Creditors question deal to protect Girardi Keese assets

Days after the trustee of Girardi Keese asked a federal bankruptcy court to approve a deal she struck with Frantz Law Group regarding the Porter Ranch gas leak litigation, creditors of Girardi Keese are questioning whether the terms of the deal go far enough to protect the firm's assets.

The deal would give Frantz, a firm that worked with Girardi Keese to represent more than 8,200 plaintiffs in the Porter Ranch gas leak litigation, authority to proceed with the cases on its own. If the plaintiffs are victorious, the deal would allocate 55% of the expected attorneys' fees to Frantz, and 45% to Girardi Keese. In re: Girardi Keese, 20-BK12022 (C.D. Cal Bankruptcy Ct, filed Dec. 18, 2020).

Andrew Goodman of Goodman Law Offices, who represents multiple creditors of Girardi Keese and convinced a federal bankruptcy court to order both the firm and its founder, Thomas V. Girardi, into Chapter 7 bankruptcy in January, was among those who expressed concerns about the Porter Ranch deal. On Friday, he said his clients had concerns about the settlement, including whether Frantz is allowed to assign all or part of its responsibility for the Porter Ranch litigation to other counsel; how the 45% of the attorneys' fees owed to the Girardi Keese estate will be calculated; and whether the trustee actually reviewed any of the retainer agreements allegedly brokered between Frantz and the 8,200-plus plaintiffs.

Goodman's filing "is intended to emphasize (or reemphasize) to the Trustee and her professionals not only the amount of monies owed to creditors, but perhaps more importantly, the pain and suffering that so many of these creditors have sustained to date... the level of distrust so many have in the legal system in general and the absolute importance of everyone working for the benefit of the creditors maximize payment on their claims," he wrote.

Similar questions about the deal between Frantz and Girardi Keese's trustee, Elissa D. Miller of SulmeyerKupetz APC, were raised by Stillwell Madison LLC, one of Girardi Keese's creditors which alleged in a lawsuit last year that Girardi and his firm failed to repay a $5 million loan. Like Goodman, Stillwell said it was concerned the deal did not place limits on whether Frantz can assign all or part of the Porter Ranch work to other firms. The company also said the deal needs to clarify that "Frantz is not entitled to any interest or charges for the advancement of any costs it may have made or may make," and that "any costs Frantz elected or elects to incur... must be approved by the Trustee."

But Stillwell clarified, "Stillwell does not challenge the Trustee's judgment that Frantz is the most appropriate choice."

Abir Cohen Treyzon and Salo LLP, commonly referred to as ACTS, expressed similar reservations about the deal in a series of court filings, but doubled down on Goodman's suggestion that Miller may not have reviewed any of the retainer agreements between Frantz and the Porter Ranch clients. Miller had filed an adversary proceeding against ACTS earlier last week, after she discovered ACTS sent an email to the Porter Ranch clients claiming it had reached an agreement with Girardi Keese in November to work on the cases.

The agreement between ACTS and Girardi Keese was made "under suspicious circumstances," Miller said in her complaint. Miller v. Abir Cohen Treyzon Salo, LLP, 2:21-ap-01019-BR (C.D. Bankruptcy Ct, filed Jan. 25, 2021).

"What is most troubling, is that the Trustee made its decision without a review of a single retainer agreement and without speaking to a single client," according to ACTS' filing. "Even if she were unable to locate retainer agreements in the Debtor's premises, she certainly could have and should have requested to examine the 8200 retainers that are in possession of Frantz."

Referencing an agreement that previously split the attorneys' fees between Frantz and Girardi Keese down the middle, ACTS said of the deal between Miller and Frantz, "The Agreement fails to explain why the Trustee has given away 5%, which given the value of these cases could amount to a loss of millions of dollars to the Estate. This is especially true considering that none of the plaintiffs alleged to be represented jointly by Frantz and Girardi are going to be in the first group of trial plaintiffs in the Gas Leak Cases. Therefore, Frantz is getting an extra 5% of the fees on the jointly represented cases and a large additional percentage on the cases that Frantz did not retain just to sit back and do nothing on the non-joint clients' cases."

ACTS said it was allowed to continuing pursuing Girardi Keese's Porter Ranch clients, since nobody -- including the court -- has invalidated its November agreement with the firm.