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Bullmore v Ernst & Young Cayman Islands 2006 NY Slip Op 30069(U) April 12, 2006 Supreme Court, New York County Docket Number: 0104314/2005 Judge: Charles E. Ramos Republished from New York State Unified Court System's E-Courts Service. Search E-Courts (http://www.nycourts.gov/ecourts) for any additional information on this case. This opinion is uncorrected and not selected for official publication.

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SCANNED ON 411912006

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SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW Y0RK:COMMERCIAL DIVISION _ _ _ _ _ _ _ _ - _ _ - - - - - _ _ - _ - - - - - - - - - - - - --X - - - -THE0 BULLMORE and PHILLIP S. STENGER, as Joint Official Liquidators of BEACON HILL MASTER LTD. (In Official Liquidation), Plaintiffs, Index No. 104314/05
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against -

ERNST & YOUNG CAYMAN ISLANDS, ERNST & YOUNG L L P , BEACON HILL ASSET MANAGEMENT, LLC, J O H N D. BARRY, THOMAS DANIELS, JOHN IRWIN, MARK MISZKIEWICZ, and ATC FUND SERVICES (CAYMAN) LIMITED f/k/a ATC FUND ADMINISTRATORS (CAYMAN) LIMITED, Defendants.
Charles Edward R a m o ~ ,J.S.C.:

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In motion sequence 1, defendant Ernst LLP"), moves to dismiss t h e complaint.

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Young LLP ("E&Y

In motion sequence 2, defendant Beacon Hill Asset Management, LLC, and defendants John Barry, Mark Miszkiewicz,
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Thomas P. Daniels and John Irwin, move t o dismiss the cornbYaht.

In motion sequence 3 , defendant Ernst
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Young
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Cayman")

moves to dismiss t h e complaint.

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!< y T i ; ; In motion sequence 4 , defendant ATC Fund Services fCayman1
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Limited ( "ATC"

, moves to dismiss the complaint.

The above motions are herein consolidated f o r disposition

and are disposed of in accordance with t h e following memorandum.
Background

This action a r i s e s o u t of t h e collapse of three hedge funds in an alleged valuation fraud scheme.

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The action was instituted by plaintiffs The0 Bullmore and Phillip Stenger, t h e appointed joint official liquidators of plaintiff hedge fund Beacon Hill Master Ltd. ("Master Fund"), a Caymanian exempted company, currently winding up pursuant t o the Cayman Islands Companies Law. three feeder hedge funds. Hill") Defendant Beacon Hill Asset Management, LLC (\Beacon
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The Master Fund is comprised of

by its four principals, the individually named defendants Barry,
Daniels, Irwin and Miszkiewicz (collectively, the "Beacon Hill Defendants"), was the investment manager for t h e Master Fund,

which holds the investment assets of, and conducts trading for
the three feeder hedge funds which comprise the Master Fund.' Pursuant to an investment management agreement ("Agreement"),Beacon Hill was to manage and value securities in the Master Fund's portfolio, according to specified valuation procedures and given nearly complete discretion in effecting transactions on the Master Fund`s behalf. Beacon Hill`s

compensation was based, in part, on the pro rata share of the combined assets and performance of the Master Fund's portfolio in addition to an incentive fee based upon the p e r c e n t a g e of net

The three feeder funds are Bristo Fun( , Ltd. ('Bristol"), Safe Harbor Fund, L.P. ("Safe Harbor"), and Milestone Plus Partners, L.P. ("Milestone") (collectively, the \FeederFunds").

The Feeder Funds were managed independently by Beacon Hill until January of 2002, when Beacon Hill changed its management approach to a master feeder f u n d structure where all trading was collectively conducted pursuant to a single investment strategy.
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appreciation and the net asset value ( " N A V S " ) , ~of the Master Fund's securities (Agreement,

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