MIAMI, FL– March 23, 2021-After finding themselves hopelessly insolvent, four related Florida companies in the business of perfume importation and distribution invoked Chapter 727 of the Florida Statutes, a state court alternative to filing for bankruptcy in federal court. The process that they began, an “Assignment for the Benefit of Creditors,” required that the companies assign all of their assets, along with all of their books, records, and any legal claims they may have had, to an assignee that is statutorily empowered and required to liquidate the assets and maximize the recovery of the companies’ creditors. That assignee, Leslie S. Osborne (the “Assignee”), hired Bast Amron to serve as his counsel. Firm attorneys Brett M. Amron, Scott N. Brown, and Hayley G. Harrison immediately set about gathering up all relevant books and records and assessing the potential claims of the assignment estate. When former management of the companies challenged the Assignee’s ability to review and subpoena pre-assignment communications between the companies and their former counsel, the Bast Amron team moved for a ruling from the court on the issue. Gamely taking up the issue, Judge William Thomas of the 11th Judicial Circuit’s Complex Business Litigation division granted the Assignee’s motion and found that control of the privilege passed to the Assignee by virtue of the assignments. In coming to his decision, Judge Thomas considered Bast Amron’s argument regarding the purpose of Chapter 727 and the nature of a Chapter 727 assignee’s duties and found that the Assignee would be unable to fully or effectively discharge his obligations without full and complete access to all books, records, and communications of the companies. The former managers appealed Judge Thomas’ ruling to the Third District Court of Appeal, arguing that Judge Thomas’ ruling represented a departure from the essential requirements of law and was without precedent.
Continuing to represent the Assignee through the appeal, Brett M. Amron, Scott N. Brown, and Peter J. Klock, II argued that the former managers’ argument reflected a fundamental misunderstanding of the nature and purpose of Florida’s assignment for the benefit of creditors statute, and that Judge Thomas ruled correctly after looking to federal bankruptcy law for guidance on the issue of control of the privilege (it is well-established that the privilege passes to a trustee in bankruptcy, but the analogous issue of whether it similarly passes to an assignee for the benefit of creditors had never been previously addressed). Within only months of briefing the issues, a panel of the Third DCA, composed of Chief Judge Kevin Emas and Judges Bronwyn Miller and Thomas Logue, upheld Judge Thomas’ ruling, finding that the petitioners had failed to establish his ruling represented a departure from the essential requirements of law and citing extensively to Florida precedent approving the practice of Florida jurists looking to federal bankruptcy law for guidance when dealing with novel issues in assignments for the benefit of creditors. The petitioners subsequently moved for rehearing and for the Third DCA to stay the issuance of its mandate, both of which were forcefully and successfully opposed by the Bast Amron team. Thereafter, the petitioners requested that the Supreme Court of Florida accept jurisdiction and review the Third DCA’s opinion, which review remains pending.
Counsel for former management: Kendall Coffey, Kevin Kaplan, Jeff Crockett, and Jared Whaley of Coffey Burlington LLP
The published decision of the Third District Court of Appeal is available on Westlaw as Assignment for Benefit of Creditors of Miami Perfume Junction, Inc. v. Osborne, No. 3D20-1317, 2020 WL 7636020 (Fla. 3 DCA Dec. 23, 2020).