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Facing millions of dollars in potential liability, former Brobeck, Phleger & Harrison partners have turned their sights on the firm’s bankruptcy trustee. In filings last week, former partners suggested that Brobeck’s landlords elected Ronald Greenspan trustee because he agreed to go after partners for money they allegedly owed the estate, rather than pursue litigation against Clifford Chance. In July, Greenspan got Clifford Chance to agree to pay $3.75 million — later upped to $4.5 million — to settle potential claims the trustee might pursue against it. U.S. Bankruptcy Judge Dennis Montali is scheduled to hold a hearing on the proposed agreement Tuesday in San Francisco. To back up their claims that the landlords have unduly influenced Greenspan, the former partners cite testimony from the estate’s interim trustee, E. Lynn Schoenmann. In a Nov. 4 deposition, Schoenmann said the landlords told her they were intent on “setting an example” by going after the partners for breaching lease agreements. “There was a discussion of proceeding against Clifford Chance, and they were very strong in their position that no, this case was not going to proceed in that direction, that it was going to proceed against the partners and not against Clifford Chance,” Schoenmann said at the deposition, according to a transcript cited in the partners’ brief. “I found all this a bit astonishing, and so some of it is clear in my recollection,” she added. “I remember Margaret Garms [a partner at Thelen Reid & Priest and counsel to Brobeck's East Palo Alto landlord] saying very clearly that as far as she — and I believe she was speaking on behalf of the group — were concerned, the Clifford Chance lawsuit was — she called it a smokescreen that had been concocted by the partners in order to divert the attention of the landlords from the partners — yes, from the partners — and that it was completely without merit,” Schoenmann said. In a declaration, Garms responded that she hadn’t met with or communicated with Greenspan before the beauty contest in which he was elected. In October 2003, a liquidation trust set up by Brobeck’s liquidation committee — consisting of retired partners and longtime employees — sued Clifford Chance and former Brobeck Chairman Tower Snow Jr., alleging that they contributed to Brobeck’s collapse and seeking a minimum of $100 million in damages. Snow took 16 other partners to Clifford Chance in May 2002, about eight months before Brobeck disbanded. In a filing last week, Greenspan denied that he had been directed by the landlords to minimize the estate’s claims against Clifford Chance. The former Brobeck partners “have insinuated (without any supporting evidence) that Equity Office Properties and University Circle Investors, the landlord creditors with the largest unsecured claims in this case, convinced or intimidated the trustee to disregard his fiduciary duties and to dispose of the claims against Clifford Chance cheaply in order to ‘send a message’ to Brobeck’s former partners,” wrote Greenspan’s attorney, James Johnston, of Hennigan, Bennett & Dorman. “The evidence completely refutes that scurrilous accusation.” Schoenmann served as interim trustee for two months last year, until creditors elected Greenspan the permanent trustee in December 2003. Schoenmann — a panel trustee of the Department of Justice’s Office of the U.S. Trustee — is currently trustee for the bankruptcy estates of Graham & James and Skjerven Morrill. Greenspan is a senior managing director of Los Angeles’ FTI Consulting Inc., an accounting firm that provides consulting services in corporate finance and restructuring and has been involved in many bankruptcy cases. He has never before served as a trustee in a Chapter 7 proceeding. Of course, former Brobeck partners have reason to be unhappy with Greenspan. He claims that partners owe as much as $275 million in distributions they received while the firm was insolvent. Earlier this month, Greenspan sent every former partner a settlement demand, offering discounts for meeting certain deadlines. Another discount would kick in if enough partners agree to settle. Greenspan has finalized settlement agreements with Morgan, Lewis & Bockius — which hired hundreds of ex-Brobeck partners and employees — and Citibank FSB, the major Brobeck creditor. Former Brobeck partners had objected to the latter deal, in which Citibank would take $2.85 million in cash as full payment for the $8.2 million still owed by Brobeck’s estate. But last week the parties revised the agreement to address the partners’ concerns about a provision that would have freed Citibank of any liability for assigning away its rights as a lender. “We agreed that if the trustee sues the partners” over the firm’s Citibank debt, the partners can raise the assignment of the debt to the trustee as a defense, said Thomas Patterson, a partner at Klee, Tuchin, Bogdanoff & Stern who is representing a group of about 120 partners.

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