Unsecured creditors seek removal of Diamond law firm as Howrey LLP trustee due to alleged conflict of interest
Law360 reports that the California bankruptcy court has been asked to remove the Chapter 11 trustee from the case of venerable antitrust firm Howrey LLP, due to a perceived conflict of interest after Diamond McCarthy LLP had announced several new attorney hires — one of whom (Christopher Sullivan) allegedly represented unsecured Howrey creditors.
The creditors filing the motion last Thursday were Advanced Discovery LLC, Give Something Back Inc., Kent Daniels and Associates Inc., L.A. Best Photocopies Inc. and Western Messenger Inc., Howrey Claims LLC (= William Imhoff — does anyone know him or this Georgia/California based entity?!) and Matura Farrington Staffing Services Inc.
Law360 quotes the motion and the trustee’s response as follows:
“How this could have happened in the era of computerized conflict checks is a mystery,” the creditors said in a court filing.
“There is absolutely no conflict and his motion is completely without merit and it will be addressed through the courts,” Diamond said.
The case is In re: Howrey LLP, case number 3:11-bk-31376, in the U.S. Bankruptcy Court for the Northern District of California.
Understanding the current state of affairs & next steps in the Howrey bankruptcy
The estate of the venerable – and since March 15, 2011 defunct and bankrupt – global antitrust law firm Howrey LLP will likely not be paying out most, if any, of its unsecured creditors.
According to sources familiar with the current state of the bankruptcy proceedings – including the value of settlements to-date, claims made, and so on – the estate’s primary secured creditor, Citibank, is owed around $700,000. General unsecured claims constitute the bulk of outstanding debt, amounting to about $94.5 million. Then there are the administrative & priority claims, which technically lie in a gray zone between secured and unsecured claims: “Priority unsecured claims are claims that are not secured by collateral but that have priority over other debts under federal law. These debts have priority typically for public policy reasons — that is, the well-being of the public depends upon these debts being paid.” (Source.) The priority claims are $15 million.
The administrative claims (debts incurred, with court approval, after the March 2011 bankruptcy filing, including items such as costs of preserving the estate, wages, salaries, court costs, lawyers’ fees, accountants’ fees, trustees’ expenses, etc.) amount to circa $11.3 million.
Prior to any distribution being made to creditors, the administrator will attempt to make further collections of estate assets and to resolve certain creditor claims.
A new status report should be issued by the trustee soon. There are also public bankruptcy filings that may be consulted by anyone interested.