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Judge OKs $10 mln settlement involving former LeClairRyan shareholders

2 minute read

A plaque is displayed at the entrance of the U.S. District Bankruptcy Court for the Southern District of New York, REUTERS/Brendan McDermid

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  • Deal resolves some of Chapter 7 trustee's claims stemming from firm's collapse
  • Settlement keeps UnitedLex lawsuit intact

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(Reuters) - A bankruptcy judge in Richmond, Virginia, on Monday approved a$10 million settlement between a trustee overseeing the dissolution of LeClairRyan and an insurer covering claims against 26 former shareholders of the defunct law firm.

The settlement with Columbia Casualty Co resolves some of the civil claims Chapter 7 trustee Lynn Tavenner has leveled against the former shareholders, including firm co-founder Gary LeClair, former CEO Erik Gustafson, and former general counsel Lori Thompson.

The deal includes $9.475 million to satisfy the trustee's claims that the shareholders improperly received money from the law firm when it was insolvent, plus $525,000 in expenses.

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The ex-shareholders made no admission of liability on any of the covered claims under the settlement. Columbia Casualty had issued a management liability policy to LeClairRyan prior to its 2019 collapse.

"I commend you on reaching a comprehensive and good agreement to satisfy these various claims," U.S. Bankruptcy Judge Kevin Huennekens said at a Monday hearing.

Despite the approval of the settlement, the trustee's work isn't done, said Erika Morabito, a Quinn Emanuel Urquhart & Sullivan partner representing Tavenner. The settlement resolves certain allegations, including breach of fiduciary duty and trade secrets claims. It doesn't address other claims Tavenner has made, such as unjust enrichment or conversion.

Huennekens said he hopes other claims "can be satisfied in a similar fashion."

The settlement also doesn't affect Tavenner's ongoing litigation with alternative legal services provider UnitedLex, Morabito said. UnitedLex and LeClairRyan struck a deal in 2018 that Tavenner has claimed added more debt to LeClairRyan and improperly ceded control over its operations and intellectual property to UnitedLex.

Tavenner added LeClair to the UnitedLex lawsuit in August, alleging he enriched himself prior to the firm's 2019 collapse. LeClair has blasted the claims as defying "human nature and logic."

LeClair's attorneys declined to comment on the settlement.

Read more:

UnitedLex, LeClairRyan must face trustee's lawsuit

LeClairRyan founder blasts claims he helped tank law firm

LeClairRyan trustee targets firm co-founder in UnitedLex lawsuit

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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.

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