LeClairRyan’s padlocked former Richmond office. (BizSense file photo)
One of the most high-profile disputes triggered by the bankruptcy of collapsed Richmond law firm LeClairRyan has been officially resolved.
Judge Kevin Huennekens last week formally approved a $21 million settlement that puts to rest the litigation between the LeClairRyan bankruptcy estate and legal services giant UnitedLex.
The settlement, which was first presented to the court in April and has since been awaiting memorialization by the judge, calls for the settlement funds to come from several sources.
The largest chunk would be $12.3 million in insurance proceeds from a policy through insurer CNA that covered UnitedLex.
Another $8.3 million would come directly from UnitedLex and its private equity backer CVC Capital Partners, which had also been sued by the trustee. An additional $500,000 would come from another insurance policy from Travelers Insurance Co.
The insurers are to 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 $3.3 million a year after that. The installments would be secured by a letter of credit.
The settlement ends the legal wrangling that began with trustee Lynn Tavenner suing UnitedLex in 2020, seeking $128 million in damages, claiming the company wrongfully benefited from LeClairRyan’s demise through their failed ULX Partners joint venture.
ULX Partners was 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 settlement was an eleventh-hour agreement reached by both sides in April after a testy mediation and just weeks before the case was to go to trial. It also allows all involved to walk away without admitting fault or liability and calls for the defendants to withdraw any creditor claims it has against the estate.
The settlement, which was crafted by mediator Frank Santoro, a seasoned bankruptcy judge from Hampton Roads, also includes $3.2 million for law firm Quinn Emanuel, the trustee’s counsel, for a so-called “improvident payment.”
Details regarding the need for the improvident payment are minimal in court records from the case, much of which have been redacted in recent weeks at the request of the defendants.
The payment was described at a hearing in April as an “equalizer,” due to the case — and particularly the dispute with UnitedLex — becoming more involved and time-consuming than expected.
The payment to the law firm was disputed by the U.S. Trustee’s Office, which argued it would provide Quinn Emanuel with an “improper windfall,” in light of a 35 percent contingency fee that was also built into the agreement for the law firm.
Huennekens disagreed, stating in his June 28 opinion that, “The court has found that the improvident payment is specifically warranted under the unique — and hopefully unrepeatable — facts and circumstances of this bankruptcy case and these adversary proceedings.”
Huennekens did rule that the 35 percent contingency should be calculated after subtracting the improvident payment and other certain expenses from the total settlement.
The opinion includes numerous redacted passages, a result of the defendants successfully requesting the sealing of certain documents and details in the case.
The ULX settlement is the latest multimillion-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 insiders from the law firm were also part of the settlement, which was funded by insurance proceeds.
The overall LeClairRyan bankruptcy case remains ongoing.
LeClairRyan’s padlocked former Richmond office. (BizSense file photo)
One of the most high-profile disputes triggered by the bankruptcy of collapsed Richmond law firm LeClairRyan has been officially resolved.
Judge Kevin Huennekens last week formally approved a $21 million settlement that puts to rest the litigation between the LeClairRyan bankruptcy estate and legal services giant UnitedLex.
The settlement, which was first presented to the court in April and has since been awaiting memorialization by the judge, calls for the settlement funds to come from several sources.
The largest chunk would be $12.3 million in insurance proceeds from a policy through insurer CNA that covered UnitedLex.
Another $8.3 million would come directly from UnitedLex and its private equity backer CVC Capital Partners, which had also been sued by the trustee. An additional $500,000 would come from another insurance policy from Travelers Insurance Co.
The insurers are to 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 $3.3 million a year after that. The installments would be secured by a letter of credit.
The settlement ends the legal wrangling that began with trustee Lynn Tavenner suing UnitedLex in 2020, seeking $128 million in damages, claiming the company wrongfully benefited from LeClairRyan’s demise through their failed ULX Partners joint venture.
ULX Partners was 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 settlement was an eleventh-hour agreement reached by both sides in April after a testy mediation and just weeks before the case was to go to trial. It also allows all involved to walk away without admitting fault or liability and calls for the defendants to withdraw any creditor claims it has against the estate.
The settlement, which was crafted by mediator Frank Santoro, a seasoned bankruptcy judge from Hampton Roads, also includes $3.2 million for law firm Quinn Emanuel, the trustee’s counsel, for a so-called “improvident payment.”
Details regarding the need for the improvident payment are minimal in court records from the case, much of which have been redacted in recent weeks at the request of the defendants.
The payment was described at a hearing in April as an “equalizer,” due to the case — and particularly the dispute with UnitedLex — becoming more involved and time-consuming than expected.
The payment to the law firm was disputed by the U.S. Trustee’s Office, which argued it would provide Quinn Emanuel with an “improper windfall,” in light of a 35 percent contingency fee that was also built into the agreement for the law firm.
Huennekens disagreed, stating in his June 28 opinion that, “The court has found that the improvident payment is specifically warranted under the unique — and hopefully unrepeatable — facts and circumstances of this bankruptcy case and these adversary proceedings.”
Huennekens did rule that the 35 percent contingency should be calculated after subtracting the improvident payment and other certain expenses from the total settlement.
The opinion includes numerous redacted passages, a result of the defendants successfully requesting the sealing of certain documents and details in the case.
The ULX settlement is the latest multimillion-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 insiders from the law firm were also part of the settlement, which was funded by insurance proceeds.
The overall LeClairRyan bankruptcy case remains ongoing.