Bankruptcy cases are, however, on the rise. With all the movement over the past two years, it is critical for bankruptcy lawyers and firms to remember ethical and professional rules that require screening for conflicts after hiring. And it is equally important to put those rules into practice. A recent case from the United States Court of Appeals for the Third Circuit provides one example of how a law firm and a newly hired bankruptcy partner properly followed and implemented those rules, specifically Rule 1.10(a)(2) of the American Bar Association’s Model Rules of Professional Conduct.

On December 18, 2020, creditors of Girardi Keese, including former named partner Robert Keese, filed an involuntary chapter 7 petition against the law firm in the United States Bankruptcy Court for the Central District of California. The involuntary filing claimed over $6.5 million of liabilities owed to the three petitioners. Within a week of filing the involuntary petition, the petitioners requested that the court appoint an independent trustee to handle the estate. Their motion was granted on January 4, 2021 following no objections.

The involuntary bankruptcy filing against Girardi Keese was no surprise, as Tom Girardi and his firm have faced numerous lawsuits surrounding his alleged theft of his client’s settlement money and other egregious ethical, and arguably criminal, violations. Four days prior to the filing of the involuntary bankruptcy petition, a federal judge in Chicago entered a civil contempt order against Girardi and his firm for stealing $2 million in settlement proceeds that belonged to the families of four victims of the Lion Air plane crash, stating that it “is disturbing when people who get [settlement money] and have it in trust don’t keep it in trust and instead spend it otherwise.”