The collapse of the Washington DC’s Howrey law firm last April has lead to court moves to recover millions of dollars required to repay the bankrupt law firm’s creditors, some of which may come from the 70 law firms that former Howrey lawyers have gone to work for.
The Washington Post reports that the judge overseeing the Howrey bankruptcy last week has approved a request by Allan Diamond, the Houston lawyer representing creditors in the bankruptcy, to subpoena 70 law firms that hired a total of 211 former Howrey partners before, during and after the law firm’s collapse last spring. Those firms include Winston & Strawn, Baker Botts, Baker Hostetler, Covington & Burling, Hogan Lovells and other major firms.
Diamond wants the firms to produce invoices, contracts and other documentation of any client matter that former Howrey partners took with them to the new firms, and how much they have been paid to work on those matters. The idea is that revenue generated from business relationships that originated at Howrey could be used to repay Howrey creditors.
“When a lawyer leaves a law firm and goes to successor firm and takes cases and files and business that is unfinished with him or her, and that work is worked on at the new firm … the departing lawyers have a fiduciary duty to take all the profits from the unfinished business and deliver them back to their old law firm in bankruptcy, Howrey, for the benefit of Howrey’s creditors,” Diamond said.
Diamond said he hopes to reach agreements with each of the 70 firms that would allow the Howrey estate to collect all the revenue that has been generated from former Howrey matters — minus the overhead costs the new firms have incurred.
Howrey’s largest creditor and sole secured creditor is Citibank, which is owed about $40 million, according to bankruptcy filings. The largest unsecured creditors are the property owners of Howrey’s former offices that are owed rent, including Warner Theater Associates ($5.9 million) and a subsidiary of Fairview Property Management in Falls Church ($814,082).
The law firms must respond to the subpoenas within 21 days of receiving them, Bankruptcy Judge Dennis Montali wrote in an order signed last week.
One of the law firms Diamond plans to subpoena, Baker Hostetler, is handling a major contingency fee case that could bring the largest potential recovery to date for the Howrey estate.