In filings made Wednesday in U.S. bankruptcy court in San Francisco, Morgan, Lewis & Bockius and the bankruptcy trustee for now-defunct Howrey outlined a $1.15 million settlement to resolve so-called unfinished business claims.
The settlement amount, which still needs a judge's approval, stems from approximately $12.8 million that Morgan Lewis has taken in from 96 hourly matters and one contingency fee assignment that originated at Howrey via seven of its former attorneys, according to court papers.
Morgan Lewis hired at least 11 lawyers from Howrey in January and February 2011. The seven whose work is involved in the settlement are partners David Clough, Kenneth Kliebard, Scott Schutte, Jason White, and Romeo Quinto in Chicago, and Scott Garner and Robert Gooding in Irvine, California. All of the Morgan Lewis hires departed several weeks before then-floundering Howrey officially dissolved on March 15, 2011, a fact that the Howrey trustee said in the Wednesday filings would have become a point of contention if the issue had been litigated.
Howrey's trustee, Allan Diamond, has been pursuing 71 firms that hired Howrey lawyers, claiming that all of them owe money for work initiated before the firm dissolved, according to controversial legal precedent established through the 1984 California case known as Jewel v. Boxer. So far, a handful of firms have already agreed to settle the claims, and several others are teaming up to jointly defend against them.
The Morgan Lewis deal is "one of the largest unfinished business settlements received by the estate," Diamond said in his motion seeking approval of the agreement. The firm's contribution is eclipsed by a deal struck with Baker & Hostetler that will see the firm pay $41 million for two successful contingency fee cases that originated at Howrey.
Diamond first began negotiating with Morgan Lewis in March, the filings show, and concluded after an August 15 settlement conference. The settlement total represents approximately 9 percent of the gross revenue Morgan Lewis has received from the nearly 100 matters in question, an amount Diamond calls "a slight discount" over what they were seeking.
Morgan Lewis is already quite familiar with unfinished business suits in law firm bankruptcies. In June 2012 it settled with the Thelen estate for work taken by 17 energy lawyers it hired in New York as the firm dissolved in 2008. The specific amount of Morgan Lewis's contribution wasn't detailed in court documents, though Thelen's trustee disclosed that the firm, along with five others, kicked in a total of $703,336.
More significantly, Morgan Lewis agreed in September 2004 to pay $10.2 million to settle claims in the Brobeck, Phleger & Harrison bankruptcy stemming from its hire of some 60 Brobeck partners before that firm's 2003 collapse.
A Morgan Lewis spokesman had no comment Thursday on the Howrey settlement. Diamond, a partner at Texas firm Diamond McCarthy, said via email that he continues to "try and reach amicable resolutions of estate claims with as many firms and people as possible and this settlement was the result of good faith, amicable discussions with Morgan Lewis throughout the process."