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Former Girardi Colleagues Say Court Lacks Power to Sanction Them

Feb. 12, 2022, 12:45 AM

Former Girardi Keese attorneys David Lira and Keith Griffin say the Northern District of Illinois lacks authority to order them to compensate their former clients for settlement funds allegedly stolen by Thomas Girardi.

Lira and Griffin worked for the firm when it represented surviving family members of people killed in 2018 when Lion Air flight 610 crashed into the Java Sea. Girardi declared bankruptcy not long after admitting to the court that he didn’t have the money he still owed the clients.

Lira and Griffin left the Girardi firm before Girardi admitted in court that he couldn’t pay his clients. Both deny acting in bad faith and claim that there isn’t evidence to show that their conduct was the but-for cause of the harm to their former clients.

There isn’t any evidence showing that “informing this Court at any specific moment in time would have led to a different result—namely that Mr. Girardi and the law firm filed for bankruptcy protection,” Griffin told Judge Thomas M. Durkin of the U.S. District Court for the Northern District of Illinois Thursday.

Lira says ordering him to compensate his clients for Girardi’s actions would be “excessive in relation to” his conduct.

Lira and Griffin also argue that before the court can order them to pay damages, they are entitled to a jury trial.

Former local co-counsel for the Lion Air clients, Edelson PC, also submitted briefing on the court’s inherent authority to issue sanctions, but it was focused on the law governing the court’s authority and didn’t argue how it applies to the facts here.

Edelson did say, however, that it would argue that the evidence shows that Lira and Griffin should be held in contempt, alleging they “violated—and aided and abetted Tom Girardi in violating—the Court’s order that Girardi Keese must pay settlement funds to the clients as soon as practicable.”

Alternatively, Edelson says the court could rely on its separate inherent authority to make their former clients whole.

If “certain factual predicates are met, the Court does have the inherent power to issue sanctions” and to require attorneys to compensate plaintiffs, Edelson says.

According to Edelson, case law suggests that sanctions must be supported by “clear and convincing evidence,” a more demanding standard than the preponderance-of-the-evidence standard applied in civil matters, and that an additional hearing might be necessary before the court can exercise its inherent sanction power.

Durkin said he wanted the briefs to address the scope of the court’s inherent sanction authority, as well as whether the court has the power to order the lawyers to compensate the plaintiffs for their lost settlement money, not because they “directly violated a court order” but because by failing to inform the court that Girardi was not paying the plaintiffs, they “caused the plaintiffs to lose that money.”

Edelson PC, which sounded the alarm on Girardi’s mishandling of client funds in December 2020, says that it is engaged in mediation with its former clients. The underlying lawsuits against Boeing were funded in 2020 for an undisclosed amount.

The firm said it is “committed to making these families whole regardless of whether Edelson has liability, and we are pursuing those possibilities on a number of fronts.” The firm is representing itself.

Lira is represented by Robie & Matthai PC and Swanson, Martin & Bell LLP. Griffin is represented by Rosen Saba LLP and Cassiday Schade LLP.

The case is In re Lion Air Flight 610 Crash, N.D. Ill., No. 1:18-cv-07686, 2/10/22.

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

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Peggy Aulino at maulino@bloomberglaw.com