A Business article last Saturday about the bankrupt Finley, Kumble law firm incorrectly reported the number of attorneys in the firm of Washington, Perito and Dubuc. It has about 110 attorneys. Managing partner Robert B. Washington Jr. said that while the firm recently laid off 11 associates, it has added 12 attorneys. In addition, the status of former senator Paul Laxalt was unclear. He has resigned as a partner but still is senior counsel to the firm. Also, former partners of bankrupt Finley, Kumble who became partners of Laxalt, Washington, Perito and Dubuc recently agreed to pay $3.8 million over 10 years to the bankruptcy trustee. (Published 10/17/90)
Nearly three years after the collapse of Finley, Kumble, a national law firm that had more than 100 attorneys in Washington, creditors have learned that they will collect $134.8 million less from the defunct firm than was owed to them, according to bankruptcy documents filed this week in New York.
Banks that had lent the firm more than $85 million before its collapse included the National Bank of Washington, which was owed $10 million. The Federal Deposit Insurance Corp., as receiver for the failed bank, will, like other creditors, collect only about 30 to 38 cents for each dollar of its loan.
One source close to the bankruptcy proceedings said the case is "absolutely unprecedented in legal history -- the scale of the shortfall, of the debt, of the firm's malpractice claims."
Many of the firm's former attorneys stayed together and formed new law firms around the country after the bankruptcy. In Washington, about 100 former Finley, Kumble lawyers formed Laxalt, Washington, Perito and Dubuc. Former senator Paul Laxalt later left the group, which has about 60 attorneys and is now known as Washington, Perito and Dubuc.
Washington, Perito and Dubuc has recently agreed with the bankruptcy trustee that its partners will pay $3.8 million over 10 years to the bankruptcy trustee because it used certain Finley, Kumble assets in its own start-up, according to bankruptcy documents.
Former Finley, Kumble partners across the country -- including those at Washington, Perito and Dubuc -- also will personally sign 10-year notes agreeing to contribute $35 million to the bankruptcy estate. The Chapter 11 bankruptcy plan does not list the amounts former partners will pay, which will be determined by a formula that considers their roles at the firm.
The four former managing partners of the firm -- including Robert B. Washington Jr., who is managing partner of Washington, Perito and Dubuc -- have previously agreed to contribute about $11.5 million to the plan.
Washington was out of the country and could not be reached for comment yesterday. His firm recently laid off nine associates, but Washington insists the firm is financially healthy.
Finley, Kumble had 700 lawyers in 14 U.S. cities and was the nation's fourth largest firm when it broke up following management battles and burgeoning debt. Since its failure, more than 100 malpractice claims totaling $115 million have been filed against the firm's estate.
Sources close to the case said approval of the final bankruptcy plan is virtually inevitable, since creditors have been working closely with the trustee and there are few options available.
According to the plan, the major alternative would be to sue each of the former partners for the full amount owed by the former firm, a move that "would likely trigger personal bankruptcy filings by various partners" and mean huge court costs.
Other major creditors of the bankrupt firm were Manufacturers Hanover Trust Corp., $33 million; Bankers Trust Co., $15 million; and Citibank, $25 million, according to court documents.