Heller Ehrman’s former employees are demanding better representation on the bankrupt estate’s unsecured creditors committee because of what they call a lack of aggressiveness in pursuing former shareholders and collecting accounts receivable.
The employees say they “lack an adequate voice on the committee” and are demanding that the U.S. Trustee appoint a former Heller employee to the committee who is not a former shareholder “nor aligned with former shareholder interests.”
The current employee representative on the five-person committee is Wondie Russell, who was once a partner at Heller. She was a contract attorney when the firm collapsed and has the largest employee claim, for about $92,000.
The other four members are retired partner William Mackey and Heller’s three largest unsecured creditors: landlords Bush Associates and MEPT St. Mathews, and document management company Williams Lea.
In a three-page letter (.pdf) addressed to Minnie Loo, a trial attorney in the San Francisco office of the U.S. Trustee who is charged with choosing committee members, the employees’ counsel Craig Collins, of litigation boutique Blum Collins, accuses Heller’s former partners of running off with clients and accounts.
“We expect that the accounts receivable are owed in most cases by clients whom the former shareholders have taken with them to other law firms,” the letter says. “Those former shareholders have no incentive to encourage their current clients to pay their old debts to Heller at the same time the shareholders are working to establish new relationships between their clients and their new firms. The economic incentive is to breach their fiduciary duty to their former firm and its creditors and to bring to their new firms all of the new income they can generate.”
The letter was mailed to The Recorder in an envelope without a return address.
Loo did not return a call for comment. A receptionist said she was off for the day. Russell could not be reached.
Steve Blum, Collins’ partner, said he did not send the letter to The Recorder.
“Fat cats keep getting fatter,” he said of the matter and declined to comment further for this story.
“I disagree with the tone and the content of the letter, and it’s just misinformed,” said Thomas Willoughby, a partner at Felderstein Fitzgerald Willoughby & Pascuzzi, which represents the creditors committee. Willoughby said Russell is a strong member of the committee.
He said Heller continues to collect money from clients and a report will be filed next week with an update on the estate’s financial affairs. He said the estate has about $10 million in cash right now. As for pursuing former partners, he said there are confidential settlement negotiations going on behind the scenes.
“I’m certain lawsuits would follow if there is no settlement,” Willoughby said.
— Amanda Royal
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