A New York bankruptcy judge disqualified Reed Smith LLP from continued work in the Chapter 11 case of reorganized oil and gas shipping company Eletson Holdings on Thursday, saying the law firm's clients no longer exist.

During a hearing, U.S. Bankruptcy Judge John P. Mastando III said a New York district court judge had ruled that the former owners of Eletson that Reed Smith represented — referred to as Provisional Holdings or more recently, Unreorganized Holdings — never existed under U.S. or Greek law, representing a change in the facts since the bankruptcy court last declined to remove the firm from the Chapter 11 case.

"The circumstances have clearly changed since the court last considered this issue, and there is no longer a client in existence for Reed Smith to represent," Judge Mastando said.

He said Reed Smith attorneys can continue to represent the firm itself in the proceedings as appropriate.

Eletson creditors pushed the company into an involuntary Chapter 7 bankruptcy case in March 2023, and the debtor later successfully sought a conversion to a Chapter 11. In October 2024, the New York bankruptcy court confirmed a plan that transferred ownership of the business to creditor Pach Shemen LLC.

Post-confirmation, international legal wrangling has occupied the debtor as the former majority shareholders petitioned foreign courts for relief, including obtaining a ruling from a Greek court that created the provisional board of Eletson that purported to control the business.

Last month, U.S. District Judge Lewis J. Liman issued a series of rulings in litigation among Reorganized Eletson, Provisional Holdings, and rival shipping company Levona and its owner, Murchinson Ltd. In those rulings, Judge Liman directed Reed Smith — which represented Eletson prior to and in the beginning of its bankruptcy case — to turn over documents to Levona that Eletson had allegedly withheld during a pre-bankruptcy arbitration in which Eletson was awarded $102 million.

In another of those rulings, Judge Liman found Provisional Holdings did not have standing to appeal rulings of the bankruptcy court because it did not legally exist in light of the Greek court recently overturning its own order creating the provisional board of Eletson.

Reorganized Eletson sought Reed Smith's disqualification via letter in September, saying since the bankruptcy court last considered the firm's role in the post-confirmation proceedings, the state of play had changed.

"There is just no purpose in our mind for something we consider to be an interloper," Eletson attorney Kyle J. Ortiz of Herbert Smith Freehills Kramer LLP said at Thursday's hearing.

Louis M. Solomon of Reed Smith said his clients believe that Reorganized Eletson is trying to commit a "hostile takeover" of gas shipping assets not included in the bankruptcy case, and those issues are on appeal to the Second Circuit, which should be allowed to rule on those appeals.

Eletson is represented by Kyle J. Ortiz, Brian F. Shaughnessy, Jennifer Sharrett and Andrew Citron of Herbert Smith Freehills Kramer LLP.

Provisional Holdings is represented by Louis M. Solomon and Colin A. Underwood of Reed Smith LLP.

The bankruptcy case is In re: Eletson Holdings Inc. et al., case number 1:23-bk-10322, in the U.S. Bankruptcy Court for the Southern District of New York.