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Sanctions, Competency at Issue as Girardi Keese Troubles Grow

Jan. 19, 2021, 11:00 AM

The legal troubles roiling Los Angeles law firm Girardi Keese LLP, over alleged misappropriation of client funds that it received in connection with Lion Air crash settlements, are deepening.

Former Girardi Keese attorneys David Lira and Keith Griffin may have to appear in person before Judge Thomas M. Durkin in Chicago, despite the pandemic, to explain why they shouldn’t be held in contempt of court.

The judicial inquiry Lira and Griffin face is whether “their knowing of nonpayment” of certain client settlement funds gave “them an obligation to do something more than what they did” to ensure the firm’s compliance with the court’s orders.

Meanwhile, questions mount about the competence of firm owner Thomas Girardi, after a federal bankruptcy court in California scheduled a February hearing on whether to appoint Girardi’s brother, Robert Girardi, as his guardian ad litem.

Lion Air Payments

While attorneys at GK, Lira and Griffin represented some of the family members of passengers killed in the October 2018 crash of Lion Air flight 610. The cases were part of multidistrict litigation against Boeing, overseen by Durkin in the U.S. District Court for the Northern District of Illinois.

Durkin found GK, along with its owner Thomas Girardi, in contempt in December after the court learned that at least $2 million in confidential settlement proceeds GK received from Boeing weren’t fully paid to clients.

Durkin said during Girardi’s contempt hearing that he intended to refer the matter to the local U.S. attorney. Later that day, Dec. 14., the government filed a motion to gain access to sealed court documents.

The extent of Lira and Griffin’s obligations to clients and the court could be further complicated by Robert Girardi’s claim that his brother is “incompetent.”

If it’s true that Thomas Girardi is suffering from short-term memory loss that is seriously interfering with his ability to understand and manage his affairs, it may intensify scrutiny of those around him.

Attorneys for Thomas Girardi and Keith Griffin declined to comment. An attorney for Lira referred back to statements made in court proceedings. A representative for Robert Girardi didn’t respond to a request for comment.

In-Person Hearing?

It’s unclear when Durkin will hold his hearing on whether Lira and Griffin should be held in contempt, or if he will ultimately do so after further briefing. But if he does,"it will take place in Chicago, in-person, and not until it is safe to travel and hold-in person hearings” according to a Jan. 8 order.

There are “many” factual disputes, Durkin said, so he would “prefer to do it with live witnesses” where he “can hear and see them.”

Lira left GK on June 13, 2020, and Griffin resigned on Dec. 4, according to their responses to a motion for rule to show cause why GK shouldn’t be held in contempt.

That motion, filed Dec. 2 by Edelson PC, didn’t originally name Lira and Griffin, but the firm has since filed a reply in support of a contempt ruling against them.

Edelson, which served as local co-counsel for GK’s Lion Air clients, also filed a separate lawsuit in the district to recover its share of fees and to track down client funds that they allege Girardi “embezzled.”

The lawsuit names GK, Girardi, Griffin, Lira, Lira’s latest firm—from which he recently resigned—and Girardi’s wife, Erika Girardi—known publicly as “Erika Jayne” and as a cast member of “The Real Housewives of Beverly Hills,” who filed for divorce in November. Claims against four other entities, including two litigation finance lenders that have already secured multimillion-dollar judgments against GK for unpaid loans, were voluntarily dismissed.

Lira and Griffin have denied that they received any of the clients’ settlement money or that they had authority to complete the necessary wire transfers, instead claiming to be mere salaried GK employees.

‘Final Confrontation’

In afiling, Lira said he resigned from the firm after exchanges with Girardi about the need to transfer the clients’ money intensified, culminating in a “final confrontation.”

Lira, who is Girardi’s son-in-law, said that he hasn’t had further communication with him.

Griffin’s response said he “took appropriate actions within his power to get Mr. Girardi to send the wire transfers as ordered” and “ultimately referred the clients to alternative counsel to sue Girardi Keese.”

Griffin described communications occurring over the course of several months with both Girardi and a lawyer from Edelson, attaching several memos he said he prepared to Girardi, reminding him of the urgent need to transfer the balance of client settlement funds.

In Griffin’s last memo to Girardi, from Nov. 18, he wrote, “This could not be more serious.”

To contact the reporter on this story: Holly Barker in Washington at hbarker@bloombergindustry.com

To contact the editor responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com

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