Next Steps

I want to thank all of you who emailed over the past 24 hours or so after the Heller Erhman bankruptcy news broke.  Many of you had questions as to process and what you need to do next to ensure your claims.

First, I want to assure followers of Heller Highwater that your cruise director will continue to report on developments during the bankruptcy process.

Second, despite Heller’s best intentions in sending out yesterday’s “memo” via email, I’ve learned that the firm was unable to reach everyone.  An even better reason to stay tuned here at Heller Highwater – we are on the mailing list for these types of communications and we’ll post what we get.  Also, as the bankruptcy process goes forward, we’ll make sure to post all bankruptcy court and Heller Dissolution Committee communications to former employees so there is no confusion as to who got what and who didn’t get what.

Third, you don’t need to worry about filing a claim at this point.  There will be plenty of time before a deadline for such claims is even set.

Fourth, what are others doing about the bankruptcy and ensuring that ex-Hellerites have a place – hopefully at the front of the line – in terms of being secured or unsecured creditors?  We are currently working on information which indicates efforts are being made to en sure the employees have a place on the unsecured creditors’ committee as well as other strategies.

Thanks again for your comments and questions – and keep them coming.

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21 Responses to “Next Steps”


  1. 1 Former IT 30 December 2008 at 1:42 pm

    What addresses are these emails being sent to? Is there a way to get on the list?

  2. 2 Thomas MacEntee 30 December 2008 at 1:46 pm

    Good question. The email I received on Sunday evening was from Paul Sugarman on the Dissolution Committee (Paul.Sugarman@hellerehrman.com). If you were to email him and ask to be put on the list, I am not sure if that is how the request should be handled but to be honest Heller has not really given ex-Hellerites a mechanism that I can recall to update contact information.

    If I am misinformed in this area, someone should please post details as to process so we can make sure those who want to stay in the loop have an opportunity to do so.

  3. 3 P-Owed 30 December 2008 at 2:13 pm

    So now that Heller is in Chapter 11, does that mean the ex-employees are guaranteed at least $10K each?

  4. 4 Thomas MacEntee 30 December 2008 at 2:18 pm

    P-Owed

    As you know there are no guarantees. It used to be that you worked for a law firm for the great pay and benefits including the ability to accrue and use lots of vacation, and to have health benefits and 401k/retirement. And usually those benefits have been pretty reliable. Now, now so much.

    I believe that the $10.950 threshold is for wages and other types of secured claims. Anything above that is unsecured and places employees in the back of the line with the rest of the unsecured creditors. Again, I am not a bankruptcy attorney so I welcome a perspective from someone with a better background. And again I reminder everyone that I am not an attorney nor do I try to engage in the practice of law here.

    There are some issues as to whether WARN Act monies are included in that secured creditor amount or not. Also, there are some issues as to accrued vacation. As I’ve said, I’ll have more info on these issues as they come up in the proceedings. We are just too early in a very long process to guess what the bankruptcy court and a possible trustee will do.

  5. 5 Another Former Associate 30 December 2008 at 3:55 pm

    There are no guarantees, but employees wage claims arising from the last 90 days of employment will have priority over other unsecured creditors (but not secured creditors to which we will still be junior) to the extent of the statutory amount (about $10,950). There are some technicalities over when that 90 day period is, considering that most of us were terminated well before the Dec. 29 bankruptcy filing. There are also some technicalities over what is included within wages for that priority amount.

    I’m particularly not sure whether accrued vacation is allocated out,with only the amount earned during the last 90 days included within the employee priority category.

  6. 6 P-Owed 30 December 2008 at 4:38 pm

    We were told that Heller owed BofA and Citi a total of $45m but the article on Law.com says that the banks were paid $51m but are STILL owed an add’l $5.7m. I guess we should still take Sugarman at his word that A/R are still going “strong” and that they’ll receive “tens of millions” of dollars…

    Quick question, what good is having a bankruptcy estate if all of Heller’s ex-clients don’t pay their bills? Judgments or orders would not carry much weight correct?

  7. 7 Another Unemployed ex-Hellerite 30 December 2008 at 6:32 pm

    According to a follow-up email from Paul Sugarman, “If your email or mailing address has changed, please inform Carol Budinger (carol.budinger@hellerehrman.com) directly.”

  8. 8 Another Former Associate 30 December 2008 at 11:12 pm

    Former clients will be expected to pay their bills notwithstanding the bankruptcy filing. Further, they can be sued in the bankruptcy court to pay up if they don’t pay, a very unfriendly forum for accounts receivable parties who don’t pay.

  9. 9 P-Owed 31 December 2008 at 10:08 am

    Another Former Associate,

    GREAT TO KNOW! I know it is very, very early but do you have a best guesstimate on when the employees will see any money? I mean, is it a matter of months or (gulp) years?

  10. 10 Thomas MacEntee 31 December 2008 at 10:33 am

    P-Owned

    I hate to say it but we are talking years. In the Brobeck process, for example, they filed in 2003 I believe and some people just received money in 2007 and 2008.

  11. 11 P-Owed 31 December 2008 at 10:42 am

    Thomas,

    Five years?! Meanwhile the members on the DC still get paid $400-500/hour?

    Did it take so long because of in-fighting among creditors or simply because it took years for enough money to be collected?

  12. 12 Thomas MacEntee 31 December 2008 at 10:55 am

    A little of both but the time is taken up mostly by process. Granted in the Brobeck case there was quite a bit of legal wrangling by former partners (which is to be expected I guess when the subject of the bankruptcy is a law firm).

    See Jayne’s fabulous website (it has not been updated in a few years but it really encapsulates what went on in the Brobeck process)

    http://www.brobeckinfo.com/index.htm

  13. 13 Jayne Loughry 31 December 2008 at 1:37 pm

    Welcome, folks, to the bizzaro world of bankruptcy. For what’s it’s worth, I believe it’s a better place for you to be. Why? Because now you have a chance of recovering at least some of what you’re owed. Emphasis on the word “chance.” Whether, when, and how much you recover depends on what you do. If you sit back just wishing & hoping that others will do right by you, you will get screwed. The dark forces about to convene in Judge Montali’s courtroom don’t care about you; they only care about getting or keeping as much money for themselves as they possibly can. If you stay passive, they’ll roll right over you. If you ever want to see any of your money, you must act.

    I’ve been where you’re headed. I’ve spent countless hours sitting in Judge Montali’s courtroom. In twenty years as a litigator, I saw a lot of strange proceedings, but nothing like the strangeness of a bankruptcy proceeding. Perhaps not elsewhere, but in the Northern District of California bankruptcy is a little club, and the members have secret passwords and handshakes, and something that looks like contempt for non-members. Yes, bankruptcy law offers special protection to employee creditors, but the law, in and of itself, won’t get you your money. The club members know how to make the law work for them, which means against you. The bankruptcy process can work for you, but that won’t happen unless you make it work for you, or at least keep it from working against you.

    Okay, so what can you do? Despite the dark forces opposing you, as a group you have three big strengths: 1) bankruptcy law does favor employees; 2) none of the big cheese players wants to be seen (at least publicly) as screwing over the employees; and 3) your numbers. There are about a thousand of you, right? That makes you in size the largest group of creditors, and in amount owed probably the 2nd or 3rd largest group of creditors. You will be regarded and treated like a group, not like individual creditors. So you might as well start acting like a group. Understand and accept that you are all in the same boat, and it can be a very big boat, so big that the club members can’t ignore you, can’t easily sink you. So get in the freaking boat and start rowing together.

    1: Get as many folks in the boat as possible. This blog is great, but it’s probably now reaching no more than a tenth of your numbers, and it’s oh so public. I strongly suggest you start communicating with each other through an email list. Make it a goal to find and get all employees on your email list (to the Trustee’s, annoyance, we eventually found about 95% of the Brobeck employees). It doesn’t matter if you start with a relatively few people, just keep trying to grow the list.

    2: Some of you are going to have to step up and speak for the group. For a variety reasons, most employees won’t be able to speak for themselves, much less for the group, but there are some of you who can do it. As well as anyone on the planet, I understand it’s a difficult thing to take on, but I also know it can be one of the most personally satisfying things one ever does. So, if you can do it, jump over your fears, and get actively involved in helping your fellow Hellerites, your boatmates, in any way you can. If for no other reason, by helping them, you will be helping yourself.

    3. Form an employees committee. Don’t wait for someone to tell you it’s okay, just do it. It’d be great if you could have a half dozen or more folks on the committee, but what’s most important is that all those club members see you as an organized force. Don’t worry about the presumptuousness of saying you represent the employees’ interests. Since you’re all in the same boat, you’re all qualified to speak for the group. And unless and until other employees put together a bigger or better committee, you might as well be the ones speaking for the group and trying to protect the group’s interests.

    4. Try your damnedest to get a San Francisco bankruptcy lawyer to represent or at least advise you. I know you’ve got lots of reasons to distrust — if not despise — lawyers, but you all will be much better off if you have a member of that strange little club on your side, speaking for you. From personal experience I can tell you two things: 1) I wouldn’t want the class action lawyers representing me or any other employee in the bankruptcy action; and 2) there are some wonderful San Francisco bankruptcy lawyers who won’t try to screw you over.

    5. If you can’t get a bankruptcy lawyer right away, at the very least let the U.S. Trustee’s Office know that you have an employees committee, and that you definitely want to sit on the Unsecured Creditors’ Committee. Even if you can’t/don’t want to organize an employees committee, you must get one or more employees a seat on the Unsecured Creditors’ Committee. Ideally, the employee(s) should live/work in San Francisco so that they can attend Committee meetings and/or court proceedings as necessary.

    6. Don’t wait for the April deadline to file your Proof of Claim. As posted elsewhere, it doesn’t really matter whether or not your name is on the DC’s creditor list. The creditor list doesn’t put you in line for payment; it just eventually gets you a mailed notice of your right to file a claim. If you’re owed money, you have the right to file a Proof of Claim regardless whether or not you get notice. (Both the Brobeck dissolution committee and later the trustee managed to screw up notice to hundreds of employees, and that’s why we ended up tracking folks down ourselves, i.e., don’t rely on any of them to get the lists right, just get the word out that folks can and should file regardless whether they’re on the list). Though it’s only a one page form, some, maybe most folks will probably still need some help filling out the Proof of Claim form. Whether it’s by getting a bankruptcy lawyer, forming an employees committee, or just exchanging information on an email list, you folks will need to find ways to help each other with filing your claims. I strongly suggest you don’t wait until the deadline’s closer; get started right away. The sooner and more Proofs of Claim are on file, the sooner you as a group become a force that must be reckoned with, that cannot be ignored or easily screwed over.

    You folks are already better organized and more knowledgeable than we were when the Brobeck bankruptcy began. We eventually got some of our money back; there’s no reason why you shouldn’t also. If you work together, I know you can do it.

    Best regards, Jayne

  14. 14 Thomas MacEntee 31 December 2008 at 1:54 pm

    As you all know I regularly bow down and worship Ms. Jayne and she has been one of my muse’s here at HH. I will be posting later today what I intend to do starting Friday in terms of pursuing ex-Hellerite claims to the fullest extent. There will be plenty of room for involvement from all of you and plenty of tasks to go around.

    Thanks Jayne!

  15. 15 Another Former Associate 1 January 2009 at 5:09 am

    Jayne’s point 4: Get a good S.F. bankruptcy attorney, is very good advice. The impression that some people get, that bankruptcy court is some kind of club with secret handshakes, usually results from either being unrepresented (by an attorney) or represented only by a non-bankruptcy attorney. You wouldn’t try to get a complex patent matter resolved without a patent specialist; the same principle — that you need a specialized in a specialized proceeding — applies in bankruptcy court.

    There are a number of excellent bankruptcy attorneys in S.F. An employees committee needs to move promptly, however; many of those attorneys will be employed by one or another creditor very soon.

    Former employees will be an important group numerically. However, the landlords and banks will have, in the aggregate, much larger claims in the bankruptcy case than the employees as a group.

    Judge Montali has known Benvenutti for, I think, nearly 30 years. Benvenutti has considerable credibility with the judge. On the other hand, Montali is a stickler for accurate technical application of bankruptcy law. Nobody will be putting anything over on him. Montali handled the PG&E bankruptcy and made many tough decisions on very controversial issues there.

    An important early issue will be whether the Dissolution Committee can show the judge a legitimate shot at treating the banks as mostly in the general unsecured category. If that is successful, Heller as debtor in possession will have a better shot at keeping the banks and/or the landlords from pushing for appointment of a trustee of their choosing.

    My two cents: If there is any push from banks or landlords for appointment of a trustee, the employees committee should vigorously argue against that. While we don’t have any fondness for the DC, we will certainly be worse off if a trustee favorably inclined to the banks or landlords gets appointed.

    It takes a good bankruptcy attorney to protect our interests in this process; that is absolutely key.

    Will we see some money out of the bk case? Speculation at this stage, but I expect yes. When: sometime from 12-60 months away. It doesn’t have to fall on the long end of that time frame, but key to that is to make the Ch. 11 process work and avoid a conversion to Ch. 7 (which I expect the banks and/or landlords will favor). If it shifts to Ch. 7, any payout will be years not months away.

  16. 16 Jayne Loughry 1 January 2009 at 2:25 pm

    Thank you, AFA, for giving me a springboard to put it even stronger: Getting a good SF bankruptcy lawyer asap is the single most important thing you folks can do right now.

    In the Brobeck mess, I made three huge mistakes. In order of magnitude, they were: 1) Not taking Brobeck into bankruptcy immediately; 2) Supporting the landlords’ choice of trustee; and 3) Not getting a bankruptcy lawyer a few months later when I realized the landlords had duped me (which means I also made the mistake of assuming our class action labor lawyers could adequately represent us in the bankruptcy action).

    We were several years into the bankruptcy before we got a bankruptcy lawyer, and that delay — my delay — severely limited what our wonderful lawyers could do for us. Because of our efforts, a larger number of employees recovered a larger amount of money than the Brobeck dissolution committee, and then later the trustee, ever planned or wanted to pay us, which is a good thing. But I live with the belief and regret that had I not made the mistakes enumerated above, the employees’ recovery would have been quicker and greater. I would hate to see you folks repeat my mistakes. Get a good SF bankruptcy lawyer immediately!

    AFA, I agree with you about Judge Montali. On the whole, I found him to be a smart and fair judge, and he showed remarkable tolerance, indeed kindness, in our pre-representation days whenever I (a bankruptcy law idiot) jumped up to speak for the employees. My only “negative” toward him is that I believe his experience as a big law partner — at Pillsbury I believe — colored his view of things such that he gave too much benefit of the doubt to those who didn’t deserve it. He’s kind of old school, and I think he just couldn’t bring himself to believe that big firm partners had behaved as badly as they had.

    As to your point about appointment of a trustee, AFA, I absolutely agree with you that you folks don’t want a trustee hand-picked by the banks and/or landlords. (See mistake #2 above.) However, I don’t know whether you’ll be better off without a trustee, i.e. leaving it to the DC to run things. If there will be enough accounts receivable money to pay you all off in full, then you’re probably fine without a trustee. But if there won’t be enough A/R money to pay you off, then I’d think you might well be better off with a trustee who will aggressively pursue not just A/R, but also the substantial assets the DC does not want to pursue, particularly the Jewel v. Boxer assets.

    The Brobeck trustee is not and never will be on my holiday greeting card list (nor I on his), but he did aggressively pursue assets. Like the Heller partners, on their way out the door the Brobeck partners attempted to waive the firm’s right to recover Jewel v. Boxer damages from the firms to which the partners migrated, taking large books of Brobeck business. The Brobeck trustee blew right through the purported waiver and has collected, and is still collecting, many millions from the firms which took in Brobeck partners (and got the benefit of Brobeck business).

    (This, Thomas, is the reason why Ron Greenspan and the Brobeck Estate are listed on the Heller creditors list. Greenspan is the Brobeck bankruptcy trustee, and Heller owes Brobeck Jewel v. Boxer money. Knowing Greenspan, I expect he will push hard to get as much of it as he can. The good news is that since the Brobeck Estate is a Heller creditor, I can’t imagine the Heller landlords could possibly get Ron Greenspan installed as trustee of the Heller bankruptcy. That is very good news for you folks. The weird news is that, since I’m a creditor in the Brobeck bankruptcy, I’ll get a percentage (albeit a teeny, tiny one) of whatever Greenspan recovers for Brobeck in the Heller bankruptcy. So it seems, indirectly I’m now a creditor (third-party beneficiary of a creditor?) in the Heller bankruptcy. Weird.)

    To make sure there’s maximum money put into the pot from which you will be paid, you folks may well need and want a trustee to be appointed, but, as AFA so rightly points out, you (and, I hope, your bankruptcy lawyer) will need to fight against getting stuck with a trustee who’s just a puppet of the banks and/or landlords.

  17. 17 Treading Water 1 January 2009 at 9:28 pm

    Good advice, Jayne and AFA, but my question is: Who is going to pay for a BK lawyer for us employees? A lot of us aren’t working, collecting unemployment, or working temporarily. Seriously, where does this money come from?!

  18. 18 Another Former Associate 2 January 2009 at 3:19 am

    Who pays for a bk lawyer for us employees:
    There are two possibilities.

    1) We pay an attorney by taking up a collection among ourselves. Not attractive, but, really, probably a necessity per Jayne’s comments on not getting bankruptcy representation soon enough in the Brobeck case.

    2) If we can get one or more employees on the creditors committee appointed by the bankruptcy court, that committee’s bankruptcy attorney gets paid out of the bankruptcy case. That is, gets paid out of Heller funds, not our pockets on a pay-as-you-go basis (but an expense that reduces the amount of money available to pay claims).

    Point 2) relates to my earlier comment about the size of landlord, bank, and employee claims. We need as good a calculation as we can get of the aggregate amount that employees are owed, both priority and general unsecured portions. We need as many dollars to put forward as our ‘stake’ in the case as possible to have a chance of a meaningful voice on the creditors committee, and in the choice of its bankruptcy attorney.

  19. 19 Another Former Associate 2 January 2009 at 3:24 am

    It is also theoretically possible to get a committee appointed just to represent ex-employees, with that committee’s attorney paid out of the bankruptcy case rather than our pockets. I don’t think Montali is likely to be willing to appoint that additional committee, though. Multiple committees are strongly disfavored; such appointments multiply the administrative expenses borne by the bankruptcy case.

    It might still be worthwhile to bring a motion seeking the appointment of such an official committee for employees. The object would be to sensitize Montali, and get him oriented toward giving us a clear position on the one overall creditors committee.

  20. 20 Jayne Loughry 2 January 2009 at 12:02 pm

    We did it by finding bk lawyers who represented us through a contingency fee agreement that was extraordinarily favorable to the employees. Trying for a court authorized employees committee would’ve been great had I known about the possibility in time. By the time I got smartened up, it was too late to get it done.

    We had a bit fewer than 1,100 former employees, which I presume is close to your total. Given that Brobeck closed more than five and a half years before Heller, I’d expect the aggregate value of your losses/claims to be higher than ours were. Nevertheless, knowing what our dollars were might help you all better grasp the power you can have acting as a group, rather than as individuals.

    Unlike you, we did get paid our accrued vacation on the last day of Brobeck’s existence. Total amount was $7 million.

    Early on, our WARN severance damages were estimated at $20 million. A few years into the process, when we had a little more info and documents, we used a model based on average salaries to estimate the total amount owed to employees (staff and non-partner attorneys); it came out at about $40 million. This total included WARN, waiting time penalties, unpaid bonuses, deferred compensation, unreimbursed expenses, employee stock funds, and whatever else we could think of. Remember though, it did not include unpaid accrued vacation because we had been paid that.

    I think you folks, as a group, will similarly have a very large number and, thus, a very large stake in the bankruptcy proceedings. This means you can, again by working as a group, have a prominent role in the bankruptcy.

  21. 21 Another Former Associate 4 January 2009 at 12:11 am

    Very useful info, Jayne. Thanks for staying with this discussion as our drama unfolds, with new twists and turns.

    I’ve probably had a low group claim figure in my head by not properly thinking about all 14 of the firm’s offices.


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