RICHMOND — After experiencing dramatic declines in gross revenue and profitability and an exodus of lawyers in recent years, the Richmond-based legal giant LeClairRyan has filed for bankruptcy.
The firm, which was founded in 1988 and grew into 25 offices with nearly 400 attorneys at its peak, filed the petition Tuesday morning in the U.S. Bankruptcy Court in Richmond.
The filing comes less than a month after the firm announced that its partners had voted to start an orderly wind down of its business, saying it “was in the best interest of our clients, colleagues and creditors.”
The decision to cease operations last month also came as departures continued at LeClairRyan this year, including Gary LeClair, the firm’s co-founder and former longtime CEO who joined crosstown rival Williams Mullen in early August.
It is one of the larger law firms to close in recent years in Virginia and nationally.
LeClairRyan listed between $10 million and $50 million in estimated assets and liabilities, bankruptcy court documents show. It said it estimated the firm had between 200 and 999 creditors.
The firm’s liabilities include an outstanding balance of $6.8 million secured loan by ABL Alliance LLLP. The loan was part of a $15 million revolving credit that was taken out on Dec. 29, 2017 and is secured by a first-priority lien to LeClairRyan’s assets, including the firm’s accounts receivable.
The firm has paid down the loan since mid-July, when it owed about $9.8 million, court documents show.
The bulk of what the firm owes its top 20 unsecured creditors is for lease obligations, the documents show. That includes $414,482 to Miami-based Parmenter Realty Fund, which owns and manages the SunTrust Center in downtown Richmond where LeClairRyan’s main offices are located.
LeClairRyan said in its bankruptcy court filings that the firm decided to file for bankruptcy to make sure it can continue using its cash collateral to pay necessary expenses including payroll; service fee payments to joint venture called ULXP that was created with UnitedLex; and rent and moving expenses.
“Payment of these expenses is critical for LeClairRyan to conduct an orderly wind down for the benefit of all creditors and parties in interest, including clients represented by the firm,” according to the court filing, which was signed by Lori D. Thompson, the firm’s former general counsel who chairs LeClairRyan’s dissolution committee. Thompson joined the Spilman, Thomas & Battle PLLC law firm on Aug. 19, but has agreed to continue to serve as chair of the dissolution committee.
The dissolution committee developed a plan to wind down the firm by using existing employees during the transition period to take care of crucial client issues, such as the orderly transfer of client records, the court records show.
“The goal of the wind down plan is not only to ensure that LeClairRyan fulfills its obligations to its clients and other constituents but also to maximize the return to all creditors by creating a smooth and uneventful soft landing for clients that would, among other things, minimize the risk that clients would stop paying invoices still owed to LeClairRyan,” the documents said.
To assist in understanding the financial implications of the plan, LeClairRyan hired consulting firm Protiviti Inc. as a financial advisor. The firm and Protiviti presented to ABL Alliance the financial projections for an out-of-court wind down process.
“The lender was unwilling to provide funding for an out-of-court wind down plan to the extent of the additional funding required by the lender under an out-of-court solution. Accordingly, LeClairRyan developed cash flow projections that would apply in a Chapter 11 wind down process,” the documents show.
LeClairRyan reached an agreement with ABL Alliance regarding the use of cash collateral. To ensure that the firm can continue to using the cash collateral to pay necessary expenses, it filed for bankruptcy.
LeClairRyan has hired Hunton Andrews Kurth LLP as its bankruptcy lawyers.