[Editor’s Note: As you probably know, the Heller Ehrman LLP estate and the Unsecured Creditors’ Committee recently filed a Joint Plan of Liquidation https://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) https://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) https://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.
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.
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.
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 firstname.lastname@example.org or email@example.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!