$21M settlement pending in LeClairRyan-UnitedLex dispute

LeClairRyan bankruptcy trustee, defendants headed to mediation

LeClairRyan’s padlocked former Richmond office. (BizSense file)

After a prolonged mediation process, the LeClairRyan bankruptcy estate looks to have reached a sizable settlement in one of the case’s most high-profile disputes.

The collapsed Richmond law firm’s liquidation trustee has agreed to settle her dispute with legal services giant UnitedLex for $21 million, according to court transcripts.

Trustee Lynn Tavenner had initially sued UnitedLex in 2020, seeking $128 million in damages, claiming the company wrongfully benefited from LeClairRyan’s demise through their failed ULX Partners joint venture.

The settlement fends off a trial between the two sides that had been set to begin today and run through May 27. It also allows all involved to walk away without admitting fault or liability.

The agreement, which still must be memorialized by the court, was preliminarily reached less than an hour before the parties had to meet in front of Judge Kevin Huennekens on April 19. At that hearing, Erika Morabito, an attorney with law firm Quinn Emanuel representing Tavenner, presented a summary of the settlement.

The $21 million in cash would be paid from several sources, Morabito said, according to a transcript of the hearing. The largest chunk would be $12.25 million in insurance proceeds from a policy through CNA that covered UnitedLex.

Another $8.25 million would come directly from UnitedLex and its private equity backer CVC Capital Partners. An additional $500,000 would come from another insurance policy from Travelers Insurance Co.

Morabito told Huennekens that the insurers will pay the entirety of their tab upon closing of the settlement, while UnitedLex and CVC would pay in installments, beginning with $2 million up front. They’d then pay an additional $3 million a year later and a final installment of $3.25 million a year after that. The installments would be secured by a letter of credit.

Also, as part of settlement, ULX Partners agrees to waive its $12.5 million claim against the bankruptcy estate.

richmond federal courthouse

The LeClairRyan case is playing out in the U.S. District Court for the Eastern District of Virginia. (BizSense file)

Huennekens ordered the case to mediation in February after denying UnitedLex’s attempt for dismissal. He appointed Frank Santoro, a seasoned bankruptcy judge from Hampton Roads, to oversee the process.

Morabito, at the April 19 hearing, described the settlement as a “unilateral mediator’s proposal,” one that was not suggested by any of the litigants.

Morabito said it is a “resolution that I guess nobody is thrilled with, but I guess that means it’s a good settlement.”

UnitedLex has since filed a motion to seal some of the settlement and hearing transcript details from public view. That motion is pending.

Morabito declined to comment about the settlement when reached last week.

UnitedLex is represented in the case by a team of Greenberg Traurig attorneys, including David Barger, who did not return a call by press time.

Quinn Emanuel, the hearing transcript states, would receive $10.5 million from the settlement proceeds in lieu of its previously agreed upon 35 percent contingency fee. The payment was described as an “equalizer,” due to the case – and particularly the dispute with UnitedLex – becoming more involved and time-consuming than expected.

ULX Partners was an ill-fated joint venture formed by UnitedLex and LeClairRyan in 2019, just prior to the law firm’s demise that same year. ULX was a back-office job outsourcing effort billed at the time as an innovative cost-cutting approach, but is now seen as having had a hand in LeClairRyan’s undoing. Tavenner had alleged that ULX was a conspiracy to siphon millions out of the 30-year-old law firm as it was teetering toward collapse.

The pending settlement with UnitedLex is the latest multi-million-dollar settlement for the LeClairRyan estate. The firm’s namesake and longtime CEO Gary LeClair had been a defendant in the same UnitedLex case but was released from the matter after reaching a $10 million settlement with the estate in late 2021. Other former LCR insiders were also part of the settlement, which was funded by insurance proceeds.

LeClairRyan bankruptcy trustee, defendants headed to mediation

LeClairRyan’s padlocked former Richmond office. (BizSense file)

After a prolonged mediation process, the LeClairRyan bankruptcy estate looks to have reached a sizable settlement in one of the case’s most high-profile disputes.

The collapsed Richmond law firm’s liquidation trustee has agreed to settle her dispute with legal services giant UnitedLex for $21 million, according to court transcripts.

Trustee Lynn Tavenner had initially sued UnitedLex in 2020, seeking $128 million in damages, claiming the company wrongfully benefited from LeClairRyan’s demise through their failed ULX Partners joint venture.

The settlement fends off a trial between the two sides that had been set to begin today and run through May 27. It also allows all involved to walk away without admitting fault or liability.

The agreement, which still must be memorialized by the court, was preliminarily reached less than an hour before the parties had to meet in front of Judge Kevin Huennekens on April 19. At that hearing, Erika Morabito, an attorney with law firm Quinn Emanuel representing Tavenner, presented a summary of the settlement.

The $21 million in cash would be paid from several sources, Morabito said, according to a transcript of the hearing. The largest chunk would be $12.25 million in insurance proceeds from a policy through CNA that covered UnitedLex.

Another $8.25 million would come directly from UnitedLex and its private equity backer CVC Capital Partners. An additional $500,000 would come from another insurance policy from Travelers Insurance Co.

Morabito told Huennekens that the insurers will pay the entirety of their tab upon closing of the settlement, while UnitedLex and CVC would pay in installments, beginning with $2 million up front. They’d then pay an additional $3 million a year later and a final installment of $3.25 million a year after that. The installments would be secured by a letter of credit.

Also, as part of settlement, ULX Partners agrees to waive its $12.5 million claim against the bankruptcy estate.

richmond federal courthouse

The LeClairRyan case is playing out in the U.S. District Court for the Eastern District of Virginia. (BizSense file)

Huennekens ordered the case to mediation in February after denying UnitedLex’s attempt for dismissal. He appointed Frank Santoro, a seasoned bankruptcy judge from Hampton Roads, to oversee the process.

Morabito, at the April 19 hearing, described the settlement as a “unilateral mediator’s proposal,” one that was not suggested by any of the litigants.

Morabito said it is a “resolution that I guess nobody is thrilled with, but I guess that means it’s a good settlement.”

UnitedLex has since filed a motion to seal some of the settlement and hearing transcript details from public view. That motion is pending.

Morabito declined to comment about the settlement when reached last week.

UnitedLex is represented in the case by a team of Greenberg Traurig attorneys, including David Barger, who did not return a call by press time.

Quinn Emanuel, the hearing transcript states, would receive $10.5 million from the settlement proceeds in lieu of its previously agreed upon 35 percent contingency fee. The payment was described as an “equalizer,” due to the case – and particularly the dispute with UnitedLex – becoming more involved and time-consuming than expected.

ULX Partners was an ill-fated joint venture formed by UnitedLex and LeClairRyan in 2019, just prior to the law firm’s demise that same year. ULX was a back-office job outsourcing effort billed at the time as an innovative cost-cutting approach, but is now seen as having had a hand in LeClairRyan’s undoing. Tavenner had alleged that ULX was a conspiracy to siphon millions out of the 30-year-old law firm as it was teetering toward collapse.

The pending settlement with UnitedLex is the latest multi-million-dollar settlement for the LeClairRyan estate. The firm’s namesake and longtime CEO Gary LeClair had been a defendant in the same UnitedLex case but was released from the matter after reaching a $10 million settlement with the estate in late 2021. Other former LCR insiders were also part of the settlement, which was funded by insurance proceeds.

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