The bankruptcy trustees overseeing the fallen law firm Girardi Keese have launched a new lawsuit targeting litigation funders they allege benefited from millions in diverted client settlement money. The complaint, filed October 24 in the U.S. Bankruptcy Court for the Central District of California, accuses investor Christopher Diamantis and his company D&D Funding II LLC of improperly receiving more than $3.16 million from a client’s settlement payout in 2013—money that, the trustees claim, was wrongfully transferred to third parties rather than to the injured client and his family.
Background: A Legacy of Fraud and Bankruptcy
This case is one of the many legal aftershocks following the downfall of Thomas Girardi, the once-prominent Los Angeles trial attorney whose firm, Girardi Keese, gained national fame through major tort settlements—including the case that inspired the movie Erin Brockovich.
Girardi’s reputation collapsed after evidence emerged that he had stolen millions of dollars from his own clients. In 2020, Girardi Keese filed for bankruptcy amid mounting fraud allegations and civil suits. In June 2025, Thomas Girardi was sentenced to over seven years in federal prison for wire fraud and client theft. He is currently appealing his conviction, arguing procedural errors and evidentiary issues.
Now, the firm’s trustees are still uncovering what they call a web of improper payments and illegal fee-sharing deals that drained settlement funds from rightful beneficiaries long before the bankruptcy filing.
The Trustees’ Latest Complaint
In their latest action, liquidating trustee Elissa D. Miller—representing Girardi Keese’s bankruptcy estate—joined with trustees for Girardi’s former clients to demand that Diamantis and D&D Funding II return $3.16 million in allegedly fraudulent transfers.
According to the complaint, this amount represented roughly half of a $10 million settlement Girardi Keese secured for the family of a worker who suffered catastrophic burns in a 2010 Pacific Gas & Electric Co. (PG&E) plant explosion. The worker sustained injuries covering about 90 percent of his body.
While the settlement was intended to compensate the victim’s family, the trustees claim Girardi funneled large portions of the award to third parties, including Diamantis and his business partner Joseph DiNardo, through D&D Funding II. The payments allegedly took place “with actual intent to hinder, delay, or defraud creditors,” and without the estate receiving reasonably equivalent value in return—language commonly used in fraudulent transfer claims under the Bankruptcy Code.
Illegal Fee-Sharing at the Heart of the Case
The trustees allege that the Girardi-DiNardo relationship amounted to an illegal fee-sharing arrangement under California law, which strictly prohibits lawyers from sharing client fees with non-lawyers. According to court filings, DiNardo’s litigation-funding company financed portions of Girardi Keese’s caseload in exchange for a share of attorney fees recovered from settlements.
This arrangement, the trustees argue, not only violated ethical rules but also deprived clients of funds that were rightfully theirs.
The trustees’ attorneys—Jenkins, Mulligan & Gabriel LLP and Gleichenhaus, Marchese & Weishaar PC—assert that Diamantis and D&D Funding II should have known the funds originated from an unlawful and unethical transaction.
Pattern of Misuse and Continuing Litigation
This lawsuit is not the first attempt by bankruptcy administrators to recover money tied to Girardi’s misdeeds. Earlier in February 2025, Trustee Miller and her team filed a separate lawsuit against DiNardo and his law firm, accusing them of assisting Girardi’s fraud and seeking to prevent them from discharging a $7.5 million fraud-related claim in bankruptcy.
DiNardo, a New York-based attorney, filed for bankruptcy himself in 2023. That filing came after other litigation funders associated with him successfully evaded a prior lawsuit accusing them of helping Girardi’s firm conceal stolen client funds.
The series of lawsuits reflects the trustees’ strategy to trace and recover assets for Girardi Keese’s creditors and victims. Each new case adds to the mounting record of financial manipulation and misuse of trust accounts that characterized Girardi’s operations in the years leading up to the firm’s collapse.
The Broader Impact on Litigation Funding
The dispute underscores growing tensions between bankruptcy trustees and litigation funders, a relationship increasingly under scrutiny as courts question the ethics and transparency of such financial arrangements.
Litigation funding—where outside investors finance lawsuits in exchange for a portion of any recovery—has become a booming industry. Yet, as the Girardi Keese saga demonstrates, these deals can cross into legally perilous territory if they blur the line between financing and improper fee-sharing.
California, in particular, maintains strict prohibitions on non-lawyer participation in legal fees. Any finding that Girardi’s deals violated these rules could have far-reaching implications for funders and law firms that rely on similar partnerships to bankroll costly litigation.
The bankruptcy court will now consider whether the 2013 transfers to Diamantis and D&D Funding II qualify as fraudulent conveyances. If the trustees prevail, the defendants could be forced to return millions to the estate for redistribution to Girardi’s defrauded clients and other creditors.
The latest Girardi Keese lawsuit illustrates how bankruptcy trustees continue to unwind one of the most notorious legal collapses in U.S. history. Even years after Girardi’s sentencing, the quest to recover funds for victims is far from over.
For law firms and funders alike, this case serves as a critical reminder that ethical compliance and transparency in financial partnerships are non-negotiable. Hidden or informal arrangements can lead to massive liability years later—especially when a bankruptcy trustee begins digging into old settlements.
As the Girardi Keese estate continues its pursuit of restitution, the legal community will be watching closely. The outcome could reshape how litigation funding is structured and scrutinized in high-stakes tort and mass-action cases nationwide.
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