Brobeck battle rages on as bankruptcy trustee seeks $275m

Ronald Greenspan, the trustee of Brobeck Phleger & Harrison’s bankruptcy estate, has escalated his attack on former Brobeck partners after launching actions to retrieve around US$275m in distributions and bonuses paid after the firm allegedly became insolvent. A portion of Brobeck’s debt to major creditor Citibank is also being sought from former partners.

As reported in San Francisco’s The Recorder (21 January 2005), Greenspan has filed suits against some 200 former Brobeck partners. In one of the largest individual complaints, Greenspan has sought the return of more than $3.1m from former corporate partner Warren Lazarow.

It is understood former Clifford Chance partners are also the subject of the suits, including Michael Torpey, Jim Burns and Karen Johnson-McKewan, who left for Orrick Herrington & Sutcliffe’s San Francisco office last year. It is not known whether iconic former Brobeck chair Tower Snow has also been sued.

The suits claim that certain former partners continued to take distributions after Brobeck allegedly became insolvent in 2001. They state that Brobeck’s income began a drastic slide in the second half of 2000, dropping from net per partner revenue of close to $1m to just $245,000 in 2002. The suits claim the firm buried itself under a mountain of debt rather than reduce distributions accordingly.

Under Californian law, limited liability partnerships can make distributions to partners only when the total assets of the firm exceed liabilities.

On 17 December, Clifford Chance finally settled its long running dispute with a group of former Brobeck partners for $5.5m after having to raise its settlement offer following the unwelcome entry of a group of asbestos lawyers who sought to buy the rights to the claim. The group had alleged that Clifford Chance triggered Brobeck’s collapse after the hire of 16 partners in 2002.