The trustee in charge of dissolving former law firm LeClairRyan has agreed to a $21 million settlement for fraud and other claims against alternative legal services provider UnitedLex.
The company’s downfall, which caused it to file for bankruptcy in 2019, sparked claims that its joint venture with UnitedLex was fabricated to benefit the LeClairRyan co-founder. Bankruptcy trustee Lynn Tavenner also sought to recover compensation paid to firm partners shortly before the firm closed.
Tavenner’s attorneys detailed the proposed settlement during an April 19 hearing in Richmond, Va. CNA Financial Corp., UnitedLex’s insurer, would pay $12.25 million, while UnitedLex and private equity firm CVC Capital Partners would pay an additional $8.25 million. Travelers insurance would contribute an additional $500,000.
Quinn Emanuel Urquhart & Sullivan’s Tavenner attorneys would receive $10.5 million in legal fees, according to a transcript of the April 19 U.S. bankruptcy court hearing.
“(T)he mediator wanted me to formally declare this to be a unilateral mediator proposal; this was not suggested, nor requested by the Chapter 7 administrator, nor by myself nor by nobody at Quinn Emanuel,” said Washington-based partner Quinn Emaunuel. Erika Morabito in court, according to the transcript.
Tavenner claimed in late 2020 that UnitedLex misappropriated funds for “improper purposes” after the collapse of the joint venture with LeClairRyan, called ULX Partners. The company was designed to develop a back-office operation at a lower cost to the business.
At the time of bankruptcy, LeClairRyan estimated he had between 200 and 999 creditors. Those with unsecured debt included the law firm Latham & Watkins, which owed more than $370,000.
Lawyers representing Tavenner and UnitedLex did not respond to questions for comment.
The case is: Tavenner as Chapter 7 Trustee against ULX Partners LLC, Banker. ED Va., 20-0314.