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A bankruptcy judge wouldn’t hand the proceeds from dozens of pending lawsuits tied to Michael Avenatti to a creditor of his formerly bankrupt law firm, Eagan Avenatti LLP, but ordered an accounting of everything the firm takes in, according to a WSJ Pro Bankruptcy analysis. Bankruptcy Judge Catherine Bauer in Los Angeles largely ruled against Jason Frank, a former business partner of Avenatti who sought to wrest control of assets belonging to Eagan Avenatti — a firm controlled by Avenatti but legally separate from Avenatti & Associates, which represents adult-film actress Stephanie Clifford, also known as Stormy Daniels, in her hush-money lawsuit against President Donald Trump. Frank’s request raised legal questions about which assets of a bankrupt law firm are available to satisfy its debts. Courts in California have held that when law firms fold, the fees collected later on by their former partners for hourly work can’t be clawed back for distribution to creditors. But Eagan Avenatti is a contingency-fee firm, a high-stakes corner of the legal industry that requires firms to invest time and money filing complaints while collecting a slice of settlements or verdicts that arrive years later if at all.

The Supreme Court yesterday resolved a split of circuits by holding that a false statement about one asset must be in writing to provide grounds for rendering a debt nondischargeable under Section 523(a)(2), according to a special analysis by ABI's Bill Rochelle. The 15-page opinion by Justice Sonia Sotomayor focused primarily on the plain language of the statute and the meaning of the word “respecting.” The opinion was unanimous, except that Justices Clarence Thomas, Samuel A. Alito Jr. and Neil M. Gorsuch did not join in a section of the decision where Justice Sotomayor buttressed her conclusion by relying on legislative history surrounding the adoption of the Bankruptcy Code in 1978. Click here for the full analysis. 

Click here for the full opinion.