Latham & Watkins will be permitted to drop its representation of one of Russia's largest state-owned banks in a lawsuit related to the 2014 downing of a passenger plane over Ukraine, a U.S. judge has ruled, but he warned that Latham's client will be found in default if it does not replace counsel within 30 days.

If the bank fails to name new attorneys by June 2, it "will be deemed in default, as a corporation may not appear in federal court except through an attorney," U.S. Magistrate Judge Gabriel Gorenstein wrote in an order issued Monday.

Judges can issue default judgments against parties that do not take a court-ordered action.

A team of lawyers at Latham had been defending VTB bank in the Southern District of New York since 2019. The family of Quinn Schansman, an American killed in the downing of a Malaysia Airlines flight over eastern Ukraine in 2014, has alleged that VTB and another Russian lender, Sberbank, funneled money to Russian separatists accused of shooting down the plane. The banks have denied the claims but last year lost a bid to have the case tossed on jurisdictional grounds.

Gorenstein said that if no attorney files a notice of appearance for VTB by June 2, Latham's attorneys will be permitted to withdraw from the case if they provide a sworn statement that includes contact information for the VTB representatives they worked with.

Last month, Latham lawyer Christopher Harris submitted a motion to withdraw from the litigation, stating that Latham is ending its relationship with the bank "on multiple matters" after VTB was sanctioned over the Russian invasion of Ukraine. The motion said the bank had agreed to allow Latham to withdraw.

Lawyers at Jenner & Block, the firm representing the Schansman's family, then wrote in a letter to the court that VTB was "exploiting" Latham's plan to withdraw from the case by attempting to delay discovery and refrain from handing over documents.

Lawyers at Latham and at Jenner & Block could not immediately be reached for comment.

Latham is not the only firm trying to extricate itself from the representation of a Russian state-owned entity. In the same case, defendant Sberbank filed a motion in March asking that the court stay action in the case, as its lawyers—from White & Case and Debevoise & Plimpton— are ending their relationship with the bank and "actively seeking substitute counsel to represent Sberbank in this action."

White & Case and Debevoise have not yet filed a motion requesting permission to withdraw, nor has substitute counsel filed a notice of appearance.

Other lawyers, too, have found that dropping a Russian client in light of the Russian invasion of Ukraine—even a government-sanctioned client—is not easy if there is ongoing litigation.

Last month, Freshfields Bruckhaus Deringer submitted a request to the District Court in Washington, D.C., asking that it allow another lawyer to take over the firm's representation of VEB Bank—another sanctioned bank tied to the Russian state—in ongoing litigation. It was able to provide the name of a lawyer as substitute counsel, but that lawyer, who is based in Connecticut, has not yet been admitted in Washington, D.C., and has not submitted a notice of appearance. If that happens, Freshfields would likely be able to end its involvement with the Russian bank.

But a British Virgin Islands court in March refused to grant offshore law firm Ogier permission to withdraw from its representation of VTB Bank, with Justice Adrian Jack saying: "even pariahs have rights."