U.S. trustee drops appeal challenging $21 mln LeClairRyan settlement

The Department of Justice (DOJ) logo is pictured on a wall in New York December 5, 2013. REUTERS/Carlo Allegri
  • Justice Department dismissed own appeal of settlement between trustee overseeing dissolution of defunct law firm and UnitedLex
  • Withdrawal comes days after trustee said she would need to hire attorneys to defend the settlement

(Reuters) - The U.S. Justice Department has dismissed its own appeal challenging a $21 million settlement between the trustee overseeing the dissolution of defunct law firm LeClairRyan and alternative legal services company UnitedLex.

The May 2022 settlement resolved claims by LeClairRyan bankruptcy trustee Lynn Tavenner that a 2018 joint venture between UnitedLex and LeClairRyan hastened the law firm's demise. The settlement included a $10.5 million payout to attorneys at Quinn Emanuel Urquhart & Sullivan representing Tavenner.

The U.S. Trustee's Office, which is part of the Justice Department, objected to Tavenner's settlement, including the fees awarded to Quinn Emanuel, according to court filings. The reasons for its objections were filed under seal.

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In court filings Monday in the U.S. District Court for the Eastern District of Virginia, the U.S. Trustee's Office said it was voluntarily dismissing its appeal challenging a bankruptcy judge's approval of the UnitedLex settlement.

A spokesperson for the U.S. Trustee's Office did not respond to a request for comment. Attorneys for Tavenner and UnitedLex also did not respond to requests for comment.

The Justice Department's decision to withdraw its appeal comes days after Tavenner said she would need to hire attorneys from Cozen O'Connor to defend the settlement. Philadelphia-founded Cozen would receive a $50,000 retainer if U.S. Bankruptcy Judge Kevin Huennekens approved Tavenner's proposal.

Tavenner alleged that the joint venture between Richmond-based law firm LeClairRyan and UnitedLex added more debt to the already struggling firm while it improperly ceded UnitedLex control over LeClairRyan's operations and its intellectual property. UnitedLex has denied the claims.

LeClairRyan dissolved in August 2019 after a spate of partner exits, and filed for bankruptcy shortly thereafter. The trustee originally sought at least $128 million in damages from UnitedLex.

Read More:

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David Thomas reports on the business of law, including law firm strategy, hiring, mergers and litigation. He is based out of Chicago. He can be reached at d.thomas@thomsonreuters.com and on Twitter @DaveThomas5150.