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A snore from the back of U.S. Bankruptcy Judge Dennis Montali’s courtroom Friday punctuated the closing minutes of the latest hearing in the long-running Brobeck, Phleger & Harrison bankruptcy case. This isn’t to say it was a boring afternoon — for a bankruptcy proceeding, Montali’s handling of arguments over how to settle claims by former Brobeck employees was actually quite entertaining. In saying he would probably approve a blanket settlement offer for employees — but also expressing concerns over how former employees would be notified of the settlement, and what would happen to money that went unclaimed — Montali kept the courtroom atmosphere light. Still, no one’s pretending that the quagmire created by Brobeck’s 2003 collapse is anything other than frustratingly complex. After settling dozens of suits accusing former Brobeck partners of improperly taking money out of firm coffers, bankruptcy trustee Ronald Greenspan aims to settle the claims of the firm’s 1,000-plus former employees with a plan that would pay a maximum of about $10 million. Greenspan’s lawyer, Bennett Murphy, explained to Montali on Friday that his proposed settlement plan for former employees was intended to move the case forward, and to keep it simple. “There’s one more word that goes after simple,” Montali said. But all in all — even with protests from a representative of former employees and the manager of Brobeck’s employee benefit plan — the judge was pleased with Murphy’s plan. Montali said he will probably approve some version of the proposed settlement scheme, which would let employees receive cash payouts within 90 days of court approval — but only if they give up the right to make further claims. Montali said the plan is the latest action by Greenspan allowing the case to move forward with relative efficiency. “I’m not going to turn this into a love fest, but there have been nice things done,” Montali said. He didn’t have to work too hard to prevent a love-in at the Friday hearing, given the attendance of Jayne Loughry — a former senior counsel for Brobeck — and the manager of Brobeck’s employee investment fund. Both were accompanied by their lawyers. Through her attorneys, Scott McNutt and Kevin Coleman of McNutt & Litteneker, Loughry argued that a committee of employees should have input into the settlement plan. She’s particularly worried that the blanket settlement offer won’t provide sufficient notice to former employees and won’t clearly notify them of what they give up. “We’re mainly concerned that it’s fairly disclosed,” McNutt said. Loughry also was skeptical of Greenspan’s assertion that claims would average about $5,000. For example, Loughry said, her claim is worth about $180,000. Before the hearing started, McNutt said he thinks Greenspan is trying to persuade individual employees to settle claims as fast as they can to avoid a much longer and more arduous process. “This is a strategy that can be very effective, and appears to have been effective in dealing with the partners,” McNutt said, referring to the strategy of suing individual partners, thereby forcing them to choose between a quick resolution and lengthy litigation. While Montali was approving of Greenspan’s strategy, he was also sympathetic to Loughry’s concerns over notification and the fate of money that went unclaimed after a 90-day period. The judge also had reservations about unclaimed money going to pay other creditors; he said he’d be more comfortable seeing the money held until claimants come forward. Montali repeatedly stressed the importance of an adequate plan to notify the former employees of the deal — one that would go beyond running ads in local legal newspapers. “A little due process here and a little due process there, and it could be useful to everyone,” he said. In the end, both the former employees and the bankruptcy trustee seemed satisfied by Montali’s decision to hold off final approval until Greenspan confers with an employee committee and makes a proposal to resolve the questions of notification and where unclaimed money goes. “We’ve got exactly what we wanted to get,” Murphy said after the hearing. Loughry said she was looking forward to “increasing the flow of information” between former employees and the trustee. “The ad hoc committee of employees believes it can make a significant contribution,” she said. And Montali seemed pleased, as well. “For all of the concerned parties, to start settling is a very good thing,” he said.

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