Zayat's Bankruptcy Lawyers Want to Sever Ties Over $368K in Unpaid Fees

The law firm representing Ahmed Zayat in his $19-million bankruptcy pleading asked a federal judge Monday for permission to walk away from the case based on Zayat's alleged non-payment of $368,273 to the firm in outstanding legal fees.

“The representation of the Debtor has consumed an extremely significant amount of the available resources of our firm,” wrote attorney Jay Lubetkin of Rabinowitz, Lubetkin & Tully, LLC, in a July 26 “motion to withdraw” filed in United States Bankruptcy Court (District of New Jersey).

“The Debtor has been consistently advised that absent satisfactory arrangements for the payment of the outstanding fees and expenses due to our firm and newly incurred billings, the firm would have no alternative but to seek to withdraw from representation of the Debtor,” Lubetkin wrote.

The purportedly insolvent owner and breeder of Triple Crown champ American Pharoah hired the firm when he filed for Chapter 7 bankruptcy protection nearly one year ago.

Lubetkin's firm has also been defending Zayat in an adversary proceeding filed against him by MGG Investment Group, LP, for allegedly obtaining a $24-million loan by fraud and then not repaying it. MGG wants that debt ruled as non-dischargeable.

Zayat's bankruptcy case has repeatedly been slowed by allegations from the trustee assigned to the case that Zayat and his family members have been uncooperative and obstructive as the trustee tries to trace millions of dollars in possibly fraudulent transfers.

Lubetkin wrote in his court filing that at the outset of their legal relationship, Zayat promised to pay what he owed in legal fees based on 60-day receivable terms. He later agreed to make at least $50,000 monthly minimum payments.

At the time of his initial bankruptcy filing in September 2020, Zayat told the court he had only $314.22 to his name.

Lubetkin wrote that Zayat has not paid his firm since May 5, 2021.

“If the Debtor were to satisfy his previously expressed commitment to keep our receivables within 60-day terms, it would require an immediate payment of $232,899 and a further payment of $76,717 when the billing governing July's efforts is tendered,” Lubetkin wrote.

“I attempted at least nine times during the month of July to communicate with the Debtor regarding status of payments to our firm, without substantive or satisfactory response by the Debtor,” Lubetkin wrote.

As for who might next represent Zayat, Lubetkin wrote in his filing that Zayat himself “fully understands the Chapter 7 bankruptcy process” and “is fully capable of representing himself.”

Lubetkin wrapped up his motion for withdrawal by noting that when he finally did manage to reach Zayat July 21, it seems as if Zayat tried to tell him he was fired before Lubetkin could quit.

“[W]hile not knowing what the Debtor's intentions were at the time of the communication,” Lubetkin wrote, “the Debtor requested that I write to the Court to advise my firm was 'no longer defending” the Debtor, which may be interpreted as the Debtor terminating his relationship with our firm.”