Two years into Chapter 11 proceedings, the trustee for Howrey — the Washington law firm that dissolved and entered bankruptcy in 2011 — has reached a settlement with one of Howrey’s insurance carriers, and is continuing to negotiate with 50 other law firms in an effort to recover millions of dollars to repay Howrey creditors.
Houston attorney Allan Diamond, whose role as trustee is to recover as much money as possible for the firm’s creditors, filed papers with the bankruptcy court Friday seeking approval for a settlement he has reached with the Attorneys’ Liability Assurance Society, better known as ALAS, which provides malpractice insurance for Howrey. The agreement would funnel a minimum of about $5.2 million and up to $7.6 million to the Howrey estate.
Diamond also filed lawsuits against seven law firms over so-called “unfinished business claims.” Those claims involve ex-Howrey lawyers who left the firm in the wake of its 2011 demise, and continued to earn fees on cases that originated at Howrey — raising the question of whether those fees should go toward repaying Howrey’s creditors, or stay with the new law firms.
The suits were filed in U.S. Bankruptcy Court in San Francisco against Haynes and Boone; Neal, Gerber & Eisenberg; Kasowitz Benson Torres & Friedman; Hunton & Williams; Venable; Sheppard & Mullin; and Levenfeld Pearlstein. Those add to the batch of suits Diamond filed last month against Dorsey & Whitney; Kilpatrick Townsend & Stockton; Ropes & Gray; Shearman & Sterling; Ralls & Niece; and Davidson Law Group. Diamond said he plans to file more such lawsuits soon.
Diamond has already reached such agreements with Holland & Knight and Fenwick & West that will bring at least $41,000 to the Howrey estate, according to papers filed with the bankruptcy court in late March. Holland & Knight, where former Howrey partner Jerrold Ganzfried now works, has agreed to pay Diamond $26,197 and an additional 11 percent of future earnings through March 2014 on an ongoing matter that carried over from Ganzfried’s time at Howrey. Fenwick & West, where former Howrey partner Teresa Corbin now works, has agreed to pay Diamond $15,000 to resolve the claims.
Those settlements are a drop in the bucket compared to what Howrey creditors are owed — the firm’s sole secured creditor, Citibank, is owed about $34 million. However, the unfinished business claims are an important part of the long and complicated process of unwinding a 55-year-old law firm whose primary assets were attorneys who are now at 70 other law firms.
The case that could bring the biggest windfall to the estate is an antitrust lawsuit that former Howrey attorneys brought on behalf of dairy farmers who alleged they were victims of price fixing. The case was settled for $303.6 million.
The ex-Howrey attorneys, who are now at BakerHostetler, have asked the judge overseeing the matter to approve $53 million in attorneys’ fees. How that gets divvied up, Diamond said, “is subject to ongoing discussions with BakerHostetler.”