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Colemans claim attorney Craig Geno has a conflict of interest, want him off the Express Grain case

Tuesday, July 25, 2023, 7:08 pm News Flash Archive

It took mere hours after Craig Geno filed a motion on behalf of the Express Grain Liquidating Trustee indicating plans to sue Dr. Michael Coleman for damages in the Express Grain bankruptcy, for both John and Dr. Michael Coleman to seek to have Geno barred from representing the trustee due to what they describe as a conflict of interest.

As we reported earlier today, Geno filed a motion yesterday afternoon asking that Dr. Michael Coleman's $2.8 million claim against EG be denied by the court, and stating that the Liquidating Trustee would be pursuing an "adversary proceeding" against him for claims of mismanagement of the bankrupt company. EG filed for bankruptcy in September 2021, and creditors filed claims of around $210 million, most of which will never be paid.

See our earlier reporting today on the Trustee's plans to sue Dr. Coleman here: Express Grain Liquidating Trustee threatens to sue Dr. Michael Coleman

Later last night, John and Dr. Michael Coleman filed their motion to block Geno from working on the EG liquidation. Here is their motion: Colemans Objection to Trustee Employment of Geno

Geno had represented EG throughout its bankruptcy, and had recently filed his final invoices for legal services rendered.

But at almost the same time, Geno filed a motion on behalf of the incoming Liquidating Trustee asking the court to approve his employment as attorney representing the Liquidating Trust and its trustee, Heather Williams.

The Liquidating Trustee will be responsible to file suits to "claw back" money she thinks was improperly paid to creditors in the past, and to pursue potential claims against, among others, EG's former officers and management.

The Colemans explain that the conflict revolves around the fact that Geno represented both EG and John Coleman in their respective bankruptcy proceedings, and presumably obtained privileged information from that dual representation that could now be used against the Colemans in the proposed litigation by the Liquidating Trustee.

The Colemans claim:

On June 28, 2023, the Liquidating Trustee filed the Applications requesting to employ the Geno Law Firm as attorneys and special counsel for professional services. The Liquidating Trustee seeks counsel to advise and consult with her regarding the pursuit of adversary proceedings for officer liability, among other things. . . .

However, these applications overlook a fundamental conflict of interest that prohibits their authorization. The Objectors [i.e., the Colemans] note that the Geno Law Firm currently represents John Coleman in his personal bankruptcy . . . and, through that representation, would necessarily have obtained privileged and confidential information in the course and scope of that representation that Objectors have not waived nor consented to its use or release. Such privileged and confidential information in the Geno Law Firm inherently taints any potential representation of the Liquidating Trustee, in any matter adverse to the Objectors.

The Colemans point out that, although Geno's applications to represent the Liquidating Trustee state that some of the parties have waived the possible conflict between EG and John Coleman, John Coleman himself has not waived any conflict at all.

The Colemans continue:

In the Geno Law Firm's role of advising John Coleman in his Chapter 7 bankruptcy, the law presumes counsel at the Geno Law Firm has learned privileged and confidential information -- information that necessarily relates to John Coleman's role and work at the point in time when he was an officer. That information precludes the Geno Law Firm from being adverse to the Objectors in its representation of the Liquidating Trustee.

Undersigned counsel also had initial conversations with the Geno Law Firm in the fall and winter of 2021 that were under joint-interest/common-interest privilege due to the Geno Law Firm's representation of Express Grain and undersigned counsel's representation of Messrs. John Coleman and Michael Coleman. While such communications were limited, Objectors are unable to ascertain from the filed applications how the Geno Law Firm would plan to separate out such conversations and knowledge in their proposed representation of the Liquidating Trustee, if adverse to the Objectors. Frankly, the Geno Law Firm cannot unlearn that privileged information and Objectors therefore object to its retention absent any special provisions carving it out of any action, whether litigation, investigation, or other, adverse to Objectors.

Such privileged information may not be used to the disadvantage of the Objectors if the Geno Law Firm were to represent the Liquidating Trustee, and as a result the Geno Law Firm cannot represent the Liquidating Trustee to be adverse, in any respect, including even investigation or assessment, over the objections of the Objectors.

The Colemans also claim that Geno's involvement would violate the Mississippi Rules of Professional Conduct:

Specifically, a lawyer cannot engage in representation of a client if the representation would be directly adverse to another client in accordance with Mississippi Rules of Professional Conduct 1.7. . . .

The Liquidating Trustee has made it clear that they intend to explore the prosecution of Chapter 5 claims as well as adversary proceedings for officer liability.

The Geno Law Firm would have a conflict of interest, in clear violation of the Mississippi Rules of Professional Conduct, if it were to represent the Liquidating Trustee and the Liquidating Trustee were to pursue claims against the Objectors. The Court is unable to authorize such retention, given the limitations under the Mississippi Rules of Professional Conduct. . . .

The Colemans point out that Geno's proposed work for the Liquidating Trustee includes taking potential actions against the Colemans themselves:

To be clear, the Liquidating Trustee's potential scope of work to the Geno Law Firm includes the ability to:

a. investigate actions against officers or insiders, conduct of same, which include the Objectors;

b. conduct investigations of corporate actions and wherewithal of corporate operations that might invoke or otherwise explore liability on directors officers (especially since certain actions of the board of Express Grain were undertaken at a point in time where the Geno Law Firm would have been advising the company including shortly before the bankruptcy filing and post-petition);

c. pursue any claims against Mr. John Coleman, former President of Express Grain;

d. pursue any alleged claims of fraud, misconduct or improper actions against any board member or officer; and

e. pursue any actions, Chapter 5 or otherwise, against any insiders or officers of Express Grain.

The Colemans summarize their position as follows:

There is a clear non-waivable conflict of interest if the Geno Law Firm is permitted to represent the Liquidating Trustee and/or be engaged as special counsel for the Liquidating Trustee. At this time, the Objectors do not consent or agree to allow the Geno Law Firm to be adverse to them, as proposed, and certainly would never agree to allow the Geno Law Firm to utilize their privileged and confidential information that it previously obtained in the course of its representation of the Liquidating Trustee.

To see the Liquidating Trustee's applications to hire Geno's law firm, see here:

Liquidating Trustee Application to Employ Geno Law Firm

Liquidating Trustee Application to Employ Special Counsel

In response to the Colemans' objection to Geno's appointment, the Liquidating Trustee filed a motion this morning to ask for an expedited hearing on the appointment requests. That motion may be seen here: Motion for Expedited Hearing

In that motion, the Trustee told the court that time is of the essence, and there are rapidly approaching deadlines for filing pleadings and possible claims, some of which run out before the scheduled hearing on the matter set for August 24.

The Trustee claims:

The Objection [by the Colemans] is obviously a roadblock to these investigations and filings . . . . Accordingly, an urgent situation exists justifying the Court in expediting the hearings . . . .

This afternoon, the court granted the expedited hearing, setting it to take place August 1.

All of this is in the context of Dr. Michael Coleman trying to block Craig Geno's final payment requests just last Wednesday, until the court has first ruled on Coleman's $2.8 million administrative claim. As first reported by the Greenwood Commonwealth, Coleman is afraid there won't be enough money left to pay his administrative claim if Geno's administrative claims for legal fees are approved first.

Some people wonder why this potential conflict of interest wasn't raised years ago, since Geno was representing both John Coleman and Express Grain in their twin bankruptcy cases from the very start.

That's because there were some pretty obvious claims that EG could have filed against John Coleman, its president, during the bankruptcy proceedings, but never did. For example, Coleman owed EG over $170,000 in personal credit card transactions that were put on EG's card, but no claim was ever filed by EG against him.

To read all our coverage of the Express Grain bankruptcy case, see here: Index of Express Grain articles


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