Ford Motor Credit Company on Tuesday filed a renewed objection to a Lubbock law firm representing Reagor Dykes in an ongoing bankruptcy case.
Reagor Dykes filed for bankruptcy on August 1. In the last week of August, the law firm, Mullin Hoard & Brown, asked permission to withdraw and permission to be paid from a retainer.
The bankruptcy judge allowed MHB to withdraw and put off the rest of the issues for later.
Separately, Ford accused Reagor Dykes of fraud and defaulting on roughly $40 million.
As an October 5 bankruptcy court date approaches, Ford once again raises objections. Reagor Dykes has a different attorney, so that’s not the issue.
The issue is whether the bankruptcy judge will make a declaration after-the-fact that MHB was authorized to act as the attorney for Reagor Dykes from August 1 through August 21.
The Source of the Retainer
Ford’s objection on Tuesday said MHB failed to disclose that Bart Reagor and Rick Dykes put up their own personal money for a $500,000 retainer.
The objection said, “Payment by partners or guarantors of a debtor is especially likely to create an adverse interest due to the inherent conflict of interests between a debtor and its partners in bankruptcy.”
In other words, Ford said MHB would have been loyal to Bart Reagor and Rick Dykes rather than the Reagor Dykes business. Since Ford is trying to recover money from the business, Ford sees that as a problem.
Ford referred to it Tuesday as a “suspect payment.” Ford went on to say that MHB concealed the source of the money instead of disclosing it right at the start of the bankruptcy case.
The objection by Ford does not specifically ask that MHB not get paid. It asks that MHB not be recognized as the legal counsel for Reagor Dykes.
MHB and Langston Respond
Late on Tuesday afternoon, MHB and attorney David Langton filed a supplemental motion to the court. It said, among other things, that previous court rulings have allowed bankruptcy attorneys to proceed and also to get paid even if disclosures were late.
MHB cited previous court cases as saying it depends on the totality of the circumstances. For example, was the failure intentional?
MHB also cited previous court cases in saying, “The payment of the retainer by an insider, without more, does not constitute a per se disqualification of the attorney.”
MHB asked the bankruptcy judge to determine if there is an actual conflict of interest. MHB pointed out that Mr. Reagor and Mr. Dykes both hired their own attorneys separate from the Reagor Dykes business.
MHB said in part: “There is no evidence that MHB proceeded in any manner to or for the benefit of Mr. Dykes, Mr. Reagor, or both. MHB took those actions necessary to preserve the estate and to keep to the Debtors’ operations going as much as possible.”
MHB also cited local bankruptcy rules that an application to employ an attorney can be filed within the first 30 days. In this case, MHB filed a request 21 days – well before the deadline set by local rules.
MHB’s motion specifically asks that it be authorized as the counsel of record from August 1 through August 21 and that payment of legal fees also be authorized. That payment, if authorized, would come from the retainer.
CLICK HERE to read the document filed Tuesday by Ford.
CLICK HERE to read the exhibits.
CLICK HERE to read the response by Mullin Hoard & Brown
The matter will be heard in court on October 5.
Related Stories: Reagor Dykes – extended coverage of the bankruptcy
