Galindo Law - Chapter 11 Case Summary

Galindo Law Firm filed for Chapter 11 in the Southern District of Texas on August 26, 2026, after its lender refused on or about February 13, 2026 to advance further funds under a $45 million credit facility that had financed its mass tort case acquisition, and after Decibel, its marketing and case-management provider and the holder of a $10,277,103.10 judgment against the firm, exercised an alleged right to garnish funds owed to GLF. The firm enters bankruptcy backed by an August 18, 2026 restructuring support agreement with Decibel's owner, Sergio P. De La Canal, and his affiliated entities, and intends to pursue a plan that pays creditors from a segregated Plan Payment Account funded by 55% of litigation recoveries while challenging the lender's asserted liens on IOLTA funds, unearned fees, and future recoveries.

Business Description

Cristóbal M. Galindo, P.C. d/b/a Galindo Law Firm (the "Debtor" or "GLF") is a Houston-based plaintiffs' law firm that represents and is ethically responsible for over 20,000 clients nationwide. GLF's practice centers on first-party insurance, personal injury, and mass tort claims, and the firm has recovered millions of dollars for its clients since inception.

GLF also holds interests in two affiliated law firms: a 50% interest in Galindo & Mott, LLP, a Texas law firm, and a 50% interest in Krause and Kinsman Group, LLP, a Washington, D.C. firm doing business as Galindo D.C.

Corporate History

GLF was incorporated as a professional corporation in the State of Texas on March 5, 2001. Cristóbal M. Galindo is its 100% owner and serves as President, Sole Director, and Sole Shareholder.

In approximately 2021, the firm expanded from single personal injury and property damage matters into mass torts, beginning with Zantac and moving into Roundup and Camp Lejeune. The Zantac lawsuits allege that manufacturers failed to warn consumers that the heartburn medication contained or could degrade into dangerous levels of N-nitrosodimethylamine (NDMA), a probable human carcinogen linked to various types of cancer. The Roundup lawsuits allege that long-term exposure to the glyphosate-based weedkiller caused non-Hodgkin lymphoma and that the manufacturer, Monsanto (now Bayer), knew of the risks but represented the product as safe. The Camp Lejeune litigation allows veterans, their families, and civilian workers to seek compensation from the United States government for serious illnesses, including multiple forms of cancer and Parkinson's disease, caused by decades of exposure to toxic chemicals in the water supply at Marine Corps Base Camp Lejeune in North Carolina. As part of its transition away from single-plaintiff cases, GLF developed and implemented a strategy and system for case acquisition.

Operations Overview

Fee Structure and Co-Counsel Arrangements

GLF's contingency fee agreements are pure contingency arrangements: nothing is owed to GLF until there is a settlement or successful litigation and the client has received a distribution. GLF does not have the right to reimbursement of expenses unless and until there is a recovery for the client's benefit and the client has signed the release approving the settlement and the disbursement approving the attorney fee and reimbursable expense amount.

One of the primary methods GLF uses to expand its ability to represent clients is entering into co-counsel arrangements with other law firms under which the firms agree to share fees, including arrangements in which GLF has the initial relationship with the client. Client engagement agreements specifically permit GLF to enter into agreements with other counsel, all clients are aware of and agree to the sharing of fees, and GLF continues to maintain responsibility for ensuring the clients are well-represented. GLF will not enter into a Consent to Associate, generally executed on a case-by-case basis, with any firm where the engagement letter does not permit the retention of additional counsel or where the client has not specifically given written authority to such agreement, and it applies the same requirement to any Memorandum of Understanding, generally executed in connection with multiple or mass cases. GLF does not share legal fees with any non-lawyers or entities controlled by non-lawyers, and does not pay or receive a fee purely for referral of a case with no comparable work.

Client Acquisition and the Decibel Relationship

To reach potential clients, GLF incurs significant marketing and similar costs, primarily with Decibel. GLF complies with American Bar Association strictures related to attorney advertising and, where cases are confined to a single state, with that state's requirements as well, as in the case of claims related to a hurricane in Louisiana, where GLF has complied and will continue to comply with Louisiana ethical and disciplinary requirements for advertising or otherwise seeking clients.

GLF has various contracts with entities owned or controlled by Sergio P. De La Canal, including Decibel Legal Services, LLC and its affiliates (together, "Decibel"), a marketing, administrative, and operational services firm whose relationship with GLF spans several distinct service areas.

Mr. De La Canal, a lawyer admitted to practice in Mexico, owns both Decibel and Damage Resources. Brenda Galindo, Mr. Galindo's spouse, is an employee of Decibel.

Cash Management and Client Trust Funds

GLF maintains its banking relationship entirely with JPMorgan Chase Bank, N.A. ("Chase") and runs a centralized cash management system across eight accounts to collect, transfer, and disburse funds generated by its legal operations. Five of those accounts are IOLTA accounts holding client trust funds. GLF's revenue primarily consists of attorney's fees derived from client recoveries, which are initially deposited into one of the five IOLTA accounts; funds belonging to clients are not deposited into any account other than an IOLTA account and are not commingled with funds attributable to other operations or income. The system carries approximately $2,315.50 in monthly bank fees.

Utilities and Records

GLF obtains internet, telecommunications, and similar services from various utility companies, paying its providers by credit card. Over the last six months, GLF has paid approximately $6,520.36 each month for utility services, with some fluctuation depending on the season.

GLF maintains voluminous and complex books, records, and accounting systems. In connection with its representation of more than 20,000 former and current clients, GLF must maintain the confidentiality of certain protected health information, particularly in personal injury and mass tort cases in which clients' medical conditions and records are a central part of the case, as well as information and records protected by the attorney-client privilege. GLF often communicates with its thousands of clients through electronic means, including by email.

Prepetition Obligations

The CMG Credit Facilities

GLF is party to a series of credit facilities used to fund case acquisition and general operations. On May 9, 2024, GLF, together with Galindo & Mott, LLP, as Borrower, executed a Credit Agreement for $25 million with CMG Funding 2024 LLC as Lender and Administrative Agent, Deer Finance, LLC ("Deer") as Servicer, and JBSL Legal Finance LLC ("JBSL") as Participation Administrator. On February 26, 2025, GLF and Galindo & Mott, LLP, as Borrower, executed a second Credit Agreement for $45 million (the "Credit Agreement") with CMG Funding 2025 LLC as the Lender and Administrative Agent ("CMG"), together with Deer and JBSL (collectively, the "Lender"), which restructured and refinanced existing obligations to provide continued liquidity.

The Credit Agreement functioned as a revolving facility in which available credit was tied to a Borrowing Base calculated on the estimated value of GLF's Eligible Cases, including high-value mass tort dockets. The Borrowing Base could move up or down depending on the Lender's opinion as to the value of those cases, its creation involved extensive discussions with the Lender, and the Lender held final approval over each Borrowing Base and any adjustments. GLF submitted periodic draw requests, typically aligned to immediate operational needs such as case-specific costs or general overhead, and requested funds on a quarterly basis to manage the high-volume cash flow requirements of a nationwide mass tort practice. Funding was contingent on GLF maintaining a sufficient Borrowing Base, remaining in compliance with the covenants in the Credit Agreement, and providing all information regarding GLF's cases to the Lender.

The account ending in x6963 is governed by a DACA between CMG and Chase. Under that arrangement, the DACA Receipts Account receives portions of funds meant for GLF and automatically diverts 75% of those funds to the Lender as debt distributions, transferring the remaining 25% to the Operating Account to provide cash for daily operations.

Asserted Collateral and the Debtor's Challenge

The Lender asserts that obligations under the prepetition Credit Agreement are secured by a first-priority lien on substantially all of GLF's assets, including:

GLF contests the reach of that lien. The Declaration states that the Lender is not a law firm, provides no legal services to any GLF client, and has no right to any share of any fees in an IOLTA account under the Texas Disciplinary Rules of Professional Conduct. Settlement proceeds remain in an IOLTA account, and GLF's interest in those funds is contingent until the client has executed any necessary documentation and been delivered its share of any settlement; GLF is not entitled to any funds in an IOLTA account unless and until the client has been paid and the fee is earned. On the Debtor's reading, while GLF did grant a security interest in funds deposited into the account subject to the Deposit Account Control Agreement, no security interest could attach to fees not yet earned, as that would constitute prohibited fee-sharing with a non-lawyer. GLF further asserts that the Credit Agreement appears to fall within Title 5 of the Texas Finance Code, Chapter 398, governing "sales-based financing" — a transaction repaid as a percentage of sales or revenue in which the payment amount may increase or decrease according to the volume of sales made or revenue received, or that provides for a reconciliation process adjusting the payment to a percentage of sales or revenue.

The Lender received approximately $182,000 within the 90 days prior to the Petition Date, and GLF takes the position that under section 502(d) of the Bankruptcy Code no claim of the Lender will be allowed until all avoidable transfers are repaid or returned. GLF also disputes the stated amount of the Lender's claim.

The Decibel Judgment and Related-Party Claims

Decibel holds a judgment against GLF for $10,277,103.10 plus post-judgment interest and has exercised an alleged right to garnish funds owed to GLF. The RSA Term Sheet separately defines the "SPD Judgment Claim" as all amounts awarded pursuant to the Final Judgment Confirming Arbitration Award signed on December 1, 2025 by Judge Garrison in the 157th Judicial District Court of Harris County, Texas (Cause No. 2024-89003).

The broader De La Canal complex is defined in the RSA Term Sheet as the "SPD Parties": Sergio P. De La Canal individually; Decibel Legal Services LLC; Damage Resources LLC; Damage Reports, LLC; LevelUp Law, LLC; Alpha Seven LLC; Pajaro Uno, LLC; Twin Diamond LLC; Triple Crown Aviation LLC; any future-formed entity owned by Mr. De La Canal that does business with GLF; and the officers, directors, managers, and members of the foregoing. Pre-Petition SPD Claims — all claims of any SPD Party arising in whole or in part before the petition date, other than the SPD Judgment Claim and the Sergio De La Canal Claims — carry an allowed amount of $4,999,860.50, and the Sergio De La Canal Claims, covering all amounts owed by GLF to Mr. De La Canal arising prior to the petition date, carry an allowed amount of $930,929.23.

The SPD Agreements are defined as the agreements between GLF and the SPD Parties, including but not limited to:

GLF owes $18,437.22 on account of utility services charges incurred before the Petition Date.

Events Leading to Bankruptcy

The Credit Agreement was the engine of GLF's mass tort case-acquisition strategy, and its shutdown drove the filing. On or about February 13, 2026, the Lender refused to advance any additional funds without new conditions and changes to funding requirements. Meanwhile, Decibel — GLF's marketing, data, payroll, and case-management counterparty, and the holder of a $10,277,103.10 judgment against the firm — moved to collect, obtaining a Writ of Garnishment After Judgment issued on March 6, 2026 by Marilyn Burgess, District Clerk, Harris County, Texas, and exercising an alleged right to garnish funds owed to GLF.

On August 18, 2026, GLF entered into a Restructuring Support Agreement Term Sheet (the "RSA Term Sheet") with Mr. De La Canal and the SPD Parties, setting the material terms of a comprehensive restructuring of GLF's existing debt and other obligations to be consummated through a Chapter 11 plan of reorganization. GLF filed its Chapter 11 petition in the Southern District of Texas, Houston Division, on August 26, 2026.

Chapter 11 Filing

GLF intends to file a plan of reorganization, to seek a determination regarding the claims it may have against any co-counsel firms or other third parties, to ask the Court for authority to use any alleged cash collateral while challenging any alleged security interest in funds in any IOLTA account or in future recoveries from continued representation of any client, and to explore whether avoidance actions can be brought.

The RSA Term Sheet

The RSA Term Sheet is a binding agreement between GLF and the SPD Parties. On the Term Sheet Effective Date — the date on which each party has executed and delivered counterpart signature pages — each SPD Party agrees to forbear from pursuing any other remedies against GLF and Mr. Galindo until the Plan Effective Date, without waiving any defaults or remedies available under the SPD Agreements.

The Term Sheet fixes the case calendar: the Case was to be filed in the Southern District of Texas, Houston Division and designated as a Complex Case; the Plan and corresponding disclosure statement are to be filed no later than 30 days after commencement of the Case (the "Plan Filing Deadline"); the Confirmation Order is to be entered no later than November 30, 2026; and the Plan Effective Date is to occur no later than December 31, 2026. Each deadline may be extended by mutual written agreement of GLF and the SPD Parties. Any Plan and the Confirmation Order must be in form and substance acceptable to the SPD Parties and consistent with the Term Sheet in all material respects.

Mr. Galindo executes an employment agreement on the Term Sheet Effective Date to serve as Chief Executive Officer / Managing Attorney of GLF as a W-2 salaried employee, with annual compensation fixed at $800,000 per annum until the Plan is confirmed and the Plan Effective Date has occurred. He is entitled to receive equity distributions, shareholder draws, or discretionary bonuses, but in no event in excess of 25%, so long as obligations under the Plan are kept current and not in default. Mr. Galindo will retain his equity interests in Reorganized GLF, which is to be registered, formed, or organized under the laws of Puerto Rico.

The Plan Payment Account

The Plan would establish a segregated Plan Payment Account funded by 55% of (i) GLF's net revenue of all recoveries from any claims asserted on behalf of clients, directly or indirectly, (ii) any payments attributable to GLF's interest in Galindo & Mott and Krause and Kinsman Group, LLP, and (iii) any payments attributable to recoveries where GLF is counsel of record or otherwise proceeds pursuant to a Memorandum of Understanding, Co-Counsel Agreement, or other agreement with other attorneys (collectively, "Litigation Recoveries"), transferred from the applicable IOLTA account.

A Disbursing Agent independent of Mr. Galindo, GLF, and the SPD Parties would be appointed, with SPD and Mr. Galindo consulting and entitled to appoint a mutually agreeable Disbursing Agent in their sole discretion. The Disbursing Agent would be paid reasonable compensation from funds on deposit in the Plan Payment Account, and its duties would include preparing a report of all funds deposited into and disbursed from the account, verifying that Litigation Recoveries have been properly paid in, disbursing payments as required under the Plan, and maintaining a reasonable reserve.

Proposed Plan Treatment

All unexpired leases and executory contracts not expressly assumed would be rejected on the Plan Effective Date. Payment of any post-Plan Effective Date amounts owed to any SPD Party, other than PEO Claims, arising during the first eighteen months following the Plan Effective Date would be deferred in full and payable in a single lump sum on the first business day following the eighteen-month anniversary from the Plan Payment Account, with net 60 terms thereafter.

Releases and Preserved Claims

Effective as of the Plan Effective Date, the parties would grant customary mutual releases of all pre-petition and post-petition claims. The releases would expressly exclude AWD, Priority Responsible Funding, LLC, Casey Gard, Bruce Copeland, and any related non-released defendants (the "Excluded Parties"). All estate claims, preference actions, and fraudulent transfer claims against the Excluded Parties under sections 547, 548, and 549 of the Bankruptcy Code would be preserved and transferred, with any recoveries transferred to the Plan Payment Account for the benefit of creditors.

Termination Rights

The SPD Parties may terminate the Term Sheet on written notice, email being sufficient, upon any of a broad set of Termination Events, including:

GLF may terminate upon an uncured SPD Party breach after five days' written notice, upon exercise of its Fiduciary Out, or upon a governmental or judicial ruling rendering the Term Sheet unenforceable or restricting consummation of the Restructuring in a way GLF cannot reasonably remedy. The Fiduciary Out permits GLF to take or refrain from taking any action with respect to the Restructuring where it determines in good faith, based on advice of outside counsel, that doing so is reasonably required to comply with applicable law, including its fiduciary duties, without incurring liability. The Term Sheet may also be terminated by mutual agreement at any time, terminates automatically upon the occurrence of the Plan Effective Date, and terminates automatically upon a final, non-appealable judgment or order declaring it invalid, void, or unenforceable. Following commencement of the Case, GLF has agreed that termination and the giving of a termination notice by any SPD Party is not a violation of the automatic stay, while reserving its right to argue that a termination was not proper under the Term Sheet's terms.

Cash Collateral

GLF filed the Cash Collateral Motion out of an abundance of caution to avoid disruption to operations during the initial stages of the Case, while disputing the validity, priority, enforceability, perfection, extent, and amount of any asserted lien on funds in an IOLTA account, client funds, unearned attorneys' fees, post-petition-earned fees, future recoveries, and other disputed categories of property. GLF is not seeking authority to use client funds held in IOLTA accounts for operating expenses. Reimbursements of expenses received after the Petition Date but incurred before it are arguably cash collateral of the Lender, and GLF will segregate such Pre-Petition Expense Reimbursements subject to further order of the Court.

The budget reflects projected disbursements of $127,957 for the interim period through the week ending September 18, 2026, and $594,305 for the period through the week ending January 1, 2027. It was prepared with the assistance of proposed financial advisor Harney Partners, based on GLF's books and records, projected receipts, projected operating disbursements, and projected restructuring-related expenses.

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