After 13 months of negotiations and a mediation led by a retired bankruptcy judge, 60 former Howrey equity partners have reached a settlement with the defunct firm’s bankruptcy estate that will raise a combined total of $4.2 million for creditors.
Allan Diamond, the estate’s trustee and a name partner at litigation boutique Diamond McCarthy, filed the proposed settlement with U.S. Bankruptcy Judge Dennis Montali in San Francisco on May 5. If approved, the former partners in question would together pay the Howrey estate a sum equal to 16 percent of the approximately $26 million they earned collectively at the firm in the year before it failed.
The individual contributions being made by the ex-partners—represented as a group by David Stern of Klee, Tuchin, Bogdanoff & Stern—range from $20,920 to $191,723. Most of those signing on to the settlement received between $270,000 and $450,000 in Howrey’s final year and will pay between $45,000 and $75,000 to resolve all claims against them. The highest payment, $191,723, will come from Peter Moll, an antitrust litigator now at Cadwalader Wickersham & Taft, who received $1.15 million from Howrey between April 2010 and his departure in March 2011. Roughly 70 former Howrey partners have not yet settled with the estate, according to a lawyer knowledgeable about the matter. Diamond said in his filing that the holdouts will be offered the same deal submitted to the court on May 5 “for a limited time.”
According to the filing, the basis of the estate’s claims against the former partners was that any money they got after April 2010 should be returned because the firm was by then insolvent. The ex-partners argued that the litigation, antitrust, and intellectual property firm was solvent until pushed into an involuntary Chapter 7 bankruptcy filing in April 2011.
The estate and the former partners also disagreed about the value of equity shares in the Howrey partnership, and the former partners asserted that the trustee should not have excluded from the balance sheet the proceeds from several contingency fee cases.
At press time Montali was expected to rule on the proposed settlement at a hearing on June 5.