Howrey LLPs bankruptcy trustee Allan B. Diamond has won the permission of a federal judge to subpoena the 70 law firms where Howrey partners went as the Washington, D.C. firm went broke. Last week, Judge Dennis Montali of the U.S. Bankruptcy Court in San Francisco passed the order allowing the bankruptcy trustee of Howrey to pursue the proceeds of ‘unfinished business’ that more than 200 partners took with them when they jumped ship. The order also begins an investigation into the amount of compensation that creditors of Howrey may be entitled to claw back from Howrey’s ‘unfinished business’ ported to other firms by partners who left the firm.
The claw back issue in ‘unfinished business’ has currently gained importance with the judge in the Coudert Brothers’ case having certified her first order for appeal. The Dewey estate too is banking on proceeds and claw backs from ‘unfinished business’ to deal with creditors.
The trustee for Howrey said that he prefers to negotiate deals to recover Howrey’s fair share of the profits, though he would sue if he has to. “I’ll do what I have to do,” said Diamond in an interview last week, stating that he expects claw backs to yield a significant amount of money. At present, Howrey’s creditors are owed more than $100 million.
The seventy firms on the list of Diamond include firms like Winston & Strawn LLP and Jones Day. Mr. Diamond says that he would subpoena former Howrey partners if firms do not provide information about which clients followed former Howrey partners to their new firms and the amount of compensation earned by firms from such ‘unfinished business’ of Howrey.
Howrey dissolved in March 2011 and later in the year entered Chapter 11 bankruptcy.
This article is based on a report from the Wall Street Journal Law Blog written by Jacqueline Palank.