12-17-20 - As Seen in LAW.COM - Tom Girardi's Creditors Planning Involuntary Bankruptcy Petition, Lawyer Says

Posted on December 17, 2020

Tom Girardi's Creditors Planning Involuntary Bankruptcy Petition, Lawyer Says

Creditors told U.S. District Judge Thomas Durkin they were planning to file within 48 hours, a lawyer for a litigation funder said at a hearing Wednesday. The court held off appointing a trustee to wait for the filing.

By Amanda Bronstad | December 16, 2020 at 06:37 PM

Creditors of Tom Girardi and his Los Angeles law firm, Girardi Keese, are planning to file an involuntary bankruptcy petition within 48 hours, according to a lawyer for a litigation funder at a hearing Wednesday.

U.S. District Judge Thomas Durkin of the Northern District of Illinois called the telephonic hearing to discuss the appointment of a trustee to manage the assets of Girardi and his firm, which he froze after imposing a $2 million judgment against them Monday. Durkin, who oversees lawsuits brought against Boeing over the Max 8 aircraft crash in 2018 in Indonesia, had concerns that Girardi and his firm may have stolen money from their clients.

At Wednesday’s hearing, an attorney for California Attorney Lending II told Durkin that other creditors were planning to file an involuntary bankruptcy petition within 48 hours, which would make an appointed trustee unnecessary.

“I think it is very important for the court to know that involuntary bankruptcy petitions have been prepared for the Central District of California, and I think the appointment of a bankruptcy trustee under the bankruptcy code would answer all the questions regarding funding for the estate, the appointment of a trustee, having a trustee on the West Coast knowledgeable of California law,” said William F. Savino, of Woods Oviatt Gilman in Buffalo, New York. “It’s best to wait 48 hours to see if that petition gets filed.”

He did not name the creditors who planned to file the petition but said they had claims “in the seven digits.” When asked in an email after the hearing, he said they were “multiple, confidential, unsecured, non-insider creditors.”

California Attorney Lending, which has a $6.2 million judgment against Girardi, is one of the defendants in a Dec. 2 lawsuit brought by Edelson’s Jay Edelson against Girardi Keese, Girardi and others, insisting that they embezzled settlement funds from the families of victims of the Lion Air Flight 620 crash.

Upon hearing this information, Durkin decided not to appoint a trustee, but wait for the bankruptcy petition, though the asset freeze remains in place.

The judge ordered Monday’s hearing after Edelson, who is serving as co-counsel to Girardi’s clients in the litigation over the Lion Air litigation, filed a Dec. 2 motion to hold Girardi Keese in contempt of court orders for failing to pay six clients. On Wednesday, Durkin granted a request from the U.S. Attorney’s Office in Chicago to have access to a sealed document that Girardi Keese filed Dec. 11 in response to Edelson’s motion.

A lawyer for the firm, Michael Monico, of Monico & Spevack in Chicago, who filed a proposed order Tuesday that indicated Girardi Keese could not pay for a trustee, supported a bankruptcy proceeding.

“This has got to be heading in that direction and makes sense to have an entity in California with a trustee in California deal with it,” he said.

Girardi’s lawyer, Evan Jenness, of the Law Offices of Evan A. Jenness in Los Angeles, agreed.

“I certainly see the wisdom of what your honor has indicated,” she said.

But Durkin also indicated that he might have to amend the judgment against Girardi and his firm, noting that a fifth client appeared not to have been paid. He asked Alexandra Wisner, of the Wisner Law Firm in Geneva, Illinois, who appeared in court Wednesday as new counsel for the unpaid clients with Boeing settlements, to submit sealed documentation about the fifth person.

“That’s very serious, obviously,” the judge said.

At Wednesday’s hearing, Edelson noted that Girardi Keese represented “8,000 to 10,000 clients” in another mass tort matter.

“We want to spread the record we’re concerned about all the clients and want to make sure at some point they’re taken care of,” Edelson told the judge.

He did not name the mass tort matter, but, in an email, he clarified that the cases involved the 2015 Aliso Canyon gas leak, which sickened residents in a suburban neighborhood of Los Angeles.

At the hearing, Boris Treyzon, founding partner of Encino, California-based Abir Cohen Treyzon Salo, said that, per Girardi’s request, he planned to take over representation of some Girardi Keese clients—a move that received a quick rebuke from the judge, who called them “potential sources of assets if there is recovery.”

“I’m not comfortable in the least in allowing any settlement or recovery of those cases taking place without being supervised by a trustee,” Durkin said.

Girardi is one of the most successful lawyers in the country. His wife, Erika Jayne, who stars on “The Real Housewives of Beverly Hills,” filed for divorce last month.

Girardi’s lawyer, Jenness, continued to insist that her client needed a “forensic evaluation.” She asked Durkin whether a third party could pay for it.

“Mr. Girardi is a very popular and a longtime attorney in Los Angeles, and I’ve been contacted by a number of people who have offered their assistance to him,” she said.

The judge had no problem with that.

“If they can assist him in providing the deficiency would cure a lot of problems in this case,” he said.

William F. Savino