life preservers for the support staff of a flooded law firm amid the flotsam and jetsam
Just a quick note:
We just received a copy of Creditor Bratton’s Objection To Approval Of Disclosure Statement (see link below). Although our copy is not stamped we understand that it has been filed. In addition, creditors Monika Lee and David Simon have also stated that they also object to the Disclosure Statement (see last page).
Finally, we’ve also been told that Judge Montali vacated the November 9th hearing just before midnight on November 2nd.
[Editor’s Note: As you probably know, the Heller Ehrman LLP estate and the Unsecured Creditors’ Committee recently filed a Joint Plan of Liquidation http://hellerdrone.files.wordpress.com/2009/01/plan.pdf, that incorporates a proposed settlement of the employee Class Action litigation. See Exhibit C to the Plan (the Compromise and Settlement Agreement) http://hellerdrone.files.wordpress.com/2009/01/plan-ex-c.pdf, especially pp. 13-23. You should also note that Exhibit A to the Plan (Assumed Contracts) http://hellerdrone.files.wordpress.com/2009/01/plan-ex-a.pdf, while currently blank, will eventually provide details of the payout for individual class members. We expect that Heller Ehrman LLP’s law firm, Pachulski Stang Ziehl & Jones LLP, will be transmitting shortly to each class member his or her individual proposed payout details.
The Class Action counsel at Blum Collins will shortly post here at Heller Highwater some answers to FAQs related to the proposed settlement. In the next few weeks, each member of the class will receive more information by mail about the plan and the settlement.
The following article was jointly authored by the four class representatives, who express some thoughts on their involvement in the litigation.]
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Why We Support the Proposed Settlement
by Debora Biggers, Carl Goodman, Marjorie Norris and Anna Scarpa
As the four named plaintiffs in the employee class-action matter triggered by the collapse of Heller Ehrman, we’d like to provide our views on the proposed settlement.
Background
We each relished working at Heller Ehrman. We felt blessed to be associated with such talented attorneys and staff. Heller Ehrman’s culture really did seem to distinguish itself from other law firms. We worked hard, believed in our product and our clients, and we were proud of the significant commitment Heller Ehrman made to a wide variety of pro bono matters in the United States and abroad.
Our tenures at the firm ranged from a few years to more than two decades. The demise of Heller Ehrman was a shock. But even more shocking was the way in which the firm violated basic state and federal employment statutes, including the payment of accrued vacation and adherence to WARN Act regulations.
We haven’t been shy about asking questions. Participating as the named plaintiffs in this class action has required having a bit of backbone. The excuses offered by management for its inability to pay wages could not be taken seriously. How could a law firm with a notable 118-year history suddenly collapse and then deny the payment of statutorily mandated staff wages?
The Class Action
Back in the fall of 2008, most employees were clearly reluctant to challenge publicly the pronouncements of the Heller Ehrman Executive and Dissolution Committees, as they feared that so doing could jeopardize their future employment prospects. But, out of a sense of conviction, each of us did raise our hands and became known as the named plaintiffs in an attempt to secure the wages owed to us and to every other member of the class. We were definitely of the opinion then, and remain convinced of the view now, that facing the cadre of attorneys representing the Heller Ehrman estate without our own counsel would not produce a favorable result. We did not think that the mere act of filing a proof of claim with the bankruptcy court would provide either corporate accountability or a just result.
Our class includes all special counsel, associate attorneys, and non-attorney professional staff – that’s a pretty varied bunch. As it turned out, no attorney volunteered to serve as a named class rep, resulting in all of the named class reps being non-attorney staff members.
Reading through the large number of comments posted on the Heller Highwater blog over the past year, a lot of self-righteous ire about the firm’s demise has been expressed (anonymously) by attorneys and staff members alike, with much denigration directed at the final set of shareholder leaders at Heller Ehrman. Our motivation to become the public face of the litigation was premised not on ire but on a more straightforward desire simply to recover our statutorily mandated wages. So we stuck out our necks as class reps and tried to engage in a fairly basic dispute-resolution process with the Heller Ehrman estate.
Blum Collins
Working at Heller Ehrman, we naturally didn’t have much personal familiarity with plaintiffs’ law firms. But now we were in need of hiring one. We were fortunate to find and select a terrific one: Blum Collins. Each of the four principal attorneys who has worked on our matter has had considerable prior litigation experience at large and prestigious law firms. In fact, one of them, Steve Blum, got his professional start at Heller Ehrman in the 1980’s after graduating from Yale. Among his co-workers at that time was a stalwart Heller Ehrman secretary, who remained at the firm until its October 2008 demise and who serves now as one of the named plaintiffs. Another of our core counsel, Doug Thorpe, was for many years the managing partner of the L.A. office of Perkins Coie.
Over the past year, Blum Collins gave each of us an intensive tutorial in employment, class-action, bankruptcy, and partnership law. Without a doubt, that tutorial, combined with a real sense of unity and fellowship among the named-plaintiff group (who previously did not know each other), was the best thing about our sometimes-stressful involvement as named reps in a class-action lawsuit. We think we’ve put that knowledge and cohesiveness to good use to collaborate closely with Blum Collins, resulting in the achievement of the current proposed settlement.
The Reality of 100% Recovery
Throughout our involvement in this matter, we think we’ve taken a pragmatic approach. Given our understanding of the context of the players arrayed against us and our developing knowledge of bankruptcy law, we never expected to achieve 100% of what we are owed.
Among other things, Blum Collins educated us on the politics of the Unsecured Creditors’ Committee. Blum Collins tried mightily to obtain Committee representation by a non-shareholder employee, but did not succeed. Membership on that Committee could have provided insight on what was being done to collect debts owed to Heller Ehrman.
In addition to what are now very old accounts receivable, we understand that other significant sources of potential revenue for the Heller Ehrman estate include the reversion into the non-priority bucket of some of the $50 million paid to Bank of America after its UCC security interest lapsed; funds from potential malpractice claims against Greenberg Traurig and Ernst & Young; monies potentially recoverable from various Jewel v. Boxer successor-liability arguments; and theories such as piercing the corporate veil to achieve independent shareholder liability.
Of course, we don’t know how successful, if at all, the estate or the Unsecured Creditors’ Committee will be in achieving revenue from any of these sources.
Simultaneously, we also understood that hundreds of non-employee creditors also have valid claims against the estate, and that our employment priority amounts can reach a maximum of only $10,950, leaving us to fight with the various landlords, vendors (e.g., Williams Lea), retired shareholders, and others for the remainder. Some of us felt that our litigation would drag out for numerous years and, ultimately, we’d end up receiving perhaps 10 cents on the dollar.
The Proposed Settlement
We feel that Blum Collins has succeeded in reaching a richer and much quicker settlement for the employee class than we originally expected. Significantly, because of our involvement as named plaintiffs representing California, New York, the District of Columbia and Washington state, Blum Collins negotiated hard and won the estate’s agreement to pay the class several million dollars of WARN Act damages. And, as we all know, we’re fighting over wages that should have been paid in 2008. Each additional month that we wait for an eventual payout reduces the present-day value of that payout, and bankruptcy court does not assess interest on any awards that it orders to be made. The rapidity of our settlement helps us all.
While we still don’t have the exact figures for the individual payouts we should be receiving under the proposed settlement, the estimates we’ve seen reinforce our belief that we achieved a significant victory in the face of long odds. The proposed settlement will result in a good number of us and our former co-workers, especially those who did not have that many hours of accrued-but-unused vacation and whose annual salary was in the lower half, receiving close to 100% of their owed wages (excluding any waiting-time penalties given that the proposed settlement treats those as subordinated claims).
Others of us won’t fare as well percentage-wise, but will receive larger overall awards. Bankruptcy court treats employment claims in excess of $10,950 as non-priority. Given that, when the final distributions from the non-priority buckets are made, some of us in the highest income brackets and with lots of hours of accrued-but-unused vacation still will have received tens of thousands of dollars, even if such awards won’t be much more than 20-30% of our respective entitlements.
But like a progressive taxation scheme, it seems equitable that some of our lower-paid brethren will receive a higher percentage of their wages under the proposed settlement. Further, and highly significantly, in our proposed settlement, we achieved payment of the Blum Collins fees and costs from the estate, rather than from the employee class, meaning that we won’t have to discount our individual payouts to pay for our attorney representation.
Conclusion
We hope you share most of our sentiments and agree that the proposed settlement is a decidedly positive development and worth accepting. We have been truly impressed by the advocacy and talent devoted on our behalf by our counsel at Blum Collins and feel that the proposed settlement provides us with much more timely relief, and with a richer payout, than we had expected.
As you read through the Plan of Liquidation and companion documents, as well as the upcoming FAQ that Blum Collins is preparing, feel free to address any questions directly to either Steven Blum or Craig Collins at blum@blumcollins.com or collins@blumcollins.com.
Compromise and pragmatism are not always thought of as virtues, but in this instance, we feel that our voices have been heard and that we have achieved a significant victory, not just for the four of us but for our former colleagues as well. We’re at the threshold of concluding our battle and we hope you join us in celebration of that feat. Best of success to all in your post-Heller Ehrman endeavors!
[Editor's note: We've received the following information from Blum Collins as to the timeline and process involved with the pending class action settlement which is part of the Plan of Liquidation.]
The proposed Class Settlement and Plan of Liquidation in bankruptcy court are proceeding together on two simultaneous tracks.
The Class Action Settlement
For the proposed class settlement, the Court will hold a hearing on October 29, 2009 at 1:30 p.m. to decide several things, including whether to give preliminary approval to the Class Settlement and to approve a notice to the Class regarding the preliminarily approved settlement.
As soon as the Court approves the Notice to the Class, you will receive notice by mail of the terms of the proposed settlement and how the general terms apply to you specifically. You will then have a fixed period of time, which will be included in the Notice, to consider whether to share in the settlement or go it on your own. You will also have the option to object to the settlement before it receives final approval.
The dates for those events also will be included in the Notice, and you do not need to do anything with respect to the settlement until you receive the Notice.
The Plan of Liquidation
For the Plan of Liquidation, the first step will be for the Court to approve a disclosure statement, which explains the plan and gives creditors information to help them decide how to vote on the plan. The Court will hold a hearing on November 9, 2009 to consider approving the disclosure statement to be sent to creditors with the plan. Objections to the adequacy of the proposed disclosure statement must be filed with the Court by November 2, 2009.
At the November 9, 2009 hearing, the Court will not make any decision about whether the plan should be approved; the Court will only decide what information must be sent to creditors with the plan. Once the disclosure statement is approved, you should receive a copy of the plan, the disclosure statement, a ballot, and information about your particular treatment under the plan.
You do not need to anything with respect to the plan until you receive these documents; the disclosure statement will tell you the deadlines for returning your ballots and voting on confirmation of the plan.
The Court-approved disclosure statement will be the official explanation of the plan. The draft disclosure statement and plan that you may have already read will be revised before the Court approves their distribution. As soon as the final documents are distributed, we will address the benefits and disadvantages of your options.
Thank You
Thank you for your continued patience as we move forward as promptly as possible to obtain compensation for all former Heller employees.
© 2009, copyright Thomas MacEntee
I’ve received several e-mails from ex-Hellerites concerning a settlement offer made by the employment lawyer for Heller Ehrman LLP (John C. Fox of Manatt).
Blum Collins – the firm representing the class action lawsuit group – has been in contact with its clients in the form of two letters:
For those ex-Heller Ehrman employees who have not yet signed up with Blum Collins as part of the class action lawsuit, I wanted to convey some of the information as to the settlement and why acceptance of such settlement is not recommended:
What You Can Do
Not only is Heller Ehrman LLP’s low-ball settlement offer unreasonable and unacceptable, it is an insult as it incorporates desperate divide-and-conquer tactics used with its former loyal employees.
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The former shareholders cannot be allowed to avoid their responsibilities to its former employees by way of inadequate settlement offers and bankruptcy maneuvers. There must be a much fairer resolution for all ex-employees.
© 2009, copyright Thomas MacEntee
Some big news which technically won’t hit the presses until Monday, April 27th but is available online now: the class action group led by Blum Collins has filed suit against at least 179 former shareholders including Matt Larrabee.
Read the article in The Recorder here.
You may also access the complaint here: complaint-v-heller-shareholders
You may remember that the former employees of another esteemed law firm which imploded last fall – Thelen Reid – were able to have Thelen’s counsel, Latham & Watkins, stipulate to class certification.
And while the counsel for the Thelen group is the same counsel which our class action group is using – Blum Collins – it appears as if Heller’s employment counsel, Manatt Phelps would rather fight such class certification.
This approach makes no sense at all unless the intent of John Fox, Manatt’s lead attorney on this matter, is to rack up lots of billable hours and soak money out of the estate’s pool of meager assets. By opposing class certification, Heller is stating clearly that they don’t believe in paying their former employees what they earned while they worked for the firm.
In fact, Heller Drone has learned that during discussions as to class certification and the merit of the claims of the ex-Heller employees, the following concept was pushed: ex-Hellerites had so much accrued vacation because they loved working at the firm so much and never had a chance to use it.
Once you stop laughing at the asburdity of such an idea, wait a minute while humor turns to anger, as it should. You should be angry that Heller feels a sense of entitlement in not paying wages that you as an ex-employee earned. I could see them opposing the WARN Act penalties and some of the other items discussed on this blog.
To want to fight in court over the basic principle of recognizing that there is a class of ex-employees that were thrown overboard from the S.S. Heller while shareholders scrambled for their lifeboats is not funny. It is shameful.
There are several new documents in the Bankruptcy section including Judge Montali’s decision allowing the Unsecured Creditors Committee to go after the banks and the Class Action complaint filed on March 31, 2009.
First, by way of dislaimer, readers should understand that I’ve opted to join the class action suit and have signed on with Blum Collins. I have various reasons for doing so, which I will explain in my next post.
Second, as part of the class action group I must guard against disclosing too much strategy information here on the blog. So I am offering below some very basic instructions on filing the proof of claim with the bankruptcy court. This is not to be construed as legal advice – you either need to seek your own counsel or you have the option of requesting a retainer agreement from Blum Collins. I won’t be able to answer specific questions about the proof of claim process.
Third, if you are already part of the class action suit or anticipate being part of the ceritified class, you do not need to file a proof of claim yet. Blum Collins will be coordinating the filing process for all those who want to pursue the class action suit.
At the end of this post are the links to previous posts about the proof of claim process.
1. Use the Proof of Claim Form below and complete it with the following information:
The US Bankruptcy Court District is: Northern District of California
The Heller Ehrman Case Number is: 08-32514
The Name of Debtor is: Heller Ehrman LLP
The Name of Creditor is: Your Name
The Name and Address where notices should be sent: Your Address
2. Use the Proof of Claim Calculation Spreadsheet below to calculate your claim. The sheet is currently populated with sample data. Enter your own info in the yellow fields using the Notes in the right column as guidance.
If you do not have access to Excel, use the Proof of Claim Calculation document (Word) below – you may need to utilize a calculator since this form will not automatically calculate your totals.
3. Enter the amount of claim in Amount of Claim as of Date Case Filed.
4. Explain basis for claim (wages, accrued vacation, etc.) in the Basis for Claim field.
5. Enter your Heller Ehrman employee number in the Last four digits . . . field (or use the last four digits of your Social Security Number).
6. IMPORTANT: in the right column, under Amount of Claim Entitled to Priority, at a minimum you need to enter the amount of your Accrued Vacation and check the Wages, salaries . . . checkbox. The enter the priority amount at the bottom of the column.
7. Sign and date the form.
8. Send the form to:
US Bankruptcy Court – Northern District of California
235 Pine Street, 19th Floor
Post Office Box 7341
San Francisco, CA 94120
Links:
Proof of Claim Calculation Spreadsheet (Excel)
Proof of Claim Caulculation Document (Word)
Filing a Proof of Claim – Gathering Documents
For some reason this is a post that I’ve stressed out over during the past 48 hours. While mulling over the “right words” in my head, I am continually self-analyzing (and self-criticizing) how I write and run this blog.
OK, Drone, just spit it out.
First, I really want to see the ex-employees of Heller Ehrman come together and work as one during the bankruptcy process. Now is not the time to be divided along attorney/non-attorney, Heller lifer/Heller short timer, class action suit/non-class action suit lines.
Second, the bankruptcy has basically placed a stay on all litigation filed in Federal and California Superior Court as well as on the wage claims process with the state labor boards. So no matter how you felt about the class action lawsuit, the named plaintiffs, the Nichols Kaster attorneys, it really doesn’t matter much right now.
Third, some may want a long, drawn out process in terms of securing representation, etc. but to be honest time is not on our side. And as Jayne Loughry has suggested, despite the claim process being made accessible to all ex-Hellerites, we still have some issues which necessitate the use of bankruptcy counsel. As stated in the previous post, I think working with Stephen Finestone will be our best option at this point.
Fourth, realize that I am wary of divulging strategy here on Heller Highwater and will be working with a very tight-knit group serving on the soon-to-be-formed Employees’ Committee. So some posts may seem cryptic from this point forward or they may lack information. Many posts will be pure journalistic reporting of what occurred that day in bankruptcy court.
Fifth, I try and use a “light hand” in guiding this blog and the actions of the ex-Hellerites. I don’t presume to speak for everyone but I do know that we need coordinated action. Right now with my non-employment status and my extensive blogging background, I have no problem lending my skills and services. I will want and need assistance from others (maintaining contact lists, files, documents, forms, etc.) and more so as the process progresses.
The people who worked at Heller were unique and they worked in a firm with a unique culture. Each person I’ve been in contact with is a “can do” person and has learned (through all the years of Heller’s pro bono work fighting the status quo) what is possible when great minds, skills and hearts come together. Let’s get working.
I know things have been kind of quiet here especially for those of us who were terminated via e-mail on Friday, October 10th. I did want to give an update on the class action lawsuit issue since your cruise director does receive many emails each day concerning this.
I was waiting to post so that I could hear from enough readers and former passengers of the S.S. Heller Ehrman to see if people are filing wage claims, etc. Also, as most of us expect to hear about another round of terminations coming this Friday, October 17th, I wanted to see exactly how soon to proceed.
We have different scenarios to pursue and I say this only because a recent article discussed a class action lawsuit letter sent to several Hellerites from the firm of Nicholas Kaster LLP, Attorneys At Law (see http://legalpad.typepad.com/my_weblog/2008/10/heller-staffers.html). I do not know if anyone has contacted the Kaster firm or not.
Please use the poll below to express your opinion and please make a comment as well. I am trying my best to not to help steer the group in the best direction, but I also like hearing all sides of an argument. I realise that if we do file, not everyone will participate.
Over and out.
Heller Drone
Cruise Director
Poll: File suit now or wait?Score:
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