Legal Question in Bankruptcy in California

malpractice or bankruptcy law

my corporation (two sharehoders)entered into chapter 7 bankruptcy,the corporations attorney submitted his request to be recognized as the corporate attorney to the trustee,in which letter he stated that an existing lawsuit had a value of 2.5 to 5.million dollars. Two weeks after his letter he made an offer to settle the lawsuit for 335,000.00.and stated in his offer that he was authorized by the trustee to settle the case for that amount. He did not consult with my corporation about the offer, Question-- does a corporations attorney have a fiduciary responsibility to consult with the corporation he represents prior to making such an offer. ps. he is also a creditor for 30,000.00 and was working on contingency.


Asked on 10/11/98, 1:44 am

1 Answer from Attorneys
Mark Markus Law Office of Mark J. Markus

Re: malpractice or bankruptcy law

Well, when your corporation filed its bankruptcy, all the assets became property of the Trustee. This includes the lawsuit. Therefore, the Trustee had sole discretion to accept any settlement offer. It is also up to the Trustee whether or not to employ a particular attorney to handle the case. I believe that in order for the attorney to be paid, who would need to have obtained court approval before doing the work. In any event, I see no malpractice here. If you believe the Trustee has settled for an amount lower than he should have--and you have compelling evidence to that effect--you should bring it to the attention of the U.S. Trustee in your area. The Trustee should also have to file a Motion to Approve the Settlement, to which you could also oppose on those grounds.

Mark Markus

Law Office of Mark J. Markus

11684 Ventura Blvd., Ste. 403


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Answered on 12/27/98, 11:18 pm


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