The remains of Howrey

Larry Ribstein —  1 August 2011

I have previously covered the death of Howrey. I noted here the question of the extent to which Howrey’s LLP shield will protect its former partners from liability for the firm’s debts, and more generally what can happen following “the swift collapse of big law firms that have no real assets except the lawyers who, not bound by non-competes and no longer personally liable for the firm’s debts, can walk out the door any time.” Here I discussed the value, if any, of the name of this once-vaunted firm.

Am Law Daily recently discussed the current status of Howrey’s Chapter 7 bankruptcy.   It noted that

Howrey listed assets of $138.7 million against liabilities of $107 million. Subsequent court filings show that the firm’s financial outlook at the end of June was actually much bleaker, although the bankrupt estate could get a boost from settlements secured this month by some of its former partners in a pair of contingency fee cases.

It seems that whether Howrey’s assets will have any positive value depends significantly on what it gets from the contingency fee cases and how much cash goes to, among others (and somewhat ironically) the many lawyers who have claims against Howrey for fees.

If Howrey’s liabilities exceed its assets, its former partners may have to make up the difference unless (1) they are protected by the LLP shield; and (2) they have to return distributions they received close to the firm’s bankruptcy.

Stay tuned for some interesting litigation.

Larry Ribstein

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Professor of Law, University of Illinois College of Law

One response to The remains of Howrey

  1. 

    Were it so simple, Larry. The consequences to individual partners of an imploded firm can be anywhere from severe to disastrous: http://kowalskiandassociatesblog.com/2011/02/03/the-financial-and-legal-consequences-of-a-law-firm-dissolution-on-the-partners-of-the-defunct-firm/