Risk Update

Bankruptcy Rules & Parties, Madoff-related, Alleged Firm Conflicts

Madoff Victims May Proceed With Suit Against Attorney” —

  • “Victims of Bernie Madoff’s Ponzi scheme convinced a federal magistrate judge April 11 that their class action against the attorney who represented them belongs in federal court. The investors sued Becker & Poliakoff LLP and Chaitman LLP alleging attorney Helen Chaitman improperly represented clients with competing interests while at the two firms.”

  • “‘The more money collected from some of her clients (the net winners), the more available to be distributed to her other clients (the net losers),’ the suit alleges. The two firms moved to dismiss, arguing the court lacks jurisdiction. But the court agreed with the investors that CAFA applies.”

  • See the decision here.

Bill Freivogel notes ” In Re Earl Gaudio & Son, Inc., 2019 WL 1429978 (C.D. Ill. March 29, 2019)” —

  • “We have written often of Section 327 of the Bankruptcy Act. It sets forth standards for the employment of professionals in bankruptcy proceedings. We have mentioned less frequently Rule 2014 of the Bankruptcy Rules, which sets forth disclosure requirements in connection with Section 327 applications. This includes disclosure of ‘all of the person’s connections with the debtor, creditors,’ and other parties ‘in interest.‘”

  • “In this opinion the bankruptcy judge denied large chunks of compensation for Debtor’s counsel (‘Law Firm’) and a corporate custodian (‘Bank’) for repeatedly failing to make required disclosures. They failed to disclose their work on trusts for Debtor’s owners and involvement in state court proceedings directly involving Debtor and its property. The court also found Law Firm’s accounting and billing accuracy woefully deficient. We see little point in providing further details here. We just wanted to re-emphasize the importance of Rule 2014 to bankruptcy practitioners.”