Howrey Trustee Files 33 Lawsuits to Recover Funds

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In advance of the statute of limitations, Howrey’s bankruptcy trustee has filed 33 lawsuits in an attempt to recover millions of dollars in possibly misallocated funds, according to a story written by The American Lawyer. Allan Diamond is hoping to obtain and redistribute $3.57 million that was paid out by Howrey in the 90 days prior to the firm’s filing of Chapter 7 bankruptcy on April 11, 2011.

Diamond, a founding partner of Texas law firm Diamond McCarthy, was appointed trustee of the now defunct Howrey six months after bankruptcy was declared. In that time, he has sought to determine if funds paid to creditors prior to the firm’s collapse were made on a preferential basis, and if so, recover those funds so that they can be distributed more fairly to the firm’s other creditors who have so far been left high and dry.

  

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Among the creditors named in the 33 lawsuits are Paul Hastings, the Zeughauser Group, Verizon, Thomson Reuters, Baker Hughes Incorporated, and a number of consultants and witness firms. Two former Howrey attorneys are also named in the lawsuits. AM Law reports that Diamond expects to file further lawsuits in the days approaching the April 11 deadline, or reach tolling agreements with parties that will extend the deadline.

Diamond told The American Lawyer that many of the lawsuits have been filed against innocent creditors, but that they are necessary for him to discover which creditors were paid on a “business as usual” schedule and which received unscheduled payments in the run up to bankruptcy. Bankruptcy law requires that all of an entity’s creditors be paid fairly, regardless of connections with the firm and its staff. Diamond must also repay between $15 and $20 million in administrative fees related to the bankruptcy and more millions to Citibank, Howrey’s secured lender, before other creditors can be paid back. “I am confident unsecured creditors are going to get a distribution,” said Diamond.

Diamond is also pursuing claims against former Howrey partners, now working at other law firms, who may have received payments from Howrey while it was insolvent. 21 lawsuits were filed against law firms, four of which have struck tolling agreements.