A group of former Howrey LLP partners has agreed to pay more than $4.2 million to the defunct law firm’s bankruptcy estate. Howrey’s Chapter 11 trustee, Allan Diamond, considers the settlement an important step towards building a plan to pay back creditors. This deal will not only help resolve Howrey’s pending clawback claims, but also help kick off additional settlements with other partners to pay off creditors.
Agreeing to settle was not an easy decision for the former Howrey partners, informs David Stern of Klee, Tuchin, Bogdanoff & Stern LLP, who represents all 60 of the settling partners. Stern said, “The basic feeling is, I know my clients and I feel they’re paying far more than they should. They’ve already suffered a lot of losses. It’s an unfortunate situation that in law firm bankruptcies, former attorneys seem to be the targets.”
The proposed settlement filed on May 5, 2014 in the U.S. Bankruptcy Court in San Francisco, includes contributions ranging between $21,000 and $192,000 from the partners ready to settle.
Last year, Diamond had made a $41 million settlement deal with Baker & Hostetler to claim a chunk of the fees in relation to contingency cases that Howrey partners took with them amid the firm’s 2011 collapse. The deal handed the defunct firm’s bankruptcy estate some much-needed cash to pay off its largest secured creditor, Citibank. The $4.2 million received by Diamond will help to resolve pending clawback claims.
Howrey’s creditors will also benefit from the settlements Diamond has reached with four firms that hired Howrey partners over so-called unfinished business claims seeking some of the profits the firms earned from work that originated at Howrey. These deals, filed for court approval on Monday, aim to collect $324,000 from Steptoe & Johnson LLP, $308,000 from McKenna Long & Aldridge LLP, $68,116 from Jenner & Block LLP, and $59,579 from Hoke LLC.
Diamond is also known to be in settlement talks over unfinished business claims with firms like Winston & Strawn and Baker Botts that hired a number of Howrey partners in the past.
A hearing is scheduled for June 5 before the U.S. Bankruptcy Court Judge Dennis Montali to seek approval of the settlement.