Possible trustee rift over assets from Erika Girardi

In a move that may indicate a rift between the two trustees handling the finances of Thomas V. Girardi, the trustee for his personal estate has asked a federal bankruptcy judge for permission to hire a law firm as special counsel to go after assets possibly held by the plaintiffs' lawyer's wife.

The possible glitch is the trustee handling the Girardi Keese bankruptcy is in ongoing litigation with the same firm the personal estate trustee wants to hire.

The trustee for Girardi's personal estate, Jason M. Rund of Sheridan & Rund PC, filed an application and motion to hire ACTS -- otherwise known as Abir Cohen Treyzon and Salo LLP -- on a contingency basis Tuesday. If the court grants Rund's request, ACTS would be tasked with seeking recovery of estate assets from Girardi's estranged wife, also known as Erika Jayne. In re: Thomas Vincent Girardi, 20-BK21020 (C.D. Bankruptcy Ct., filed Dec. 18, 2020).

"The trustee believes that Erika is in possession of assets of the debtor's bankruptcy estate and/or has transferred estate assets to third parties prior to the commencement of this bankruptcy case," Rund's filings said. "However, the trustee has been informed by Erika that she does not have any community property in possession (except for certain household items) and that what she does have were alleged gifts from the debtor [Girardi], which she claims are her separate property."

Rund said he believed ACTS qualifies for a special counsel role because of its familiarity with Girardi's financial affairs. The trustee noted ACTS recently secured a judgment in excess of $11 million against Girardi and his firm, Girardi Keese, on behalf of the Ruigomez family. The family, who were victims of a gas pipeline explosion, claimed in their lawsuit that Girardi withheld the settlement money he secured for them from PG&E.

"ACTS (on behalf of the Ruigomez Creditors) has been performing due diligence, investigation and collection actions since approximately September of 2019, in efforts to collect on the Ruigomez creditors' obligation and then judgment against the debtor, his law firm Girardi Keese, and the debtor's spouse Erika," said Rund's filings.

Meanwhile, the trustee for Girardi's firm, Elissa D. Miller of SulmeyerKupetz APC, has an adversary proceeding against ACTS pending before the same bankruptcy court. Miller filed her action against ACTS in January, alleging the law firm -- which has hired multiple attorneys from Girardi Keese -- was improperly soliciting Girardi Keese's clients in a case expected to net a settlement of about $2 billion. Miller v. Abir Cohen Treyzon Salo, LLP, 2:21-ap-01019-BR (C.D. Bankruptcy Ct, filed Jan. 25, 2021).

Right before filing her adversary proceeding, Miller brokered an agreement with Girardi Keese's co-counsel on the case, Frantz Law Group APLC, to proceed with the 8,000-plus clients on its own. ACTS entered into an agreement with Girardi Keese last November to participate in the litigation with the clients' consent.

In early April, Miller filed an amended complaint that asked the court to render ACTS' agreement with Girardi Keese void. Because Girardi Keese owed money to the Ruigomez creditors, who were represented by ACTS, Miller said Girardi Keese entered the November agreement under pressure.

It is unclear whether Miller was aware Rund intended to hire ACTS as special counsel for Girardi's personal estate. Rund's filings on Tuesday did not reference Miller's adversary proceeding, and Rund's counsel, Timothy J. Yoo of Levene Neale Bender Yoo & Brill, LLP, said Wednesday he could not comment on open cases.

Miller and her attorney, Lei Lei Wang Ekvall of Smiley Wang-Ekvall, LLP, did not respond to requests for comment. But in a status report filed by Miller Tuesday, the attorney referenced Rund, writing, "The trustee has been monitoring Thomas V. Girardi's individual case to ensure that actions taken by that trustee (the "TG Trustee") do not have a negative impact on the instant case and to protect and preserve this estate's claim against Thomas Girardi's estate."

ACTS meanwhile referred directly to Rund's special counsel application in a brief responding to Miller's adversary proceeding. Characterizing Miller's actions as hostile, the firm said its communications with Rund were cooperative and good-natured by contrast. ACTS and Rund "have taken a more cooperative and cordial approach," the firm said, "even going so far as to move this court to employ ACTS as his special counsel to recover estate assets from Erika Girardi or third-party transferees of hers."

Erika Jayne's attorney, Peter J. Mastan of Dinsmore & Shohl LLP, filed a limited opposition to the proposed settlement between Rund and the Ruigomez creditors, arguing she is entitled to her share of a homestead exemption before they are paid.

"Because exemption rights are senior to those of judgment lien creditors and the estate, the trustee may not use exempt property or its proceeds in payment of the Ruigomez liens," Mastan wrote in a March filing.

During an April 6 bankruptcy hearing, Mastan told U.S. Bankruptcy Judge Barry Russell he was reserving his client's rights.

Russell said at the hearing he did not need to rule on Jayne's claim or that of Thomas Girardi's ex-wife, Karen.

In an emailed statement Wednesday, Boris Treyzon, a founding partner of ACTS, said he did not believe there would be a conflict if the firm served as special counsel for Rund, even while it is in litigation with Miller.

"We have considered this issue before the motion was filed," Treyzon said. "We could come up with no scenario under which our engagement by Mr. Rund to recover the maximum amount of money for clients of Mr. Girardi's actions would conflict with Ms. Miller's stated goal of doing the same. Given the fact that Girardi Keese is a sole proprietorship, there is no separate legal entity and therefore there could be no conflict of interest. Tom Girardi is personally responsible for all of the obligations."

Treyzon added, "Ultimately, we are all working for the benefit of the clients. Of course, we would not have taken any of these steps without first consulting ethics counsel."

Treyzon did not respond when asked to identify the ethics counsel, and whether Rund coordinated with Miller before filing his special counsel application.