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Bankruptcy, Third Party & Professional Liability

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Diamond McCarthy represents creditors’ committees, shareholders, trustees, secured and unsecured creditors, court-appointed trustees and others in bankruptcy litigation as well as parties involved in disputes arising from business dissolutions or restructurings. Our premier practice is known for its ability to handle virtually every type of litigation arising from financially distressed and insolvency situations.

We handle disputes between partners, business entities and the holders of their equity and debt securities, as well as conflicts between business entities and their own officers, directors and professional advisors.

We identify what factors are at the heart of a company’s failure, including misappropriation of corporate assets and opportunities, and intentional, reckless or negligent breaches of fiduciary, contractual or other duties. Our well-regarded forensics area includes investigations into RICO, the Lanham Act and other statutory torts, fraud and misrepresentation, securities fraud, fraudulent transfers and other bankruptcy court causes of action. Many of our lawyers also have backgrounds as accountants, certified fraud examiners and MBA's, which provides our clients with a broad spectrum and depth of experience in tackling these issues.

Diamond McCarthy trial lawyers are known for cases with important and long-ranging legal repercussions, often involving issues of first impression before the courts. The Firm currently represents the Chapter 11 bankruptcy Trustee for Dreier, LLP, in its bankruptcy proceedings pending in the Southern District of New York (the Trustee appointed by the U.S. Department of Justice was Sheila Gowan, a Diamond McCarthy, LLP partner in its NY office). This prominent case involves the Ponzi scheme perpetrated by lawyer Marc Dreier and is one of the largest Ponzi /fraud scheme case(s) involving the legal profession in U.S. history. The fraudulent scheme involves losses to hedge fund investors and others of more than $750 million. Diamond McCarthy’s representation of the Trustee includes the prosecution of many high profile lawsuits against the recipients of fraudulent transfers and preferences, often involving legal issues of first impression before the federal courts.  Currently, there are two appeals pending before the U.S. Court of Appeals for the Second Circuit.  Other litigation arising out of the Dreier matter has involved complex financial, banking, insurance and bankruptcy issues.  Diamond McCarthy has been successful in reaching settlements to date in the tens of millions of dollars and continues to prosecute numerous litigations seeking further recoveries.  In addition, our representation in the case has pioneered new roads challenging the complex issues facing the intersection of criminal and civil government forfeiture proceedings, SEC Receivership and bankruptcy proceedings.  The firm’s work in the Dreier case has resulted in one of the largest and most successful coordination agreements between a bankruptcy estate trustee and the United States government involving asset seizure and forfeitures in U.S. history. 

The Firm also currently represents the Chapter 11 Trustee for Howrey, LLP, in its bankruptcy proceedings pending in the Northern District of California (the Trustee appointed by the U.S. Department of Justice was Allan Diamond, a Diamond McCarthy, LLP partner in its Houston and New York offices). This prominent case involves the bankruptcy of one of the largest, if not the largest, law firm bankruptcies in U.S. history in which the debtor, Howrey, LLP, had offices in more than eight countries and many cities across the United States. While early in the bankruptcy proceedings, the case already has had to address issues of first impression involving a law firm’s operations while insolvent and is expected to involve a plethora of third party and contingency fee litigation issues. 

In addition, the Firm has been on the cutting edge of constitutional issues in the bankruptcy courts implicating the U.S. Supreme Court’s 2011 decision in Stern v. Marshall. Most recently, in January, 2012, the Firm filed, as co-counsel, an Amicus Curiae brief on behalf of Concerned Chapter 7 and 11 Trustees and Plan Administrators in the Ninth Circuit U.S. Court of Appeals in the Bellingham Insurance Agency, Inc. case in support of the Plaintiff-Appellee arguing that the bankruptcy courts have the constitutional authority to issue final decisions (or alternatively to issue report and recommendations) with respect to Bankruptcy Code section 548 fraudulent transfers.

  • Allan B. Diamond participated as a panelist discussing governmental forfeiture and bankruptcy issues at the Joint Session of the Eastern District of California's Annual Conference at Tenaya Lodge, Yosemite National Park, California
  • Allan B. Diamond spoke on Bankruptcy Forfeiture and SIPC Receivership: Three Regimes for the Compensation of Ponzi Scheme Victims - March 2011 Update, South Florida Bankruptcy Bar Association Annual Conference, Naples, FL
  • Allan B. Diamond spoke on An Overview of the Role of Forfeiture and Bankruptcy Following the Collapse of Large Ponzi Schemes, South Florida Bankrtupcy Bar Association Annual Conference, Naples, FL
  • Allan B. Diamond spoke on Bankruptcy, Forfeiture and SIPC Receivership: Three Regimes for the Compensation of Ponzi Scheme Victims, American Bankruptcy Insitute Annual Conference, Washington, D.C.
  • Eric D. Madden, served as a panelist, In Pari Delicto: What Are the Recent Cases Saying?, a national webinar hosted by The American Bar Association
  • Allan B. Diamond participated in The Great Debates: Resolved: Investors in Ponzi Scheme Cases Are Entitled to Their Last Statement Balance up to the $500,000 SIPC Limit, American Bankruptcy Institute, 30th Annual Midwestern Bankruptcy Institute & Consumer Forum, Kansas City, MO
  • Fraudulent Transfer Claims Against the FDIC in Bank Holding Company Cases, Collier Guide to Chapter 11 Practice (Matthew Bender 2012)
  • Andrea Levin Kim, co-author Recent Developments Affecting Professionals', Officers', and Directors' Liability, Tort Trial & Insurance Practice Law Journal, Vol. 48, Issue 1, Fall 2012
    • Kathy Bazoian Phelps, author of The Ponzi Book: A Legal Resource for Unraveling Ponzi Schemes (LexisNexis® 2012), co-authored with Hon. Steven Rhodes, United States Bankruptcy Judge for the Eastern District of Michigan
    • Kathy Bazoian Phelps, author of The Depths Of Deepening Insolvency: Damage Exposure For Officers, Directors and Others (to be published in 2013 by the American Bankruptcy Institute), co-authored with Prof. Jack F. Williams
  • Kathy Bazoian Phelps, author of Ponzi Proof Your Investments: An Investor’s Guide to Avoiding Ponzi Schemes and Other Fraudulent Scams (to be published in 2013)
  • Kathy Bazoian Phelps, FraudNet Compendium, author of chapter on Ponzi Schemes (to be published in 2013)
  • Kathy Bazoian, author of The Ponzi Scheme Blog at www.theponzischemeblog.com
  • Andrew B. Ryan, CLE Presentation, Insurance Basics for the Bankruptcy Lawyer, Dallas Bar Association, Dallas, TX (August 1, 2012)
  • Speaker, FDIC's Expanded Role in Bank Holding Company Insolvencies, Stafford Legal Webinar (July 26, 2012)
  • Andrea Fischer, speaker at 28th Annual Bankruptcy & Restructuring Conference, Financial Advisors Tookbox (June 6, 2012)
  • Fraudulent Transfer Remedies Available to Bank Holding Company Bankruptcy Trustees After Gramm-Leach-Bliley, 127 The Banking Law Journal 3 (January 2010) 
  • Constructing a Bank Holding Company Insolvency Model: Part II, American Bankruptcy Institute Journal (December 2009)
  • Constructing a Bank Holding Company Insolvency Model: Part I, American Bankruptcy Institute Journal (November 2009)
  • Andrea Fischer, panelist at 7th Annual NYIC/AIRA Joint Bankruptcy and Restructuring Event, Achieving Prompt and Efficient Confirmations:  Pre-Negotiated Plans, Pre-Packaged Plans and Plan Support Agreements (January 25, 2012)
  • Eric D. Madden, co-author, Cut to the Core: Distilling Recent Decisions Interpreting Stern v. Marshall - Part II, ABI Bankruptcy Litigation Committee Newsletter (November 2011)
  • Eric D. Madden, co-author, Cut to the Core: Supreme Court Curtails Bankruptcy Court Jurisdiction in Stern v. Marshall - Part I, ABI Bankruptcy Litigation Committee Newsletter (September 2011)
  • Allan B. Diamond author and speaker, An Overview of the Role of Forfeiture and Bankruptcy Following the Collapse of Large Ponzi Schemes, South Florida Bankruptcy Bar Association Annual Conference, Naples, FL (May 6-8 2011) 
  • Allan B. Diamond author and speaker, Bankruptcy, Forfeiture and SIPC Receivership: Three Regimes for the Compensation of Ponzi Scheme Victims - March 2011 Update, South Florida Bankruptcy Bar Association Retreat, Naples, Florida (May 6-8, 2011)
  • Allan B. Diamond author and speaker, Bankruptcy Forfeiture and SIPC Receivership: Three Regimes for the Compensation of Ponzi Scheme Victims - March 2011 Update, South Florida Bankruptcy Bar Association Annual Conference, Naples, FL (May 6-8, 2011)
  • Bank Holding Company Insolvencies:  Is the Grass Greener?  Speaker on fraudulent transfer actions against the FDIC in bank holding company bankruptcies at ABA Business Law Section Spring Meeting, Boston, MA (April 14, 2011) 
  • Allan B. Diamond author and speaker, Bankruptcy, Forfeiture and SIPC Receivership: Three Regimes for the Compensation of Ponzi Scheme Victims, American Bankruptcy Institute Annual Conference, Washington, D.C. (March 31, 2011)
  • Eric D. Madden, panelist, In Pari Delicto: What Are the Recent Cases Saying?, a national webinar hosted by The American Bar Association (December 2010)
  • Kyung S. Lee speaker, Elements of Preference - How to Win a Preference Action or Lose it, Panel Presentation at the Commercial Finance Association’s 66th Annual Convention, Chicago, IL, (October 21, 2010)
  • Allan B. Diamond participant in The Great Debates: Resolved: Investors in Ponzi Scheme Cases Are Entitled to Their Last Statement Balance up to the $500,000 SIPC Limit, American Bankruptcy Institute, 30th Annual Midwestern Bankruptcy Institute & Consumer Forum, Kansas City, MO (October 2010)
  • Richard I. Janvey presenter, Ponzi’s Revenge: Clawback and Financial Fraud Litigation, 2010 ABA Section of Litigation Annual CLE Conference, New York, NY (April 2010)
  • Andrew B. Ryan, CLE Presentation, The Evidence Objections (and Responses) a Trial Lawyer Must Know to Survive at Trial, Dallas Bar Association, Dallas, TX (March 5, 2010)
  • Establishing Bank Holding Company Insolvency: Lessons Learned from the Bank of New England Corporation Bankruptcy, 29 Banking & Financial Services Policy Report 1 (January 2010)
  • Allan B. Diamond participant in panel discussion, Conflicts Among the Bankruptcy System, SEC Receiverships, and the Federal Criminal Forfeiture Laws in Achieving an Equitable Distribution of Assets for Victims of Ponzi Schemes, other participants on the panel included Irving Picard, Trustee of the Estate of Madoff Securities, and Ralph Janvey, appointed as SEC receiver of Stanford Financial Group, American Bankruptcy Institute Winter Leadership Conference, La Quinta, CA (December 5, 2009)
  • Andrew B. Ryan, CLE Presentation, You Can't Get There from Here: Why the Supreme Court Must Revisit Mid-Continent Ins. Co. v. Liberty Mutual Ins. Co., North Texas Association of Insurance Counsel (June 26, 2009)
  • Ladd Hirsch, Andrew B. Ryan, J. Benjamin King, CLE Presentation, Insurance Litigation: Adding to the Company's Bottom Line, Diamond McCarthy presentation to GC Netweavers (April 16, 2009)
  • Andrew B. Ryan, co-author, Debating Third-Party Policy Deadlines: Why Texas Should Equitably Toll an Insured's Claim for Breach of the Duty to Defend, 61 BAYLOR L. REV. 610 (Spring 2009)
  • Reda M. Hicks and Andrea Levin Kim co-authors, In Ratings We Trust? The Role Played By Rating Agencies in the Subprime Debacle, American Bar Association Section of Litigation, Bankruptcy and Insolvency Litigation Newsletter (March 2008)
  • Eric D. Madden, speaker and author, Recovering from the "Bad Guys" and Their Advisors - Fiduciary Duties to Creditors, Deepening Insolvency, and In Pari Delicto, presented at Bankruptcy Institute 2007, sponsored by the Houston Bar Association (February 2007)
  • Andrew B. Ryan and J. Gregory Taylor, co-authors, Pleading to Keep Your Promise: Litigation Tactics Concerning Insurance Coverage for Breaches of Contract, presented to the North Texas Association of Insurance Counsel (February 2007)
  • Eric D. Madden, speaker and author, Fiduciary Duties in Distressed Corporations: Avoiding Director Liability in the Zone of Insolvency, presented at the Northern District of Texas Bankruptcy Bench-Bar Conference (September 2006)
  • Eric D. Madden, co-author, Recovering for the Wrongful Death of a Company: A Dialogue on the Rights and Remedies Available to Victims of a Corporate Collapse, ATLA's Trial magazine (June 2006)
  • Eric D. Madden, author, Keeping the Catch - Post-Confirmation Jurisdiction, presented at Bankruptcy Litigation: Advanced Pre-Trial Practice and Procedure Workshop, sponsored by the State Bar of Texas and the University of Texas School of Law (February 2006)
  • Eric D. Madden, speaker, Developing and Pleading Effective Causes of Action in Bankruptcy Cases, Bankruptcy Litigation: Advanced Pre-Trial Practice and Procedure Workshop, sponsored by the State Bar of Texas and the University of Texas School of Law (January 2005)
  • James D. McCarthy and Kyung S. Lee  co-authors, Deepening Insolvency, 23rd Annual Bankruptcy Conference, The University of Texas School of Law, Austin, TX (November 2004)
  • James D. McCarthy Litigation Support: Are Disenfranchised Constituencies Using Litigation to Obtain a Post-Confirmation Recovery, American Bankruptcy Institute Seminar on Workouts, Restructurings, and M&A Transaction Alternatives: The Dealmaker's Perspective, New York, NY (September 2004)
  • Eric D. Madden, co-authors, Shareholder Litigation in the Shadow of Bankruptcy: The Low Priority Claimants' Search for Justice, presented at the Houston Bar Association Seminar "Lessons from Enron - The Issues We Face When Big Companies Fail" (April 2002)