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LeClairRyan Trustee to Settle UnitedLex Case for $21 Million

May 17, 2022, 9:16 PM

The trustee handling the break up of defunct law firm LeClairRyan has agreed to a $21 million settlement of fraud and other claims against alternative legal services provider UnitedLex.

The firm’s downfall, which led it to file for bankruptcy in 2019, sparked claims that its joint venture with UnitedLex was manufactured to benefit the LeClairRyan’s co-founder. Bankruptcy trustee Lynn Tavenner has also sought to claw back compensation paid to firm partners shortly before the firm closed.

Lawyers for Tavenner detailed the proposed settlement in an April 19 hearing in Richmond, Va. CNA Financial Corp., UnitedLex’s insurer, would pay $12.25 million, while UnitedLex and private equity company CVC Capital Partners would chip in another $8.25 million. Travelers Insurance would contribute another $500,000.

Tavenner’s lawyers from Quinn Emanuel Urquhart & Sullivan would get $10.5 million in legal fees, according to a transcript of the April 19 U.S. bankruptcy court hearing.

"(T)he mediator wanted me to state on the record this was a unilateral mediator’s proposal; it was not suggested, nor requested by the Chapter 7 trustee, or by myself or anybody at Quinn Emanuel,” said Washington-based Quinn Emaunuel partner Erika Morabito at the hearing, according to the transcript.

Tavenner claimed in late 2020 that UnitedLex misappropriated funds for “improper purposes” after the joint venture with LeClairRyan, called ULX Partners, fell apart. The venture was designed to develop a lower-cost back-office operation for the firm.

At the time of bankruptcy, LeClairRyan estimated it had anywhere between 200 and 999 creditors. Those with unsecured claims included the law firm Latham & Watkins, which was owed more than $370,000.

Lawyers representing Tavenner and UnitedLex did not respond to questions for comment.

The case is: Tavenner as Chapter 7 Trustee v. ULX Partners LLC, Bankr. E.D. Va., 20-0314.

To contact the reporter on this story: Sam Skolnik in Washington at sskolnik@bloomberglaw.com

To contact the editors responsible for this story: Chris Opfer at copfer@bloomberglaw.com; John Hughes at jhughes@bloombergindustry.com