EXCLUSIVE: ‘RHONJ’ Teresa Giudice’s Former Bankruptcy Attorney Opposing Her Settlement In $13.5 Million Bankruptcy Case

Backstory

On Dec. 6, 2016 U.S. Bankruptcy Court Judge Stacey L. Meisel will decide whether to approve a settlement reached between Real Housewives of New Jersey cast member Teresa Giudice and the bankruptcy trustee, John W. Sywilok. However, no longer is the proposed settlement unchallenged. On Nov. 22, James Kridel’s attorney, Carl M. Perri, filed a cross-motion to oppose the Trustee’s motion to approve the settlement. In early November, court documents showed Teresa reached a deal with the Trustee to settle her bankruptcy case. 

READ: Court documents below

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Teresa’s lawyers Carlos J. Cuevas and Anthony M. Rainone settled with the Trustee, agreeing that her creditors will get 45 percent of any winnings, and that they would try the malpractice case. As per the settlement terms, Teresa will receive 55% of the net proceeds of the Kridel malpractice claim.

READ: Legal Q&A: Will The Court Approve Teresa Giudice’s Proposed Agreement to Settle Her $13.5 Million Bankruptcy Case?

According to James Kridel, Teresa’s former bankruptcy lawyer, the Trustee’s motion has raised serious issues that could adversely affect his rights to defend a potential lawsuit. Kridel made it clear that he does not oppose going to court. In fact, he welcomes the opportunity to spotlight the absurdity of Teresa’s claims and litigate the merits. Rather, Kridel’s cross-motion seeks to show that Carlos Cuevas and Anthony Rainone are not authorized to represent the Trustee in any malpractice action against him.

“While Mr. Kridel prepared her petition, the debtor admitted that she knew it was false, and never alleged that she disclosed the true facts to Mr. Kridel or that he knowingly participated in her fraud,” the cross-motion states. “The debtor admitted giving false testimony at several bankruptcy court proceedings relating to her assets. Again, she never claimed that Mr. Kridel had advance knowledge concerning the falsity of the testimony she provided.”

As for the charge that she admitted she signed amended financial statements knowing that they were not correct, the cross-motion contends Teresa “never claimed that Mr. Kridel had knowledge of the true facts that made her statements knowingly false.”

James Kridel explains that he does not oppose the requested relief by the Trustee in its entirety. He believes that the malpractice claims asserted against him are totally false and should be dismissed. The source of contention surrounds his opposition to Carlos Cuevas and Anthony Rainone being appointed as special counsel to prosecute the legal malpractice action in state court.  The reason? Those attorneys would proceed under an inherent and non-waivable conflict of interest.

The settlement concerns the insistence by Cuevas and Rainone that they alone be permitted to prosecute the malpractice case against Kridel. Who is looking out for the creditors? How can attorneys representing Teresa (the debtor) also represent the Trustee? Kridel asserts that Cuevas and Rainone should be disqualified from representing the Trustee by virtue of the conflicts of interest inherent in the positions they have advocated on behalf of Teresa, the debtor. The Trustee himself even described why Cuevas and Rainone are inappropriate persons to represent the estate. The Trustee, through his counsel in response to Teresa’s opposition to the application to retain the Siegel & Siegel law firm, specified: “Cuevas and Rainone are disqualified from representing the Trustee in Bankruptcy in the Kridel Lawsuit because they have taken positions adverse to the interest of estate.”

Cooperation and Sanctions 

Overtures have been made in legal documents showing Teresa might withhold information, that she may not be willing to devote time to prosecute the malpractice action, and that she generally lacked “trust” in the Trustee. According to legal documents, Cuevas and Rainone refused to submit Teresa for discovery in response to the subpoena served by the Trustee. How will the judge view Teresa’s potential lack of cooperation until and unless Cuevas and Rainone are appointed to litigate the malpractice suit?

The debtor has an absolute obligation to cooperate with the Trustee in all his duties. Can Teresa, through her attorneys, hold her testimony and possible evidence hostage? A failure by a debtor to cooperate gives rise to sanctions for contempt. Does threatening the debtor’s lack of cooperation mean that Cuevas and Rainone demonstrate their contempt for the interests of the estate and its creditors and do so in a manner that could give rise to sanctions against Teresa?

New Jersey Rule of Professional Conduct 1.7(a) prohibits a lawyer from representing a client “if the representation involves a concurrent conflict of interest.” By representing Teresa in the malpractice action and claiming for her 55 percent of the proceeds while at the same time purporting to represent the Trustee and estate in the same action, are Cuevas and Rainone acting directly adverse to the estate?

In theory, the interest of the Trustee’s lawyer lies in assuring the greatest possible recovery for the benefit of creditors, which is undermined when a portion of any recovery would be diverted to satisfy Teresa Giudice. Stated another way, in the absence of intervention from Cuevas and Rainone, the estate would be entitled to 100 percent of any proceeds, not just 45 percent.

Relatedly, the Trustee repeatedly told the Court that the Kridel malpractice action is property of the estate. However, Cuevas and Rainone have never agreed to that position and continue to oppose it. “That continued opposition has resulted in their claiming for the debtor – directly contrary to the interests of the estate – 55 percent of the proceeds from a lawsuit, from which they expect to receive a substantial fee,” notes the cross-motion. Could their seizing for the debtor the majority portion of the claim that is rightfully the property of the estate constitute a showing of adversity and disregard that these attorneys have for the rights and interests of the estate and creditors? That is a question which will undoubtedly be raised and perhaps ruled upon on Dec. 6.

Ready, Set, Trial

James Kridel is confident that once the appropriate court becomes aware of the absurdity of the claims and of the bankruptcy crimes to which Teresa has admitted and of which she has been convicted, the malpractice litigation should quickly come to an end.  The claim of legal malpractice is totally false and baseless, contends Kridel.

The cross-motion indicates that James Kridel opposes any action by the Court that would authorize litigation against Mr. Kridel in state court. If the malpractice action is to proceed, it should proceed in federal court.

Despite the frivolous nature of the lawsuit – Teresa committed crimes for which she took full responsibility – Teresa’s former bankruptcy lawyer is ready for trial. The bankruptcy revealed the crimes but didn’t create them. Should Cuevas and Rainone represent creditors of the estate when they also represent Teresa? Is that unethical and a conflict of interest and contrary to the Bankruptcy Code because they are not disinterested persons? How should the court handle Teresa’s “It’s my way or the highway” stance regarding production of testimony and evidence? Is she extorting the Trustee? The court will entertain these and other issues Dec. 6. Grab your gavel, join the conversation, and tell us whether the Court should approve the proposed settlement.

 

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