The Sunday after Adorno & Yoss co-founder Henry "Hank" Adorno was suspended by the Florida Supreme Court, the firm flew in outlying partners for an emergency meeting at its Coral Gables headquarters to discuss the future of the 24-year-old firm.
During the 3 1/2-hour meeting last Halloween, managing partner George Yoss went around the room asking partners one by one if they wanted the firm to continue or fold. The partners voted unanimously to keep the law firm alive, renaming it Yoss LLP.
But the fate of the firm, it turns out, was not in the partners' control.
After months of defections, office closings, bounced paychecks, missed capital contributions and a malpractice judgment that depleted the firm's bank account, the firm announced in early March it would dissolve and close within three weeks.
The final decision apparently was forced on the firm by its bank, Wells Fargo, with which firm leaders were in negotiations the week of March 7. Former partners said the firm owed the bank $8 million. The week ended with a closing announcement, after attempts by Yoss to secure a merger over the last two months failed.
In a Worker Adjustment and Retraining Notification Act notice filed with the state March 17, Yoss placed its employee count at 91, under the 100 threshold that would trigger severance pay with less than 60 days' notice. Plantation-based DJSP, a foreclosure processing company that recently dissolved, listed 96 employees at the time of dissolution and was hit with a class action suit by employees who claim they weren't given adequate notice or pay under federal law. Five former employees said the Yoss firm does not plan to pay any severance.
Yoss declined requests for an interview to discuss the firm's plans for winding down, and CEO Alfredo Gonzalez did not return calls for comment by deadline. Yoss and senior management were trying to find jobs for the remaining employees and themselves during the final two weeks of operation, according to a firm spokeswoman.
John Genovese, a Miami bankruptcy partner with Genovese Joblove & Battista, isn't involved in the shutdown but said the firm faces three options -- filing a notice of dissolution in state court, filing a Chapter 7 bankruptcy or being forced into involuntary bankruptcy by creditors. The potential for recovering from the dissolved firm depends on whether its partners signed personal guarantees with its bank or landlords, he said.
Former Yoss litigation chief Neil Linden said no partners signed personal guarantees.
"The big issue to me has been is there any personal liability by any of the partners for any of the firm's obligations," Genovese said. "My understanding is the partners were not personally obligated on the leases or the line of credit."
If that is the case, the shutdown should be relatively simple, Genovese said. The bank would take possession of the accounts receivable, which could be considerable, and landlords would likely take possession of office furniture and equipment.
Some of the biggest losers may be former partners who are owed capital contributions of $30,000 to $100,000 each, Genovese and others said.
Linden, now a partner at GrayRobinson, said he has no expectation of getting his capital contribution back.
"If the firm is closing its doors and you are an owner, you're the last one to get paid," he said. "By the time the secured lender is paid, plus the costs of administering the wind-up, I do not anticipate a distribution. I'm not a pie-in-the-sky kind of guy, I'm a realist. I'm moving on. I don't look backwards about stuff like that."
Former West Palm Beach managing partner John Koenig said a group of former partners is considering suing Adorno and Yoss individually for breach of contract.
Former partner Sylvia Krainen already has requested mediation on her claim for her capital contribution, according to former Atlanta managing partner Tracey Blackwell and others. Krainen did not return calls for comment.
But a suit against Adorno and Yoss personally could be filed only on misconduct grounds and would be difficult to prove, Genovese said.
"Suing the entity is pointless," Genovese said. "And it would be rare that management would be personally obligated unless they committed some kind of misconduct that caused the firm's demise. It would be extraordinarily unusual."
The firm could easily be pushed into involuntary Chapter 7 bankruptcy, he said. It would require the firm to have at least 12 creditors and for three of them who are owed at least a combined $13,000 to agree to file. That's what happened to Finley Kumble, a New York-based firm that collapsed in 1988 when a partner placed the firm in receivership.
Legal experts agree a national law firm like Yoss likely had dozens of vendors. Other than former partners, the biggest creditors are likely the firm's former landlords.
Koenig, Blackwell and others said landlords in Coral Gables, Fort Lauderdale, West Palm Beach and Atlanta had not been paid for at least three months. Koenig said he received a three-day eviction notice the day he left the firm in early March.
In Atlanta, Yoss was $120,000 in arrears on rent, said Blackwell, who left the firm last June to launch an Atlanta office for Gonzalez Saggio.
The firm has been sued by two vendors for alleged nonpayment -- Quattro Mortgage Solutions, a document review company, for $113,000 in Miami-Dade Circuit Court, and OTS Legal, an office supply company, for $10,000 in Broward Circuit Court.
Sanibel attorney Stanley Pond, who represents Quattro, said in an interview last month that the firm was working out a payment plan with him. Pond did not return subsequent calls for comment.
A former Atlanta employee, who did not want to be identified, said Yoss had not paid the company that changed the signs from Adorno &Yoss to Yoss and owed extensive fees to recruiters.
"In all probability, they will file an action in circuit court for dissolution or a Chapter 7," Genovese said. "It doesn't look to be particularly dramatic. The firm just needs a decent burial."
Still, the process likely will not be quick. WolfBlock, a Pennsylvania law firm that dissolved two years ago, is still dealing with its wind-down. New suits have been filed by vendors, former clients and others as recently as this month.
In addition to the financial wind-down, the firm under Florida Bar regulations must ensure the remaining clients are notified about the firm's dissolution. The firm's lawyers cannot unilaterally contact clients unless the firm fails to send out its own notice, Bar rules state.
Yoss LLP has at least three major clients -- the state of Florida, which partner Wesley Parsons represents in citrus canker class actions; AT&T, a client of Yoss; and Stewart Title, a national title company that was a client of Miami managing partner Neil Rollnick, Koenig said.
Sterling Ivey, a spokesman for the Florida Department of Agriculture, said Parsons recently notified the agency of the firm's dissolution.
"We are reviewing our contract and have not determined if Wes or his future firm will continue representing the state," Ivey said. "It is certainly an option that may be pursued once he is established with a new firm."
H.T. Smith, a prominent Miami attorney and friend of Adorno's, said he has heard at several general counsel conferences that Yoss LLP lost numerous clients in past months including Wal-Mart.
"I knew if they were losing major accounts, the chance of the firm surviving was small," Smith said.
In an interview last month, Yoss told the Daily Business Review the firm lost Wal-Mart after Adorno's license suspension, but the client recently returned.
When Linden left Yoss two months ago, he said it was due to a client conflict. He now says the problem was a "large institutional client" he declined to name had given a major piece of work to another firm due to its concerns over Adorno's suspension and he worried about losing the client.
"The reality was I was concerned it would not be a one-off," Linden said. "That was the substantial reason I left. This was fallout from the suspension."
Between now and Thursday's official shutdown date, Yoss and firm leaders have a myriad of tasks to complete under The Bar's checklist for dissolving firms, including discussing final payroll, notifying the Internal Revenue Service and other government agencies, liquidating retirement plans, shutting down the firm's website, canceling ads and firm credit cards, transferring trust accounts, canceling various insurance policies, copying client files and more.
The closing also will dump upscale space onto a soft office market. That includes 45,000 square feet in the 2525 Ponce de Leon building in Coral Gables, 23,000 square feet in the high-end Las Olas Centre in Fort Lauderdale and about 1,000 square feet in the Guaranty Building at 120 S. Olive Ave. in downtown West Palm Beach.
FACE OF THE FIRM
The South Florida legal community was saddened but not surprised by the loss of one of the area's largest law firms, which billed itself as the nation's largest minority-owned law firm. At its peak, the firm boasted 250 lawyers in 14 states. It's not clear how many were affiliates and not full-time employees, however.
In 1986, Cuban-born Adorno started Adorno & Zeder, which later became Adorno & Yoss, with the plan of setting up an affiliate system of minority-owned law firms to capitalize on the burgeoning demand from clients for minority lawyers. Establishing affiliations was a more cost-effective way of expanding than by hiring lawyers and growing "organically."
Adorno started his practice with a powerful client: Cuban American political force Jorge Mas Canosa, who opened many doors for Adorno. He soon picked up national clients and opened offices and affiliates throughout South Florida, in Atlanta, Boston, New York, Philadelphia and elsewhere.
Generous to charities, Adorno led such organizations as the Super Bowl Host Committee, the Miami-Dade County Safe Neighborhood Parks Oversight Committee, Our Kids of Miami-Dade/Monroe and the Miami Inner-City Games.
A dozen former partners and employees said that while the firm had an executive committee, Adorno and Yoss ran the firm, with Adorno the primary rainmaker and Yoss in charge of day-to-day operations. Adorno was the majority shareholder, owning 51 percent of the firm.
"Hank is a genius at marketing and a skilled litigator," said David Tarlow, managing partner of the Fort Lauderdale office of Quintairos Prieto Wood & Boyer and a former Adorno & Yoss partner. "Hank was the face of the firm, and he had a major influence on client development and relationships, which likely caused a large void upon his separation with the firm."
The firm suffered some financial aches and pains as far back as 2006 when partners complained about missed paychecks.
But the city of Miami fire fee scandal rocked the firm in slow motion. In 1998, the budget-busted city created a fire rescue fee, charging homeowners for fire services on top of property taxes. Homeowners represented by Adorno sued weeks later. The Florida Supreme Court declared such fees unconstitutional in 2002, and Miami-Dade Circuit Judge Peter Lopez ruled the fee illegal in 2004.
Adorno and another lawyer at the firm settled the case the same year, but the $7 million agreement benefitted just seven people, cut out Miami taxpayers and allotted $2 million to Adorno's firm.
Lopez invalidated the settlement, but Adorno & Yoss appealed. In a scathing opinion, a 3rd District Court of Appeal panel called the settlement "a scheme to defraud" and labeled the attorneys' actions unethical and reprehensible.
The Florida Bar followed up with disciplinary charges against Adorno. While a Bar referee recommended a simple reprimand, the lightest possible punishment, the Florida Supreme Court took a much harsher view and suspended Adorno indefinitely. The court is considering disbarring Adorno.
While steadfastly defending Adorno, the firm said it was prepared for his suspension. In 2006, Adorno left Miami for Atlanta, where the firm opened an office in 2004. He bought a $4.2 million house on Tuxedo Lane, sharing the block with the founder of Home Depot and the Atlanta Falcons, and a $2 million Blue Ridge Mountain estate in North Carolina's exclusive Linville Ridge, where Dick Cheney is a neighbor.
A close friend of HowStuffWorks founder Jeff Arnold, Adorno served on the company's board and saw the information and consumer website through its sale to Discovery Communications in 2007.
Blackwell and others say Adorno was on a mission to make the Atlanta office bigger than Coral Gables, expanding to 55 lawyers at its peak. But Blackwell and other former partners say some of the partners did not bring in their promised book of business, and the firm's finances suffered as a result. Partners started missing some draws and paychecks.
BEGINNING OF THE END
The day of Adorno's suspension was a particularly bad day for the firm, but things got worse. The action prompted an attorney to garnish the firm's bank account to the tune of $1.5 million for a malpractice judgment. That was the first many employees heard the firm had been battling the lawsuit since 2005.
The client claimed the firm let a lawsuit lie dormant for more than a year, resulting in an automatic dismissal. Adorno & Yoss lost the case at trial and was hit with the verdict last summer. The garnishment resulted in bounced paychecks for many staffers.
Larry Kellogg, the winning attorney in the case, was castigated by many at the time for causing paychecks to bounce. He said his client now calls him a genius.
"It's not like I had any inside information about Yoss closing, but I was rightly concerned the firm would have difficulties when Mr. Adorno was suspended, and I needed to protect my client," said Kellogg of Miami's Levine Kellogg Lehman Schneider & Grossman. "He's relieved he was able to get paid before this happened."
A second malpractice suit is being pursued over an $11.3 million verdict in an Internet defamation lawsuit.
Notwithstanding the firm's collapse, Miami attorneys David Pollack and Christopher David said they intend to go forward with the suit and pursue the firm's $5 million insurance policy plus possible assets rather than push the firm into involuntary bankruptcy.
The attorneys already have deposed former Yoss attorney Alan Kipnis, and another deposition with former Yoss attorney Jan Atlas is pending. The suit alleges the two attorneys were negligent in their defense of a client. They were not named defendants in the complaint. The firm denies the charges. Neither Atlas nor Kipnis returned calls for comment.
After that fateful Halloween day, the firm spiraled downward. Some affiliate offices decamped, including ones in Santa Ana, Calif., and Princeton, N.J. In recent weeks, the Delray Beach office, which reportedly brought in $1 million a month in collections, became an affiliate. Atlas, the Fort Lauderdale managing partner, left with 11 attorneys. The West Palm Beach office launched a new firm.
"It's a tragedy," said Joe Ankus, a legal headhunter with Weston-based Ankus Legal Search. "At their peak, they were one of the most well-regarded and successful firms in South Florida. That's not the first firm to go down, and it won't be the last. Florida has had its share of casualties over the years, including Blackwell Walker and Steel Hector & Davis."
For former Florida Supreme Court Justice Raoul Cantero, the failure of the firm where he cut his legal teeth is tragic. The 13th lawyer at Adorno & Yoss, Cantero credits the firm with his becoming a justice. The only young litigator who was not a former prosecutor was stuck doing appeals, and he took a liking to it.
"We got to work on some very interesting cases that Hank among others brought in representing Orlando Bosch when he was entering the country, representing Jorge Mas Canosa in his lawsuit against the New Republic," Cantero said. "At one point the firm was one of the prominent firms in Miami. I'm very sad."
Cantero attributes the meltdown to Adorno's disciplinary action and the name change on the heels of the recession.
"Hank's problems were a devastating blow it was difficult to recover from," he said. "That, plus the economy were two convergent forces that were hard to overcome."