The trustee overseeing the bankruptcy liquidation of LeClairRyan has just scored millions of dollars more in her hunt for cash to pay back creditors of the collapsed Richmond law firm.
A nearly $10 million settlement was struck Monday between trustee Lynn Tavenner and two dozen of the firm’s former directors, officers and shareholders, including co-founder and namesake Gary LeClair, as well as former CEOs David Freinberg and Erik Gustafson.
As approved by Judge Kevin Huennekens on Monday, the settlement money will come from a management liability insurance policy LeClairRyan had in place at the time of its collapse in 2019. It includes an initial payout to the bankruptcy estate of $9.47 million plus additional expenses of no more than $525,000.
The deal brings to an end Tavenner’s effort to claw back certain compensation paid to the 26 shareholders in question leading up to the firm’s demise. Each of the 26 was a shareholder or in leadership roles either in the firm’s management ranks or on its board of directors from 2014 until its demise.
Tavenner began the process by sending demand letters offering to settle through mediation. For those who refused to go to mediation, the trustee took the next step and filed a round of lawsuits in Sept. 2.
Tavenner had sought five to six figures’ worth of compensation to be returned from most of the shareholder defendants. For many of the former directors, the suits sought tens of millions in damages.
All parties ultimately participated in a 14-hour settlement conference on Nov. 16, after which the deal was struck.
“After lengthy and hard-fought negotiations, the parties agreed to fully and finally resolve the covered claims without admission of liability,” court filings state.
In the end, Tavenner was able to tap into a liability policy from Columbia Casualty. Tavenner had previously said in court proceedings she was targeting the policy proceeds.
In addition to Freinberg and Gustafson, those included in the settlement were Lori Thompson, who was the firm’s general counsel in its final days and served on its dissolution committee.
For Gary LeClair, the settlement frees him from litigation by Tavenner which was set for trial in April. In that case, in which LeClair was a co-defendant along with legal services firm UnitedLex, Tavenner sought to blame him for the firm’s failure and claimed that he had benefitted from it financially.
While LeClair had initially sought unsuccessfully to have the case dismissed, this latest settlement absolves him of any further liability and releases him as a defendant. That case moves on against the remaining defendants, with depositions beginning this week ahead next year’s trial.
The settlement comes just days after former longtime LCR attorney and chief legal officer Bruce Matson was sentenced to nearly four years in prison for stealing money from bankruptcy trust accounts during his time at the law firm. Matson is now serving his sentence at a federal facility in Maryland.