Dreier Victims Seek To Stand Out From The Pack: Give Us Back Our Stolen Settlement Funds

Should the bankruptcy court overseeing the liquidation of Marc Dreier’s law firm give priority to clients who claim that Dreier stole settlement money from them on the ground that those settlement funds were never the law firm’s property? That’s the claim being made by Alston & Bird lawyers Craig Carpenito, Alexander S. Lorenzo, and John E. Stephenson, Jr. on behalf of Paul Gardi and Alex Interactive Media, LLC. The Alston lawyers argue that “Dreier’s theft of the settlement proceeds . . . is no different than if Dreier had robbed a courier service on its way to deliver the $6.3 million in settlement funds to Gardi’s office – in both situations the criminal conduct effectuates the transfer of neither legal nor equitable title to the stolen funds.”

It may be difficult for this argument to persuade the court to change its prior position that Dreier’s victims should be treated on a pro rata basis, but the Alston argument is an interesting interpretation of the Bankruptcy Code and general bankruptcy law principles.