I'm not going to say I was looking forward to the trial that would determine whether the bankruptcy trustee for defunct Am Law 200 firm LeClairRyan could recover $128 million from UnitedLex, in the fight over the new law provider's culpability for the firm's collapse.
As a former litigation reporter, I'm well aware of how tedious the testimony in these kinds of disputes can be. But now that the parties have settled, there is something potentially lost in not being able to see the full details of the failed outsourcing partnership between LeClairRyan and UnitedLex revealed under the microscope of a trial.
The publication Richmond Biz Sense was the first to report that a $21 million settlement was revealed in open court in April. As for the insurance implications of this sizable settlement, the largest chunk would be $12.25 million in insurance proceeds from a policy through CNA that covered UnitedLex. An additional $500,000 would be paid out from another insurance policy provided by Travelers Insurance Co. The insurers will be responsible for paying the entirety of what they owe upon closing of the settlement.
That's far from a serious hit for a company that reported $350 million in revenue in 2019, the last time it spoke publicly about its finances, and has ownership that boasts $130 billion under management. (UnitedLex declined to comment on both its current revenues and on the resolution to the dispute, and an attorney for the bankruptcy trustee did not respond to a request for comment.)
A trial this year may have brought more light to the financials behind the failed partnership and how others could avoid a similar fate.
"The benefit of a trial is that the fact pattern emerges," Liam Brown, founder and CEO of UnitedLex rival Elevate, told me. "Within that process, what would have happened for law firms and law companies is that there would have been pointers for what deal structures to stay away from."
So that lost week of Zoom testimony could have helped erect some firmer guideposts to demarcate how law firms and alternative legal service providers can work and collaborate in the future. But it's not as if the nearly 18-month-long dispute hasn't had any instructive value for others in the space.
"It is a cautionary tale for all businesses, whether or not you're a law firm or a law company, doing business today: making sure that you fully do due diligence and understand the risks in going into outsourcing partnerships or any kind of strategic business relationships," Brown said.
Brown and legal industry observers have noted the singularity of the agreement between LeClairRyan and UnitedLex in the past to conclude that the dispute isn't going to have any chilling effect on future collaborations. But that doesn't mean that there are no lessons to be learned.
"Law firms and law companies will reflect on what do we need to do to mitigate risk and managing risk so that this isn't repeated," Brown added.
For those who feel cheated out of some Zoom litigation time, the matter isn't fully over and done with. The details of the settlement came to Richmond Biz Sense via a transcript of the April court hearing in which Quinn Emanuel Urquhart & Sullivan attorney Erika Morabito read it into the record.
This coming Wednesday, the parties will be back online to urge the bankruptcy judge to redact that transcript (which is currently sealed) and place the settlement agreement itself and other related documents under seal. Expect a riveting proceeding.
Dan Packel
Dan Packel is an editor on the Business of Law desk at ALM. He writes a weekly briefing for Law.com, "The Law Firm Disrupted," on change and innovation in the legal marketplace. He is based in Philadelphia. Contact him at [email protected]. On Twitter at @packeld