Ex-Thelen Partner Clawback Deal Paves Way for More Pacts

January 16, 2013 – In The News
Law360

A New York bankruptcy judge approved a $475,000 clawback settlement with eight former partners of the bankrupt law firm Thelen LLP. The agreement paves the way for further settlements with highly compensated partners who left before the firm’s desolation in 2008.

All of the settling partners agreed to repay the firm for purportedly failing to meet certain capital requirements required by compensation they received in 2007 and 2008, according to Thelen’s Chapter 7 trustee Yann Geron of Fox Rothschild LLP, who appeared before U.S. Bankruptcy Judge Allan L. Gropper at a recent status conference.

“This marks the first settlement with attorneys who departed before the dissolution,” Geron told U.S. Bankruptcy Judge Allan L. Gropper. Geron said the settlement would most likely prompt deals with other partners who left the firm before its bankruptcy.

In 2011 Geron reached a $5 million settlement with 93 partners who remained at Thelen after it voted to dissolve the partnership, an approximately 70 percent discount on the firms’ initial claims, according to court documents. The trustee later reached settlements on similar terms with 35 additional post-dissolution partners.

In September, Geron asked Judge Gropper to greenlight reduced settlements over precollapse compensation with two of its former partners who met hardship requirements.

Thelen began to fall apart after an ill-fated merger in December 2006 and voted to dissolve in October 2008. The firm filed for Chapter 7 in September 2009.