At one time, the breakup of a big, prestigious law firm was rare. But since the technology boom and bust, implosions of once highflying firms like Brobeck, Phleger & Harrison and Testa, Hurwitz & Thibeault have occurred with more frequency.
Yet the bankruptcy of Coudert Brothers still stands out. Eighteen months after the firm voted to dissolve, its unwinding continues to be a complicated, messy affair.
Creditors and at least one former partner have filed lawsuits against the firm. Malpractice claims have accrued as well. There are allegations in court filings that three overseas lawyers sequestered money from the firm as it tried to pay off its creditors.
And the committee for unsecured creditors contends that payments to partners were done improperly at a time when the firm should have known it was insolvent, an assertion that lawyers for Coudert deny. Although it is difficult to determine just how much is at stake, the lawyer for the creditors’ committee, David Adler of the New York office of McCarter & English, said the amount could exceed $25 million.
Coudert, experts say, may be an example of what happens when lawyers do not run their firm on sound business principles.