Details of a recent deal struck between the LeClairRyan bankruptcy estate and the collapsed law firm’s now-disbarred longtime general counsel will remain a mystery for the foreseeable future, despite objections from one of the biggest creditors in the case.
A judge ruled last week to seal all documents and hearings related to the trustee’s settlement with Bruce Matson.
That decision came much to the chagrin of UnitedLex, a legal services firm that is owed $8 million from LCR and is in the midst of litigation with LCR trustee Lynn Tavenner.
The company argued that to seal the details of the Matson matter harms its position as both a creditor and defendant in the LCR case.
UnitedLex, which formed a controversial joint venture with LCR shortly prior to the law firm’s dissolution in 2019, is facing a lawsuit filed by Tavenner accusing it of keeping LCR alive longer than it should have in order to “improperly and unfairly extract millions of dollars from the estate, to the detriment of LeClairRyan’s creditors.”
Tavenner is seeking up to $128 million in damages.
UnitedLex has described Tavenner’s case as “wildly aggressive,” and that keeping the documents out of sight gives the trustee an undue advantage.
“The trustee is seeking to litigate in secret and engage in trial by ambush. (UnitedLex has) … a fundamental right to discover and examine the information the trustee now seeks to cloak in secrecy,” it argued in court filings.
During last week’s hearing, UnitedLex attorneys also remarked on the tricky nature of dealing with the bankruptcy of a law firm, pitting attorneys against attorneys in a close-knit legal community.
“This is a case where it’s lawyers dealing with lawyers. We all know people who used to be with LeClairRyan,” said attorney Gregory Milmoe of law firm Greenberg Traurig.
He suggested concerns about how such relationships could seep into the LCR case and reminded the judge that Tavenner and her law partner Paula Beran both used to work at LCR.
“I think the best way to guard against any suggestion of impropriety is to protect transparency,” he said.
Beran, who spoke on behalf of Tavenner during the hearing, did not take kindly to that assertion, calling it “nonsense” and “unconscionable.”
She reiterated arguments made in a court filing that keeping the settlement matter sealed helps maximize the value to the estate.
The trustee also previously argued in court filings that “If disclosed, the revelation of such information could be harmful to the estate and/or Mr. Matson in other ongoing proceedings…”
Judge Kevin Huennekens ultimately sided with the estate, ruling to keep sealed any documents related to the settlement as well as barring access to any related hearings and transcripts.
The ruling comes as Matson has found himself embroiled in both the LCR bankruptcy and the recently revived bankruptcy of LandAmerica, a once-resolved case that was brought back from the dead after it was discovered Matson had wrongfully taken $3 million out of a wind-down account. Matson had served as trustee of the LandAmerica case during his decades-long tenure at LCR.
While Matson has since returned the missing money to the LandAmerica estate, his actions have triggered a domino effect that he is still facing. That includes his disbarment in Virginia as well an ongoing investigation at the hands of Benjamin Ackerly, who was enlisted to replace Matson as trustee on the LandAmerica case after the missing money caused the case to be reopened.
Ackerly’s efforts have led to Matson recently repaying an additional $577,000 into the LandAmerica estate for undisclosed reasons.
Attorney Tyler Brown of Hunton Andrews Kurth, who is representing Ackerly, said during last week’s hearing that the scrutiny of Matson isn’t finished.
“Mr. Ackerly’s work continues,” Brown said.
Matson is represented in the settlement by McGuireWoods attorney Dion Hayes, who also stated that Matson still has additional unresolved claims with the LandAmerica estate.
Brown said one such ongoing demand is that Matson return certain past compensation into the LandAmerica trust.
Judge Huennekens also approved Tavenner’s plan to sell LCR’s book of accounts receivable to collections firm Atwell, Curtis & Brooks.
AC&B would make an initial payment to the estate of $35,000, while then keeping the first $35,000 it collects. After that, 60 percent of whatever is collected would go to the LCR estate and AC&B would keep the remaining 40 percent.
Court filings list around $2.5 million in remaining accounts receivable owed to LCR. The list includes more than 300 outstanding invoices owed to the firm, from as much as $122,000 to as little as $500.