Trustee looks to question former LeClairRyan insiders in bankruptcy case

The door to LeClairRyan’s Richmond office was padlocked after their landlord evicted them from the property last year. (BizSense file photo)

The trustee overseeing the bankruptcy liquidation of Richmond law firm LeClairRyan is starting to dig a little deeper.

Lynn Tavenner, who has led the hunt for assets for creditors since the once mighty firm collapsed last year, will question and gather information from a lengthy list of LeClairRyan’s former attorneys, management and others it did business with over the years.

Tavenner sought and received court approval last month to begin the so-called 2004 examination process, which would give her the ability to push for the turning over of documents and conducting of depositions, including via subpoena if necessary.

Assisting in the process is Washington-D.C.-based law giant Foley & Lardner, which is serving as special counsel to Tavenner to “investigate, assess, and pursue certain litigation claims.”

Such examinations are common in big corporate bankruptcies, as are blanket lawsuits against a debtor’s former officers and directors. Those suits often trigger insurance policies that would have been in place at the time of the firm’s collapse.

“Based upon the trustee’s investigation thus far, it appears that the estate possesses substantial causes of action against various persons,” Tavenner stated in her request for approval of the 2004 motion. “However, in the exercise of her business judgment, the trustee maintains that it is prudent to further evaluate the potential causes of action with additional information that may only be available by the Rule 2004 parties.”

Tavenner lists more than 300 of those parties in her filing, including former CEOs Gary LeClair, David Freinberg and Erik Gustafson, other former firm leaders such as longtime partner and general counsel Bruce Matson and dozens of former shareholding partners.

Also on the lists are some of the firm’s former accountants and other advisers, as well as executives from legal services tech firm UnitedLex, with which LeClairRyan struck an ill-fated joint venture known as ULX Partners. That partnership, designed to cut costs by outsourcing back-office jobs from LeClairRyan to the joint venture, is seen by many observers as having had a hand in the law firm’s undoing.

Another name that jumps out on the list: The New York Jets football franchise. It’s unclear what the team’s relationship was with LeClairRyan. The law firm did have offices in New York and New Jersey.

For its services as special counsel, Foley & Lardner is being $355 to $1,250 per hour for its attorneys for investigative work, including $1,050 for lead attorney Erika Morabito. Should the trustee pursue litigation as a result of the investigative work, Foley will work on a contingent fee basis of 30 percent of any funds recovered.

Tavenner’s firm Tavenner & Berran is working as counsel to her during the case at an hourly rate of $250-$450.

Foley, in its first round of payments from the bankruptcy estate in July, was awarded $291,000, the bulk of that in investigative fees.

Tavenner & Berran received $399,000 in its first round of payments in July.

Judge Kevin Huennekens is presiding over the case, which is playing out in federal court in Richmond.

Founded in Richmond in 1988, LeClairRyan at its peak had 385 attorneys at 25 offices. It fell into bankruptcy in September 2019 in the face of a mass attorney exodus. It listed hundreds of creditors owed tens of millions of dollars, the largest of which were lender ABL Alliance, which loaned the firm $15 million in 2017, and ULX Partners.

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