Ford questions law firm payment in Reagor Dykes bankruptcy case

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Ford Motor Credit Company objects to Reagor Dykes’ request to change attorneys in its ongoing bankruptcy case.  On Friday, David Langston and the firm he represents, Mullin Hoard & Brown, requested permission to withdraw as the attorney for Reagor Dykes (RD).  

Mullin Hoard & Brown’s motion on Friday said the newly appointed Chief Restructuring Officer for RD would like to bring in his own legal counsel. The motion asked that Mullin Hoard & Brown be named after-the-fact as attorneys for RD from August 1 through August 21.  

The motion also asked the bankruptcy court to approve payment to the law firm.  Rick Dykes and Bart Reagor put up personal money in a $500,000 retainer.  Mullin Hoard & Brown requested legal fees be paid out of that retainer.

The retainer is big problem, according to Ford. 

“Mullin Hoard & Brown L.L.P. did not disclose this payment [the $500,000 retainer] to the Court at the outset of the bankruptcy representation,” Ford said.

Ford also said taking money from Mr. Reagor and Mr. Dykes “is especially likely to cause the attorney to have an adverse interest due to the inherent conflict of interests between a debtor and its partners in bankruptcy.”

In other words, the law firm might be more loyal to Mr. Reagor and Mr. Dykes instead of being loyal to the RD companies. 

Ford said Mullin Hoard & Brown should have asked the court’s permission and made proper disclosures on day one of the bankruptcy case. 

“This application comes nearly a month after the commencement of the case, only after [Reagor Dykes] have sought new counsel,” Ford said.

On July 31, Ford sued RD saying RD defaulted on roughly $40 million of debt. Ford later went on to claim RD committed outright fraud.  Some but not all of the RD companies filed for bankruptcy on August 1.

Ford questioned whether Mullin Hoard & Brown can be compensated. 

A bankruptcy court hearing on Thursday will include the issue of RD’s legal counsel. 

Related Stories: Reagor Dykes – extended coverage of the bankruptcy 

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