(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.
