Law firm LeClairRyan PLLC will convert its bankruptcy case to Chapter 7, with an independent trustee to take over liquidation proceedings.
The conversion, ordered by Judge Kevin R. Huennekens of the U.S. Bankruptcy Court for the Eastern District of Virginia, won’t be effective until Oct. 4. It’s unusual to order a conversion for a later date, Huennekens said.
“This case was always destined for Chapter 7,” Huennekens said at a hearing Sept. 26. “It’s just a question of how it will be done and timing.”
LeClairRyan, joined by its principal secured lender, asked the court for one more week to properly dispose of sensitive client information before the conversion. The trustee appointment happens automatically when the case is converted to Chapter 7, which is less costly than Chapter 11.
The lender, ABL Alliance LLP, agreed to let LeClairRyan continue to use its cash—on which ABL has a lien—until the conversion.
Huennekens said he was converting the case on the debtor’s agreement with ABL and was not making a finding of “cause.”
The U.S. Trustee, the Justice Department’s bankruptcy branch, had asked the court immediately to convert for cause because it saw no prospect for reorganizing in Chapter 11.
“I’m convinced there’s nothing improper going on by any of the parties,” Huennekens said.
Since its Chapter 11 bankruptcy filing on Sept. 3, LeClairRyan has closed its offices and is preserving clients’ files and records in accordance with the lawyers’ legal obligations, said Tyler Brown of Hunton Andrews Kurth LLP, which represents LeClairRyan.
Huennekens also said at the hearing he’d approve LeClairRyan’s request to terminate its leases.
LeClairRyan’s partners voted July 29 to wind down the firm, according to its website.
The case is In re: LeClairRyan PLLC, Bankr. E.D. Va., 19-34574, Response of LeClair Ryan to Motion to Convert 9/23/19.