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Girardi Keese Bankruptcy Appears Imminent After Lion Air Hearing

Dec. 17, 2020, 12:21 AM

An Illinois federal judge likely won’t need to appoint a receiver for the assets of plaintiffs’ attorney Thomas Girardi and his law firm Girardi Keese despite holding them in contempt of court and freezing their assets two days ago for failing to pay out $2 million in Lion Air crash settlement funds to their clients, based on a Wednesday court hearing.

Counsel for nonparty California Attorney Lending made a special appearance to notify the U.S. District Court for the Northern District of Illinois judge that involuntary bankruptcy petitions will be filed by unsecured creditors in federal court in California within days.

When counsel suggested that the bankruptcy trustee would be best suited to oversee distribution of the firm’s and Girardi’s assets, Judge Thomas M. Durkin agreed.

The unsecured creditors are separately represented but notified California Attorney Lending, which said it has a $6.2 million judgment against Girardi and him firm, of the lender’s intention to file the impending suits.

Girardi Keese earlier filed a response to Durkin’s order to show cause why the firm shouldn’t be held in civil contempt. The firm said in its filing, unsealed Tuesday, that four of six plaintiffs are still waiting to receive about $500,000 each of their respective settlements from the plane crash suit, for a total of about $2 million that hasn’t been distributed and that it can’t presently afford to pay.

But at the Wednesday hearing, Alexandra Marie Wisner, new counsel for the Lion Air plaintiffs, said another individual has yet to receive any settlement payments.

Durkin said that if that proves true, he’ll need to revise Monday’s $2 million judgment to account for the additional unpaid funds.

Durkin also clarified during the hearing that GK was prohibited from transferring any of its files about ongoing matters to any other firm, including to California-based Abir Cohen Treyzon Salo LLP law firm.

ACTS said during the hearing that it had been in discussions with GK to take over some of the firm’s larger matters. But the pending lawsuits are potentially firm assets, Durkin said.

Durkin said he won’t grant Girardi’s attorney’s request for permission to hire a third-party to assist with a “forensic evaluation,” unless the fees are paid by someone other than Girardi or his firm.

If and when the bankruptcy petitions are filed, pending litigation against Girardi and GK will be stayed automatically. That includes related litigation brought by Edelson PC to track down all the unpaid settlement funds and recover fees for its part as local counsel for the Lion Air plaintiffs.

Earlier reporting on the case indicated that Keith Griffin was still with Girardi Keese, but according to the firm’s Tuesday filing, he has departed the firm.

Girardi Keese is represented by Monico & Spevack.

The case is In re: Lion Air Flight JY 610 Crash, N.D. Ill., No. 1:18-cv-07686, (docket) 12/16/20.

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; Steven Patrick at spatrick@bloomberglaw.com