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Thelen, Heller Face Huge Wage Claims
The Recorder
April 02, 2009
In the five months since Thelen's dissolution, the firm has managed to avoid bankruptcy and has paid down more than half of the bank debt that forced it to close, a firm representative said Wednesday.
But it now must contend with a lawsuit filed by former employees and certified as a class by a federal magistrate on Tuesday. Lawyers for the class say the suit may be worth up to $25 million.
Thelen joins fellow defunct firm Heller Ehrman, which was hit in bankruptcy court on Friday with a claim (.pdf) by former employees for $32 million. Employees had filed a class action against Heller in October, but the case was stayed by the firm's December bankruptcy filing. The employee suit against Thelen was first filed in November.
Employees in both suits allege their former firms violated federal and state WARN acts by failing to provide 60 days' advance notice before they shuttered. The suits also seek accrued vacation pay.
Representing employees in both suits is Los Angeles employment boutique Blum Collins. Steven Blum and Craig Collins reiterated that they intend to pursue some former Thelen partners and the firms that hired them to collect what's due to employees.
"We'll collect some money from Thelen. But we won't collect all the money from Thelen," Blum said. "We may have to tap into other sources."
Reed Smith , Winston & Strawn and Nixon Peabody each took on large numbers of Thelen partners.
Thelen said it would dissolve in October after partner defections over the previous year triggered a lending covenant that puts the firm's bank in charge of expenditures. Thelen still owes Citibank $20 million, according to Douglas Davidson, a member of Thelen's three-person administrative committee, which is charged with overseeing the firm's dissolution. When the firm decided to dissolve, it owed Citibank more than $50 million, he said.
Negotiations are continuing with Thelen's landlords, the biggest unsecured creditors. And about 17 employees are working in the San Francisco office completing administrative tasks and attempting to collect accounts receivable.
Davidson said that is becoming "more challenging." Some clients have been extremely cooperative, while others have taken "a little more discussion."
"As time goes on, and accounts receivable get older -- this is true whether or not we were in dissolution mode or not -- it gets very hard to collect very old accounts, and the economy, of course, is not helping the situation," Davidson said.
The Thelen class will include about 500 former Thelen staff, associates, of counsel and non-equity partners, Blum said.
Depending on the length of time an employee spent at the firm and his or her salary and accrued vacation, a member of the class could receive from a few thousand dollars to up to $100,000, if the suit is successful. The suit is Bergman v. Thelen , 08-cv-5322EDL.
The $32 million claim filed on behalf of former Heller employees, represented by Garfield Granett, Carl Goodman and Anna Scarpa, asks for at least $10,950 for each of the firm's 861 former employees. Called a priority claim, that amount is guaranteed to employees of a company in bankruptcy, after secured creditors are paid. In addition, the claim asks for $22.5 million for accrued vacation, state and federal WARN Act benefits, and "other" wages for the employees.
The Thelen class certification, approved Tuesday by U.S. Magistrate Judge Elizabeth LaPorte, creates a national class from New York, California and Connecticut offices that employed more than 50 people.
In addition, the order approves several subclasses, including all California employees fired with fewer than 60 days' notice.
It also creates three subclasses of employees who had unused vacation time in each of the California, New York and Connecticut offices.
