Ford Credit objects to Reagor-Dykes earlier legal team

Ford Credit objects to Reagor-Dykes earlier legal team

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LUBBOCK, Texas -

Attorneys for Ford Motor Credit have filed objection to the law firm Reagor-Dykes Auto Group initially hired to handle bankruptcy proceedings.

In Wednesday's filing, Ford Credit states Rick Dykes and Bart Reagor contacted Mullin Hoard & Brown L.L.P. on July 29 to analyze Reagor-Dykes financials and to negotiate with creditors. Aug. 1 several, but not all, Reagor-Dykes companies filed for chapter 11 bankruptcy protection. David Langston from Mullin Hoard & Brown has served as attorney for Reagor-Dykes in this case.

Reagor-Dykes since filed notice with court that, at the request of its chief restructuring officer, it will employ Foley and Lardner as legal representation, which recently merged with Gardner, Wynne and Sewell and Marcus A. Helt.

Rick Dykes and Bart Reagor each individually paid Mullin Hoard & Brown a retainer totaling $500,000. This is listed both in today's filing and in the earlier request to change representation. Ford Credit writes "While payment of a retainer by any third party may divert the loyalty of the attorney to the third party creating a disqualifying adverse interest, payment by partners of a debtor 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."

Ford Credit states because Mullin Hoard & Brown has previously represented Rick Dykes individually it creates another conflict that can damage the bankruptcy estate. 

Ford Credit also takes issue with a lack of notice to the court. It cites a bankruptcy rule that payment or agreement regarding attorneys' fees must be filed with the court within 14 days of receipt.

Ford Credit claims Mullin Hoard & Brown performed services for R-D companies that filed for bankruptcy protection as well as other companies in the Auto Group, as well as Reagor and Dykes individually, all prior to chapter 11 filing. But the law firm received the retainer after the filing. The filing claims there is no evidence the law firm was paid for work before Aug. 1, making Mullin Hoard & Brown a pre-petition creditor, creating another conflict.

Ford Credit states Reagor-Dykes' application to employ Mullin Hoard & Brown should not be granted nunc pro tunc, essentially meaning the court should not grant authority now for Reagor-Dykes to hire the firm for its work Aug. 1 through Aug. 21.

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AUG. 16: Bankruptcy court allows Reagor-Dykes continued use of cash collateral, hiring of CRO
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AUG. 3: Judge approves Reagor-Dykes employee pay
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INITIAL STORY: Ford Motor Credit sues Reagor-Dykes; R-D files for chapter 11 bankruptcy

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