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On the morning of Dec. 9, Ronald Greenspan strode to the front of a conference room at the San Francisco Hyatt Regency. Fifty tense lawyers sat in the audience and another 50 were listening in on telephone lines. Greenspan — the trustee of Brobeck, Phleger & Harrison’s bankrupt estate — was asking the firm’s former partners to pay back millions of dollars. The mood was somber as Greenspan worked his way through a two-hour PowerPoint presentation chronicling the history of Brobeck’s demise, calling it a “death spiral.” He also laid out the legal theories for the partners’ liability and explained his formula for determining how much each owed the estate. The first-time trustee was confident and calm, but braced for opposition. “Obviously there was a certain amount of tension,” Greenspan said. “It was an unpleasant, costly situation for everybody.” Most partners were unhappy with Greenspan’s plan. They certainly weren’t eager to open their checkbooks and write a sum of between $5,000 and $500,000. “The overwhelming feeling was the legal theories were novel — that he was wrong on the legal theories and some of the facts,” said Ronald Moskovitz, a former Brobeck partner who attended the meeting. But within three months, 208 of the former Brobeck partners had inked individual settlements with Greenspan. Together they agreed to pay about $24 million to the estate. A motion to approve those settlement agreements will be heard by U.S. Bankruptcy Judge Dennis Montali today. “You’ve got to give him credit for that level of success,” said Moskovitz, now a partner at Morgan, Lewis & Bockius. “That’s spectacular.” In some respects, Greenspan’s role in the bankruptcy has been unlikely. He obtained the work through a beauty contest — unusual for a bankruptcy trustee. And although he describes the Brobeck litigation as more emotional than his usual corporate bankruptcy work, Greenspan seems to have earned the respect of most, though certainly not all, of his adversaries. “He did a very nice job,” said Cooley Godward partner John Dwyer, who is representing former Brobeck Chairman Tower Snow Jr. “He didn’t pull any punches or point fingers. He put forward his case in a candid way and acknowledged some of its weaknesses.” SEARCHING FOR A TRUSTEE Brobeck, Phleger & Harrison collapsed in February 2003. The 500-lawyer firm had nearly $90 million in bank debt, $560 million of leasehold liability and per-partner debt of $505,000. The firm’s landlords, its biggest creditors, petitioned to put Brobeck in involuntary Chapter 7 bankruptcy in September 2003. Equity Office Partners and University Circle Investors, the principal landlords that together have a $52 million claim against Brobeck, wanted someone to oversee the case. Greenspan, 50, was already well known in the bankruptcy community. As a senior managing director at FTI Consulting Inc., one of the largest restructuring firms in the country, he has advised debtors and creditors in numerous bankruptcies. But this is the first time he has served as a trustee. Based in FTI’s Los Angeles office, Greenspan had most recently advised the creditors in Peregrine Systems Inc.’s bankruptcy. He had also counseled debtors in the bankruptcies of Kmart Corp., U.S. Airways Group Inc. and Regus Group, a British company that rents executive offices. He has both a legal and business background. A 1979 graduate of Harvard Law School, Greenspan began his career at New York City-based Stroock & Stroock & Lavan. He soon moved in house where he held a series of management jobs. He became a partner at PricewaterhouseCoopers in 1991 and moved to FTI when PwC sold one of its divisions to the company in 2002. During his work on the Regus bankruptcy, Greenspan worked opposite Vincent Coscino, a partner at Allen Matkins Leck Gamble & Mallory who is representing Equity Office Partners in the Brobeck case. Coscino was impressed. When Brobeck’s landlords were scouting for someone to serve as trustee, lawyers at Allen Matkins asked Greenspan if he’d like to be considered for the role. He said yes. Greenspan competed in a beauty contest with five other bankruptcy advisers in October 2003. The landlords’ attorneys chose him as their candidate for the trusteeship and lobbied other creditors to vote for him at a creditors’ meeting the following month. “We felt he and his counsel had the best grasp of the issues that would become important in this case,” said Margaret Garms, a partner at Thelen Reid & Priest who represents University Circle. But the election was a contentious one. The Department of Justice’s Office of the U.S. Trustee has a panel of individuals, referred to as panel trustees, who it assigns to bankruptcy cases on an interim basis. It’s rare that creditors elect someone else to take over. E. Lynn Schoenmann, who had been the interim trustee for the past two months, fought to keep the post. She had experience on her side, having served as trustee in several bankruptcies, including those of defunct law firms Graham & James and Skjerven Morrill. At the meeting Schoenmann’s attorney, Jones Day partner Corrine Ball, and Assistant U.S. Trustee Patricia Cutler suggested that Greenspan might have a conflict of interest. They argued that Morgan, Lewis, which had a lease deal with the landlords for Brobeck’s old space in San Francisco, had referred cases to FTI. Morgan, Lewis, which took on 60 former Brobeck partners, was also potentially on the hook to pay money to the estate. Cutler voiced her concern in a report filed with the U.S. bankruptcy court in San Francisco, but she ultimately decided not to object. Of hundreds of Brobeck creditors, only a small number showed up for the election. Seventeen of the claimants cast ballots: Two didn’t write a name on the form; the rest voted for Greenspan. Mark Thierman — a solo practitioner in Reno who is representing former Brobeck employees in a suit against Brobeck and Morgan, Lewis for severance pay — said creditors were concerned that Schoenmann didn’t have the resources to handle the multimillion-dollar litigation that the case would involve. “We voted for Greenspan because we did think he had the backing,” Thierman said. That backing has included his consulting firm, FTI, and his attorneys at Los Angeles’ Hennigan, Bennett & Dorman. It’s been a lucrative job for both firms. Hennigan, Bennett has been awarded nearly $1 million to date and has a fee application pending for another $1 million. FTI was granted about $568,000 in fees and also has another application in for $337,000. Greenspan has not yet filed an application for his fees. A FORCEFUL PUSH Some of the lawyers attending the Dec. 9 meeting with ex-Brobeck partners had expected a heated clash. But the audience was quiet during Greenspan’s presentation. Although one or two people angrily shot out questions during the Q&A session that followed, it was, for the most part, a subdued, restrained proceeding. The lawyers left the meeting with a stack of handouts and a looming deadline. They could agree to Greenspan’s proposal and try to negotiate a deal or they could refuse to play ball and then probably face litigation. In mid-January, before the first deadline passed for responding to his offer, he gave the partners a forceful push. He filed suit against 223 partners, specifying how much each had received from the firm in distributions and bonuses in 2001 and 2002, the years that Greenspan claims Brobeck was insolvent. He also held a series of meetings with counsel for the various partner factions and tweaked his settlement proposals to address individual concerns. Brobeck partners Moskovitz, John Larson, David Halbreich and James Penrod met with Greenspan on Feb. 1 to discuss their objections. Moskovitz said they won a couple of concessions, including a reduction in the amount of money Greenspan was seeking from junior partners. Moskovitz said partners ultimately decided it would be better to write a check than spend more time and money litigating. “Would you torture yourself for a year and a half to save ten, twenty, thirty thousand?” he asked. Greenspan claimed partners had taken $285 million in distributions in 2001 and 2002. Under the settlement agreements, partners are paying 10 percent of their distributions for both years and 22.7 percent of their 2002 distributions. The value of the settlement is actually greater, Greenspan said, because partners dropped $33 million in claims they had against the estate — for retirement benefits, expense reimbursement, capital loss — and gave up claims on investment funds that had a book value of $17 million. William Brandt, CEO of Development Specialists Inc. which, like FTI, advises companies in bankruptcy, said the settlements are similar to what partners have contributed in other law firm bankruptcies, such as those of Chicago’s Keck, Mahin & Cate and Cleveland’s Arter & Hadden. What stood out in this case, he said, is the lawsuits Greenspan filed against the partners. “You might as well let people know you’re not joking,” said Brandt, who competed against Greenspan in the beauty contest for the Brobeck trusteeship. The publicity over the suits “probably ratcheted up their nuisance value,” he said. coming full circle In the past four months, Greenspan has made swift progress. In addition to the settlement with ex-Brobeck partners, he’s negotiated a $10.2 million deal with Morgan, Lewis, which took on about 60 Brobeck partners and dozens of associates after the firm folded, and a $5.5 million deal with Clifford Chance. And he got Citibank to shave $5 million off the amount Brobeck still owed it. Greenspan said he also has been collecting $200,000 to $300,000 per month in accounts receivables and from the liquidation of Brobeck investments. He expects to get $1 million in Google stock that Brobeck owned and close to $1 million from the sale of other stock the firm owned in 300 private companies. Greenspan acknowledged that this case has been more emotional than the typical corporate bankruptcies he’s been involved in. The individuals involved in this case are “trying to feed their family, trying to do good in the world and have house payments to make,” Greenspan said. “The partners and those who the estate owes money to are much more emotionally involved than when I’m dealing with a billion-dollar corporation.” When Greenspan was faced with whether to try to collect money from disabled lawyers and the families of four partners who had died during the proceedings, he chose not to. One of the most contentious settlements involved how much Clifford Chance would pay the estate. One faction of former Brobeck partners had been pursuing litigation against Clifford Chance, claiming the defection of Tower Snow and 16 other partners had caused Brobeck’s downfall. Richard Wynne, who represented Clifford Chance, praised Greenspan’s efforts to avoid further litigation. “I think he’s actually done a pretty remarkable job working out settlements with parties — not just us — very quickly,” Wynne said. “He’s constructive, very professional, very thorough and smart.” Wynne, a partner at Kirkland & Ellis, has been involved in several bankruptcy cases with Greenspan over the years. In one case Greenspan was an expert witness for the opposing side. “He was better than my expert,” Wynne recalled. Greenspan also gets high marks from one of the attorneys who picked him to be the trustee. “I’m very impressed with Ron’s grasp of this case,” said Garms, the partner at Thelen Reid & Priest who represents University Circle. “It’s big and complex and he has it all in his head.” Not everyone is enthused about Greenspan’s work. The ex-employees and their counsel are worried Greenspan may not give them what they think they deserve — and they feel they’ve been left out of the loop. “If he would tell us why he’s doing what he’s doing, people would feel better,” Thierman said. “My biggest [issue] is his lawyers. They’re not returning phone calls.” Jayne Loughry, a former senior counsel and a plaintiff in the employee suit, said she had voted for Greenspan because she thought he would be open to communicating with employees. But she said she regrets her decision. “I haven’t seen him make any efforts to reach out to any unsecured creditors but the landlords,” she said. Greenspan still has several items left on his agenda: pursuing lawsuits against the 15 partners who did not settle with him, resolving claims against former Brobeck client Tickets.com and addressing the $20 million claim former employees have against the estate. The biggest task, though, is dealing with $220 million in claims from creditors. He said he hopes to make substantial payments on those claims later this year. As for now, he’s content with the progress he’s made. “Looking back, there may have been periods when we thought the game plan that was best for the estate would not play out,” he said. “But we really have achieved what we wished.”

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