Former LeClairRyan lawyers targeted by bankruptcy trustee lawsuits
Lynn Tavenner, the trustee overseeing the estate of the collapsed Richmond law firm LeClairRyan, last week filed a wave of lawsuits against dozens of former LeClairRyan partners in an attempt to potentially recover tens of millions of dollars for them. creditors.
The complaints, which total nearly four dozen, make similar claims against different defendants based on their previous status with the company. From each of the shareholder partners, Tavenner seeks to recover certain indemnities which were paid to them in the years preceding the disappearance of LeClairRyan.
For the defendants who were partners and had served on the board of directors of the company, Tavenner alleges that they breached their fiduciary duty to the company as directors and that their decisions contributed to its financial losses.
From most of the defending shareholders, Tavenner wants the reimbursement of a five to six figure indemnity. For many former directors, the lawsuits claim tens of millions in damages.
Erik Gustafson, who served as CEO of LeClairRyan from 2016 until its disbandment in 2019.
Tavenner’s 69-page lawsuit against Gustafson seeks to recover $ 786,000 in allegedly inappropriate compensation and $ 41 million in damages.
Lori Thompson is also on trial, who was the firm’s general counsel in its dying days and sat on its dissolution committee. Tavenner wants $ 386,000 in salvage and $ 34 million in damages from Thompson.
Thompson has taken over the role of general counsel from Bruce Matson, who faces his own separate legal issues dating back to his days at LeClairRyan.
Tavenner had previously indicated his intention to fight for the funds of the company’s former shareholders. These efforts first took the form of letters of formal notice proposing to settle through mediation. For those who refused to go to mediation, Tavenner took the next step and continued in this latest round of lawsuits, all filed on September 2.
Among the more than 40 lawsuits in common are Tavenner’s claims that LeClairRyan was insolvent from 2014 and until his final bankruptcy in the summer of 2019. She says the business was only profitable for so long. one year since 2011.
Its annual losses peaked in 2018 at $ 16 million, while annual income jumped from $ 200 million in 2013 to $ 110 million in 2018, when it lacked cash to pay for many of the expenses. based.
The lawsuits also show the rapid decline in the number of shareholder lawyers within the firm. It peaked at 156 at the end of 2015 and fell to 44 by the time of filing for bankruptcy less than four years later.
As is usually the case in large corporate bankruptcies, Tavenner’s lawsuits could also trigger an insurance policy that would have been in place to cover one of the defendants who were members of the board of directors of the company at any time after 2014.
She said in previous court records that the policy was worth $ 10 million.
The September 2 filings follow Tavenner’s modification of his lawsuit against legal services technology firm UnitedLex by adding LeClairRyan co-founder and namesake Gary LeClair as a defendant.
UnitedLex and LeClairRyan have formed an ill-fated joint venture in recent months at the law firm, known as ULX Partners. This partnership, designed to reduce costs by outsourcing LeClairRyan’s administrative tasks to ULX, is believed to have contributed to the loss of the law firm.
Tavenner first sued UnitedLex in 2020, claiming $ 128 million in damages alleging the ULX plan was a conspiracy to hijack millions from the 30-year-old law firm as it faltered toward the collapse.
Adding LeClair as a defendant with UnitedLex, the case paints a portrait of a deceptive ‘entrepreneur’ of a law firm conspiring with an opportunistic ‘global provider of corporate legal services’… ” Tavenner August 25.
“Indeed, LeClairRyan’s operations had aspects of a Ponzi scheme,” says Tavenner. “LeClairRyan funded the payments to historic shareholders with capital contributions from new side hires, even though the company was insolvent at the time and was slowly falling to its death. For those who hadn’t been paid when the music stopped, it was no different from a “money in, money out” scam game.
UnitedLex, which are among LeClairRyan’s biggest creditors, continued to fight to get the case closed.
LeClair, who is now a partner at Williams Mullen in Richmond, has yet to file his response to the allegations.