequate relief, courts have great flexibility as to the appropriate remedy,
including by means of an accounting. At the very least, it is obvious that the Trustee has sought
the accounting in good faith.
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As the Trustee properly observes, her preliminary injunction motion is one “the
Trustee should not have to bring.”237 It was necessitated by Composite’s attempt to
renege on assurances given to this Court when not just the Soundview Debtors, but also
Composite, “sign[ed] onto”238 a consensual freeze on the assets in the Wilmington Trust
account, to avoid the TRO and preliminary injunction that would have been entered
against them in January 2014.
As discussed above,239 in deciding whether judicial estoppel is warranted, courts
in this circuit consider whether the party’s later position is clearly inconsistent with its
earlier position; the party succeeded in persuading a court to accept the party’s earlier
position; and the party seeking to assert the inconsistent position would derive an unfair
advantage, or impose an unfair detriment on the opposing party. Here Composite’s
conduct satisfies all three of those requirements.
Back in January 2014, the JOLs filed an emergency motion seeking a TRO and
preliminary injunction seeking essentially the same relief the Trustee seeks now. The
Soundview Debtors, and, importantly here, Composite—which as this Court was told,
“are managed by the same entity, Soundview Capital Management,” wanted to avoid
that. The Court was told that they “wish[ed] to avoid entry of any TRO under these
circumstances out of concerns over continued damage they might suffer among creditors
and investors as a result of the entry of a TRO.”240 And they agreed that the entry of the
freeze was appropriate, first in the January 2014 Martin Letter and then again in the
237 	Trustee PI Br. at 1 (ECF # 74).
238 	See January 2014 Martin Letter, discussed at page 21 supra.
239 	See page 60 supra.
240 	January 2014 Martin Letter at 2.
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January 2014 Martin Statements in open court. Based on that statement, and the
voluntary undertaking, the Court found the JOLs’ TRO application moot.
Composite has now taken exactly the opposite position. The earlier position
induced the Court not to then enter the TRO, as the Court believed what it was told: that
Composite’s agreement to the consensual freeze—one that “Composite has agreed it will
sign onto”—would be sufficient. Now Composite has reneged on the promise on which
the other parties, and the Court, relied.
Composite’s decision to “sign onto” a consensual asset freeze did not happen by
accident. Counsel for the JOLs was nervous about the lack of a TRO and subsequent
preliminary injunction, and looked for assurances that a consensual freeze would be
sufficient. At the hearing on the TRO, James Beha, Esq., counsel for the JOLs, began the
colloquy that led to the representation upon which the JOLs and the Court later relied:
MR. BEHA: Your Honor, the JOLs are simply
concerned about this cash being dissipated before
this Court makes a decision. We are happy to take
Mr. Martin’s representation. Our only concern is
whether—we understand that Mr. Martin is debtors’
counsel. Our only concern is whether he has the
ability to bind all of the parties that may have the
ability to dissipate these funds. And if he is
representing that he does, and he is representing that
the Fletcher team at large will not dissipate these
funds before the Court basically sorts out what’s
happening here, then that is good enough for us. …
But again, if Mr. Martin is able to ensure that these
funds do not go anywhere before Your Honor
makes a decision, then I think that should be good
enough.241
Mr. Martin stated, in response:
241 	Tr. of Hrg. of 1/21/2014 (ECF No. 157) at 8 (emphasis added).
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Yes. I mean, without subjecting myself to a
motion to be disqualified as representing parties that
I shouldn’t be representing and I don’t represent,
the managers of the Soundview debtors, who are
my clients, are the identical managers of the [sic.]
Soundview Composite, which is the entity that
owns these funds. …
I have the representation from those people
who do stand as my clients, with respect to the
Soundview debtors, that Soundview Composite will
do nothing to move those funds absent the
presentation of an acceptable consent order to the
Court.
I take that representation at face value. I accept it. I
think the—particularly given the long road that we
have all traveled on in these cases, that it would be
an exercise that would make no sense to do
something other—something else with these funds,
other than protect them and to make sure that to the
extent that Soundview Elite has the primary claim,
that Soundview Elite’s claim is satisfied.242
Documents in the record confirm that many members of the Fletcher team,
including Mr. Fletcher himself, reviewed and approved the January 2014 Martin Letter
before it was submitted to this Court.243 Mr. Fletcher responded to Mr. Martin’s draft of
the letter with “Thank you very much. This seems good.”244 But astoundingly,
Composite claims that even Mr. Fletcher’s review and approval of the January 2014
Martin Letter was not enough to bind him to the statements in the January 2014 Martin
Letter.245 Given the express representations made to the Court, the Court finds
242 	Id. at 9.
243 	See Exh. T to Declaration of Michael J. Dailey in Support of Trustee’s Motion for a Preliminary
Injunction, dated 12/1/2014 (ECF No. 75).
244 	Id.
245 	See Composite PI Br. at 10 (“Similarly, though Fletcher had the capacity to act as Soundview
Composite’s agent, here, as in Teamsters, the Trustee has not cited any evidence that Fletcher was
acting in that capacity when he reviewed and approved the January 21, 2014 Letter.”).
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Composite’s protestations that it was not really bound by them, and that they were made
without authority, absurd.
The Court finds the requisite change in position; reliance by the Court; and
unfairness all to be present here. It holds that Composite is judicially estopped from now
contending that the continued asset freeze is inappropriate.
Conclusion
For the reasons set forth below, the Court grants summary judgment to the
Trustee on all issues other than the amount of Elite’s entitlement, and the extent to which
other creditors’ claims are senior to, or pari passu with, Elite’s claims. The Court grants
partial summary judgment to the Trustee determining that:
(1) 	Composite’s only outside investor is Elite;
(2) 	Elite duly requested a full redemption, by no later than May 2012;
(3) 	The trade date for Elite’s redemption was September 30, 2011;
(4) 	Composite’s redemptions have never been suspended;
(5) 	Composite’s redemptions have never been gated;
(6) 	There has been no reason for Composite to gate redemptions, since
Composite has only one investor;
(7) 	Composite had the right to gate redemptions, but never exercised
that right;
(8) 	Elite’s redemption request was outstanding as of May 2012, and
remains outstanding today;
(9) 	The value of Elite’s redemption request, as estimated by Composite,
ranges from $5 million to $3.8 million, and thus is no less than $3.8 million;
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(10) 	Composite failed to comply with its obligations to honor Elite’s
redemption request;
(11) 	Composite must honor Elite’s redemption request;
(12) 	Composite owes Elite the NAV of Elite’s shares in Composite as of
the close of business of September 30, 2011;
(13) 	If less elaborate means to fix Elite’s monetary entitlement are
impractical, the Trustee is entitled to an accounting for the purpose of fixing
Elite’s entitlement as a consequence of its redemption demand.
The Court will hold a conference to ascertain whether discovery is necessary
incident to the trial on the computation of Elite’s entitlement pursuant to its redemption
demand, or if there are any other impediments to a prompt trial to fix the amount of
Elite’s entitlement. Counsel should be prepared to address the extent to which other
creditors’ claims need to be ascertained; the amount of any senior creditor claims; the
extent to which the Court must rule on the priority of any claims asserted against
Composite; and the extent to which any other matters need to be judicially determined
before this action can be sent up to the district court for entry of a final judgment.
A trial in the bankruptcy court will thereafter be held as soon as practical to
resolve the open issues.
The Trustee is to settle two orders (one with respect to summary judgment,246 and
one with respect to the continued asset freeze) consistent with these rulings.
Dated: New York, New York 	s/Robert E. Gerber
January 4, 2016 	United States Bankruptcy Judge
246 	The Trustee’s order granting partial summary judgment may include determinations on matters
not included in the above list if they are supported by the Court’s rulings as stated in this Decision.
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APPENDIX A

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Pg 84 0f 84"

Fletcher Asset Management, Inc. etlieeccceroctt re

50%

04/16 16:09:30 Main Document

RPGP, Limited

100%

Vv

Richcourt Acquisition Inc. (BVI)

85%

Richcourt Holding Inc. (BVI)

100%

Vv

Soundview Capital Management

Ltd.
100% Voting
Control of Each
Debtors
. Soundview Elite, Ltd
° Soundview Premium, Ltd
) Soundview Star, Ltd
. Elite Designated
2547031 °
e

Premium Designated
Star Designated

1 00%

\

Fletcher Income Arbitrage Fund, LP

Equity Income Corporation

100%

Multi Manager Investors, L.L.C.

93%

N

y

Fletcher International, Inc.

7%

100%

Fletcher International, Ltd