Sunday, February 7, 2021

Girardi bankruptcy judge mulls guardian appointment amid competency fight

(Reuters) - With plaintiffs lawyer Tom Girardi and his law firm both forced into insolvency proceedings, arguments over Girardi's mental competency are moving to center stage.
 
But even if a judge finds that Girardi requires a guardian ad litem, it won't serve to keep his creditors at bay, experts said.
 
"It really doesn't affect the debts, it doesn't affect the liabilities. What it affects is the procedure under which you would go about attempting to figure out what debts are what," said Bruce Markell, a bankruptcy professor at Northwestern University Pritzker School of Law and a former Nevada bankruptcy judge.
 
U.S. Bankruptcy Judge Barry Russell in Los Angeles is slated to hear arguments on Feb. 16 over whether Girardi's brother, Robert Girardi, should be appointed guardian of both Girardi and his firm, Girardi Keese.
 
Robert Girardi said in a January court filing that his brother is incapable of understanding the bankruptcy proceedings. Tom Girardi suffers from short-term memory loss and is unable to have "a reasoned conversation" about the issues at stake, the filing said.
 
The guardianship bid has drawn opposition from Elissa Miller, the Chapter 7 trustee for Girardi Keese, and from Edelson PC, whose allegations that Tom Girardi misappropriated $2 million in client settlement funds helped spark the bankruptcies.
 
A federal judge in Chicago held both Girardi and his law firm in civil contempt in December and entered a $2 million judgment against them, finding their clients never received settlement funds they were due from Boeing in litigation over the Lion Air Flight 610 crash. He also temporarily froze their assets and referred the matter to prosecutors.
 
Both Michael Monico, a lawyer for Girardi Keese, and Evan Jenness, a Los Angeles attorney representing Tom Girardi, told U.S. District Judge Thomas Durkin in December that Girardi has competency issues. Girardi could not be reached for comment.
 
Edelson, for its part, has accused Girardi of faking incompetence, while Miller argued this week that the bankruptcy court lacks authority to appoint a guardian for Girardi Keese because it is an entity, not a person. She also questioned the need for guardian given her role as trustee.
 
In a Jan. 19 opposition filing, Edelson asserted that "Mr. Girardi's conduct over the last several months makes clear that he is not incompetent." Robert Girardi has not yet provided medical documentation supporting his "bare assertions about the debtor's mental state," Edelson wrote.
 
Robert Girardi's attorney, Leonard Peña of Peña & Soma in Pasadena, California, did not respond to requests for comment.
 
Both Edelson and Jason Rund, the Chapter 7 trustee in Girardi's personal bankruptcy, have argued in court filings that Russell should defer the guardianship question to California state courts, where Robert Girardi is also litigating the issue.
 
Los Angeles County Superior Court Judge Daniel Juarez appointed Robert Girardi as his brother's temporary conservator on Feb. 1 in a probate case.
 
Guardianship issues in bankruptcy cases are rare, said Northwestern's Markell. He said he only had two cases involving guardians during his nine-year tenure as a bankruptcy judge.
 
If Girardi was mentally incompetent when he entered into a transaction, that transaction could be set aside by a guardian or a trustee, Markell said.
 
"The problem here is that it's unclear exactly if and when he became incompetent," he said, speaking hypothetically. "If he was competent when the money was diverted, it doesn't change the liability."
 
Debtors themselves often have very little to do in their own bankruptcy proceedings, said Charles Tabb, a bankruptcy professor at the University of Illinois College of Law, aside from answering questions from creditors.
 
A guardian would allow Tom Girardi "to answer every inquiry from a trustee or creditor with a nonplussed look and a shrug of his shoulders," wrote Mark Telloyan, a bankruptcy attorney at O'Brien & Telloyan, in an email.
 
But the questions must still be answered eventually. Debtors and their representatives answer creditors' questions under oath, Markell noted, and the most a court will offer is more time.
 
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