Trustee objects to firm taking on Girardi Keese clients

The trustee overseeing the finances of Girardi Keese filed an amended complaint in a bankruptcy action, introducing two new claims against a law firm that solicited Girardi Keese's clients in a potentially lucrative case.

Abir Cohen Treyzon and Salo LLP, which is also known as ACTS, entered into an agreement with Girardi Keese last November to assume responsibility for thousands of Girardi Keese's clients in the Porter Ranch gas leak litigation, with the clients' consent. Plaintiffs' attorneys say the litigation is worth up to $2 billion. Southern California Gas Leak Cases, JCCP4861 (L.A. Super. Ct., filed Feb. 2, 2016).

Robert Finnerty, a former attorney at Girardi Keese who joined ACTS last year, said Friday of the amended complaint, "I am disappointed over the actions of the trustee."

"Seems to me she's forgotten that the clients have the right to have whichever lawyers they would, and quite candidly, I represented many of those clients -- if not all of them -- when I was at Girardi Keese."

He added, "Everyone seems to forget that Girardi Keese was a sole proprietorship... I'm not really sure where that has gotten lost in translation that Tom Girardi was Girardi Keese, and responsible for all of its actions."

In her amended complaint, Girardi Keese's trustee, Elissa D. Miller, an attorney at SulmeyerKupetz APC, said the November agreement should be rendered void because it is a fraudulent transfer, and she should be able to recover any fees and costs connected to the Porter Ranch cases that ACTS took over.

Miller reasoned that Girardi Keese "received less than reasonably equivalent value in exchange for signing the ACTS/GK agreement," since the agreement only allowed Girardi Keese to "receive its quantum meruit fees and advanced costs if there was future recovery, which the debtor was already entitled to as a matter of law." Miller v. Abir Cohen Treyzon Salo LLP, 2:21-ap-01019-BR (C.D. Bankruptcy Ct, filed Jan. 25, 2021).

Thomas V. Girardi is accused of stealing millions of dollars from clients. The State Bar has launched disciplinary proceedings and federal prosecutors in Chicago are reportedly investigating the allegations. In January, creditors forced Girardi and his law firm into bankruptcy.

When Girardi Keese entered into the November agreement with ACTS, Miller's amended complaint said, the firm was already insolvent "as evidenced by the fact that the debtor had approximately $15,000 in its operating account, substantial debt, and was unable to meet payroll on December 14, 2020." As in Miller's initial complaint, which was filed in January, last week's amended complaint alleged Girardi Keese also owed money to ACTS at the time it was brokering the November agreement with ACTS, because ACTS had "obtained a judgment for approximately $11 million against the debtor" on behalf of a client earlier that year.

Shortly before the November agreement was brokered, ACTS had filed a turnover action on behalf of the client, "which the trustee is informed put an immense amount of pressure on the debtor," Miller wrote.

The second new claim Miller introduced last week concerned a 2017 lawsuit Girardi Keese had filed in Alameda County Superior Court on behalf of clients who were pursuing claims related to a fire at a building called Ghost Ship. In December 2019, Miller said, ACTS filed a document in court indicating it would be replacing Girardi Keese as counsel for the plaintiffs.

Girardi Keese withdrew its lien for attorney fees and costs in the Ghost Ship litigation in October 2020, according to court documents. Miller estimates the firm is owed $352,924 for its work in the case, and alleged ACTS pressured Girardi Keese to withdraw its lien. Any of this amount owed to Girardi Keese, but instead received by ACTS, should be voided and rendered fraudulent and recovered by Miller instead, she said.

Miller initially filed her adversary proceeding against ACTS in January, alleging the law firm was wrongly in possession of Girardi Keese's Porter Ranch client list and improperly used it to solicit clients. At the time she filed the action, Miller had just agreed to allow Girardi Keese's Porter Ranch co-counsel, Frantz Law Group APLC, to continue with the cases on its own.

Together, Girardi Keese and Frantz Law Group had represented more than 8,000 clients in the case.

In February, U.S. Bankruptcy Judge Barry Russell issued a temporary restraining order to stop ACTS from soliciting Girardi Keese's Porter Ranch clients.

A hearing on whether the court should dismiss the case, or issue a preliminary injunction against ACTS, is set for April 27.

According to court filings last week, Girardi's Pasadena home has been listed for sale at $13 million.