Russian bank faces U.S. court default if it can't find new law firm

(Reuters) - A U.S. judge will allow a law firm to stop representing Russia's VTB Bank in a lawsuit over the downing of a passenger flight over Ukraine, but warned the bank to quickly hire new attorneys or risk being in default.

A team at Latham & Watkins has been defending VTB, one of Russia’s largest banks, in the Manhattan federal case since 2019. The family of Quinn Schansman, an American killed in the downing of a Malaysia Airlines flight over eastern Ukraine in 2014, says VTB and fellow Russian lender Sberbank funneled money to Russian separatists accused of shooting down the plane. The banks have denied the claims and last year lost a bid to toss out the case on jurisdictional grounds.

Magistrate Judge Gabriel Gorenstein said Monday that the Latham attorneys can exit the case next month if they provide a sworn statement that includes contact information for the VTB representatives they worked with on the case.

Gorenstein also directed VTB to have a new lawyer enter the case by June 2 or risk being in default.

Judges can issue default judgments against defendants that do not take any action in court, and Gorenstein noted that corporations cannot appear in court without a lawyer.

An attorney with Latham did not immediately respond to a request for comment.

VTB's team at Latham last month moved to withdraw from the litigation, stating that it is ending relationship with the bank "on multiple matters" after VTB was sanctioned over the Russian invasion of Ukraine.

Schansman's family, represented by attorneys at law firm Jenner & Block, later claimed in a letter to the court that VTB was “exploiting” Latham's plan to exit the case to avoid handing over documents. A Jenner spokesperson did not immediately respond to a request for comment on Monday's ruling.

Latham is one of several U.S. law firms cutting ties with Russian clients after the start of the war in Ukraine and the sanctions that followed. Attorneys representing Sberbank in the Schansman case have also told the court that they are planning to exit but have not formally asked to do so.

Since the Russian invasion of Ukraine, other U.S. judges have denied bids by lawyers for Russian parties to halt cases so new attorneys can take over.

The case is Schansman v. Sberbank, Southern District of New York, No.19-2985.

For plaintiffs: David Pressman and Terri Mascherin of Jenner & Block

For VTB: Christopher Harris of Latham & Watkins

Read more:

Law firm defending Russia's VTB Bank asks to exit U.S. case over downed flight

For some law firms dropping Russian clients, U.S. courts have final say

Our Standards: The Thomson Reuters Trust Principles.