Yacovi v. Rubin and Rudman, L.L.P. (In re Yacovi)
- Citation:
- No. 10-1673 (1st Cir. 2011). Not for Publication in West's Federal Reporter.
- Tag(s):
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- Ruling:
- The Bankruptcy Court did not abuse its discretion when it approved a settlement between the Bankruptcy Trustee and a third-party where the Trustee investigated Debtor's claims against the third-party and determined there was a "real risk" that the claims would be unsuccessful if fully litigated and that the proposed settlement was in the best interests of the estate.
- Procedural context:
- Debtor appeals from ruling of the District Court affirming Bankruptcy Court's approval of a settlement entered into by the Bankruptcy Trustee under Federal Rule of Bankruptcy Procedure 9019.
- Facts:
- Debtor reopened his bankruptcy case to pursue a malpractice claim against his former attorneys. The Bankruptcy Trustee performed an investigation as to the strength of the malpractice claim which included discussing the claim with Debtor's counsel and former attorneys, reviewing a previous arbitration decision from which the malpractice claim was based, reviewing the state court documents seeking to enforce the arbitration award, and reviewing Debtor's proposed state court malpractice complaint. The Trustee concluded that the Debtor's claim had serious flaws that presented a “real risk” that the estate would not recover on the claim if the claim were fully litigated. Therefore, the Trustee entered into a settlement agreement with the Debtor's former attorneys. In the settlement agreement, the attorneys agreed to pay the Trustee $25,000 and waive all claims against the estate. The Debtor contested the settlement by claiming that the Trustee did not perform a thorough investigation because the Trustee did not talk to Debtor's counsel despite the Trustee’s assertion that it had discussed the merits with Debtor’s counsel. The Debtor also claimed that the Trustee's failure to consider allowing Debtor's counsel to pursue the claims on contingency was an error that should have prevented the Bankruptcy Court from approving the settlement. The Bankruptcy Court found that the Trustee had performed a thorough enough investigation to approve the settlement under Federal Rule of Bankruptcy Procedure 9019. Debtor appealed.
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