Howrey Bankruptcy Trustee Objects To Class Action Against Ex-Partners
Allan B. Diamond, the Chapter 11 trustee in the bankruptcy case of legal firm Howrey LLP, is arguing against a proposed class action targeting hundreds of equity security holders of the defunct firm. The class action suit accuses the equity holders of siphoning firm's funds to themselves in the years leading up to the bankruptcy.
Diamond of Diamond McCarthy LLP, says the suit interferes with the estate's own recoveries, violates the automatic stay and "seeks to hijack these bankruptcy proceedings.”
Diamond has aggressively targeted former partners for any excess compensation they received after the firm was insolvent. In his efforts to raise revenue to help repay creditors, he has spent months identifying how much work former partners and the firms that now employ them need to be clawed back.
Case law on the ability to claw back funds is well-established. The California statute known as Jewel v. Boxer says bankrupt law firms can seek to recover proceeds from unfinished business that departing partners bring with them to their new firms.
Prior to its demise, Howrey LLP was a global law firm that practiced antitrust, global litigation and intellectual property law. At its peak Howrey had more than 500 attorneys in 16 locations worldwide.
In April 2011, a group of alleged creditors of Howrey LLP filed an involuntary chapter 7 bankruptcy petition against the law firm with the United States United States Bankruptcy Court for the Northern District of California. That involuntary chapter 7 case was converted to a chapter 11 bankruptcy case in June 2011 at the request of the law firm. On July 6, 2011, Howrey filed schedules of assets and liabilities with the bankruptcy court which listed assets of $138.7 million and liabilities of $107 million.
Diamond of Diamond McCarthy LLP, says the suit interferes with the estate's own recoveries, violates the automatic stay and "seeks to hijack these bankruptcy proceedings.”
Diamond has aggressively targeted former partners for any excess compensation they received after the firm was insolvent. In his efforts to raise revenue to help repay creditors, he has spent months identifying how much work former partners and the firms that now employ them need to be clawed back.
Case law on the ability to claw back funds is well-established. The California statute known as Jewel v. Boxer says bankrupt law firms can seek to recover proceeds from unfinished business that departing partners bring with them to their new firms.
Prior to its demise, Howrey LLP was a global law firm that practiced antitrust, global litigation and intellectual property law. At its peak Howrey had more than 500 attorneys in 16 locations worldwide.
In April 2011, a group of alleged creditors of Howrey LLP filed an involuntary chapter 7 bankruptcy petition against the law firm with the United States United States Bankruptcy Court for the Northern District of California. That involuntary chapter 7 case was converted to a chapter 11 bankruptcy case in June 2011 at the request of the law firm. On July 6, 2011, Howrey filed schedules of assets and liabilities with the bankruptcy court which listed assets of $138.7 million and liabilities of $107 million.
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