Judge In KSL Bankruptcy Case Slaps Its Former Law Firm With Big Fine

The U.S. Bankruptcy Judge overseeing the KSL Media case — still winding its way through bankruptcy proceedings after the company went belly-up two-and-half years ago — has slapped a huge fine on KSL’s initial bankruptcy law firm, Landau Gottfried & Berger.

Judge Alan M. Ahart awarded sanctions and related expenses against the firm totaling nearly $308,000 for various violations of the bankruptcy code in part related to efforts it took to hinder an investigation into the fees it charged KSL both before and after the media agency filed its bankruptcy petition in 2013.

David Gottlieb, the Trustee overseeing the KSL Media Estate, launched an inquiry into the professional fees being charged by a number of firms involved with the case, including Landau, in May of 2015. At the time the trustee reported that Landau incurred fees and expenses totaling more than $1.4 million. About $510,000 of that total was incurred preparing for and filing the Chapter 11 petition for KSL. The rest was incurred in post-petition proceedings. Experts submitted declarations to the court that the pre-petition fees were multiple times the cost to prepare and file a bankruptcy petition in most instances. Gottlieb launched the inquiry hoping to recover some of the fees for the KSL Estate.



In his ruling Judge Ahart wrote that “the court finds that Landau filed objections for an improper purpose, including to cause unnecessary delay and to thwart the Trustee’s investigation into Landau’s own conduct,” during the Chapter 11 case.

In imposing the heavy sanctions, Judge Ahart noted that Landau describes itself as a “pre-eminent litigation and insolvency boutique,” which he ruled “weighs in favor of imposing a more substantial sanction.”

Meanwhile a separate civil lawsuit filed in California by Gottlieb against KSL Media founder Kal Liebowitz and two other former KSL executives — Hank Cohen and Russell Meisels — for breach of fiduciary duty and related charges continues. This week the three defendants filed for summary judgment. A hearing on the matter is set for next month. 

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