Two litigation funding lenders have been sued by the Chapter 7 trustee who is handling the Girardi Keese bankruptcy.
Counsel Financial Services and California Attorney Lending II are accused of being implied in-fact partners and insiders of the embattled law firm.
“The Trustee is also alleging claims for fraudulent conveyances both actual and constructive,” wrote Larry Gabriel, who is representing Trustee Elissa Miller on behalf of the estate of Girardi Keese, in the Aug. 31 complaint.
Weiss
| Pardalis & Nohavicka
As previously reported in the Southern California Record, the Girardi Keese law firm was founded by the disbarred 83-year-old Thomas Girardi who appeared on Real Housewives of Beverly Hills with his now estranged wife Erika Jayne. The disgraced Girardi, who is currently under a court-appointed guardianship, was once known for securing the highest medical malpractice judgment statewide as a recent law school graduate in the 1960s.
"It is very interesting that a Chapter 7 bankruptcy trustee in the Central District of California opened an adversarial action against Girardi's law firm alleging in her filing that the lawyer who was entering into arrangements with litigation funding creditors as a mass tort attorney was a 'two-bit thief,'" said Jacqueline Weiss, a Pardalis & Nohavicka litigation attorney in New York. "It's almost unprecedented for a bankruptcy trustee to be commenting on the lack of integrity of a respected mass tort attorney."
While Girardi was ordered by the California Supreme Court to pay $2.2 million-plus 10% interest to four minor children of Lion Air flight 610 crash victims from whom it was determined he stole money, Counsel Financial Services and California Attorney Lending II managing member Joseph D. DiNardo is a former asbestos lawyer who was once suspended from practicing law for three years after he pled guilty to tax evasion. Currently, the complaint alleges that DiNardo, who is licensed to practice in New York, handles personal injury claims on a contingency fee basis. DiNardo is not licensed to practice law in California, however he is doing business in California.
"Both the litigation funding firm and Girardi Keese may be held liable for damages and the court will determine how that responsibility will be divided," said Cayce Lynch, administrative partner for Tyson & Mendes in San Diego. "The court will consider the extent of each defendant’s concealment, misrepresentation, negligence, and intent to defraud to make that determination."
Although the litigation funding creditors are now defunct firms, they can still be held accountable because they had a fiduciary duty to Girardi's clients, according to media reports.
“The litigation lending firm would certainly be held to be jointly responsible as a co-conspirator or joint tortfeasor in this ponzi scheme and the law firm’s client could hold them to be secondarily liable in the event that the money was not paid by Girardi’s law firm," Weiss told the Southern California Record.
Some 682 claims have been filed against the bankruptcy estate totaling more than $495 million, but the fact that Girardi is under court supervision could leave the litigation lenders holding the proverbial 'bag.'
"The California Bar has indicated that it is legally unable to move forward with formally disciplining Girardi as long as the conservatorship is in place," Cayce told the Southern California Record. "This may affect the extent to which Girardi will be held accountable for his actions."