Genova Burns, Prominent NJ Law Firm, Sued for Nearly $500,000.00 in Alleged Bankruptcy Preference Payments

Genova Burns, Prominent NJ Law Firm, Sued for Nearly $500,000.00 in Alleged Bankruptcy Preference Payments

Prominent North Jersey law firm Genova, Burns, Giantomasi, Webster LLC has been sued in the United States Bankruptcy Court for the District of New Jersey for over $480,000.00.  The plaintiff bankruptcy trustee alleges that Genova Burns received preferential transfers from Jersey City’s Christ Hospital within the last 90 days before the hospital filed bankruptcy proceedings.  Elnardo Webster, a name partner in the firm was recently replaced as the WNY Parking Authority and Zoning Board attorney.

According to the certification of Geneva Burns’ attorney Celia Bosco, filed on February 21, 2012 in the Christ Hospital bankruptcy, Genova Burns had been the outside general counsel to the hospital since 2009 and obtained a $150,000.00 legal fee retainer from the hospital before the February 6, 2012 bankruptcy.   On March 2, 2012, the Bankruptcy Court authorized Christ Hospital to hire Genova Burns as Special Corporate Counsel in the bankruptcy case.  An order entered by the Bankruptcy Court on September 6, 2013, awarded Geneva Burns more than $748,000.00 in legal fees as final compensation for the firm’s services rendered to the bankrupt Christ Hospital.

However, and unfortunately for Genova Burns, it not only received this three quarter million dollar payment during the Christ Hospital bankruptcy, it also received additional payments of nearly $500,000.00 just before the bankruptcy.   This pre-bankruptcy payment has potentially placed Genova Burns in violation of the bankruptcy laws.

The United States Bankruptcy Code contains a section 547, known as the “preferential transfer” statute.   This makes it unlawful when the creditor of a company which is sliding into bankruptcy gets payment of old debt within the 90 days before bankruptcy is filed.   On May 23, 2014, the bankruptcy trustee for the Christ Hospital Liquidating Trust filed suit against Genova Burns, seeking to recover $483,728.00.  Allegedly, Genova Burns received this sum in three payments on November 22 and December 30, 2011 – – less than 90 days before Christ Hospital filed its February 6, 2012 bankruptcy.

The principal behind preferential transfer liability is to prevent certain creditors of a weakening company from being favored (or “preferred”) to the detriment of the other creditors.   Accordingly, any payment which gives one creditor a leg up on the other creditors – if made within the last 90 days before bankruptcy — is potentially “preferential” and must be returned to the bankrupt.   Once returned, that money is then distributed equally to all creditors, so that everybody shares alike.

To date, Genova Burns has not responded to the complaint, although there is a pretrial hearing scheduled for July 15, 2014.   Attorney Joseph J. DiPasquale, a partner at the Trenk Law Firm, based in West Orange, is currently representing Genova Burns.  DiPasquale provided Hudson County TV with a statement, and said,

“The action is common in post-confirmation Chapter 11 cases.    However, we believe there are defenses to the alleged preference claims.   We have been attempting to resolve the action with the Liquidating Trustee.”

HCTV will follow up and provide Hudson County residents with the latest updates.