In a move that may do nothing more than add a layer of complication and delay, a former Heller shareholder has forced nine corporations that made up Heller Ehrman LLP into bankruptcy, including Heller Ehrman Hong Kong, Heller Ehrman Europe and corporations in various states like California which technically employed Heller’s partners.
These corporations were also the target of the class action brought by Heller’s former employees that was winding through civil court before being dismissed Wednesday. The request to dismiss was submitted before the corporations were forced into bankruptcy, according to Steve Blum with litigation boutique Blum Collins, which is representing the employees. The employee suit will be folded into one that’s already under the jurisdiction of the bankruptcy court, he said.
Heller’s corporations were basically the business entity through which its shareholders were paid.
Following the money, after the jump.
Most of Heller’s assets lie in the LLP, which collected accounts receivable and which is responsible for suing third parties that may owe it money, like former partners and its banks.
However, the LLP advanced about $17 million to the Hong Kong and Europe affiliate corporations, according to financial statements filed in the court. These affiliates are also expected to receive tax refunds that could be substantial. Most of Heller’s creditors are owed money by the LLP and don’t have claims against the affiliates.
Matthew Shier, a bankruptcy specialist at Pinnacle Law Group who is among a dwindling number of lawyers not involved in the Heller bankruptcy (the estate has four law firms, and its 1,100 creditors have hired various lawyers) said the bankruptcies may delay claims resolution between the estate and its partner corporations.
“The question of whether there is a priority, one over the other, will have to be resolved,” Shier said. That is, the court will have to decide “whether direct claims against the partner have any priority over the claims against the partnership.”
And that’s true regardless of whether the partner is a person or a corporation.
Alfred Moore, a former shareholder of Heller who left in early 2008, filed the involuntary bankruptcy petitions in the Bankruptcy Court for the Northern District of California in late May. When a corporation has fewer than 12 creditors, only one creditor is required to force an involuntary bankruptcy.
“The professional corporations and the affiliates named in the various involuntary filings owe me money under an agreement I have with them,” Moore said. “So does the debtor (Heller LLP). They have refused to pay me and despite every effort on my part to resolve this matter amicably, they’ve left me no choice other than to proceed in the manner that I have.”
Moore originally filed a claim for $450,000 a few days after Heller LLP filed for bankruptcy in December. Then in late April, he added a claim for $30 million. Heller apparently believes Moore does not have a claim against it, but rather only a claim against its California professional corporation (one of the ones Moore forced into bankruptcy), according to the claim.
Moore’s first claim says it is based on confidential agreement between Heller and Moore. His second claim accuses Heller of “calculated efforts” to “destroy” Moore’s practice; and alleges breach of fiduciary duty, and race and age discrimination.
— Amanda Royal
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