Archive for September, 2010

Future Settlement Money

With many ex-Hellerites receiving settlement payments this week, several questions arise.  Below are questions being asked by former Heller Ehrman employees along with answers formulated from court filings and the settlement agreement.

Will there be settlement checks in the future, besides what we just received?

The settlement checks recently received by members of the employee class as a result of our lawsuit against the shareholders constitute payment of each respective employee’s “priority wages.” Given that the Heller Ehrman estate is in bankruptcy, any payouts to the various creditors of Heller Ehrman, which number in the hundreds, must follow bankruptcy court rules. In general, a creditor in a bankruptcy matter has a right to secured, priority, non-priority (aka, unsecured) or subordinated payments, depending on the status of the creditor. Employee wages can be treated as a “priority” claim against the estate, but the amounts so treated as priority are capped in various ways. See, for instance, the three sample explanations located under Exhibit “D” in the fat “Disclosure Statement in Support of Joint Plan of Liquidation of Heller Ehrman LLP” that all members of the employee class should have received in May 2010.

In this regard, “wages” include such items as accrued but unused vacation time and WARN Act wages. See, again, the Disclosure Statement for details.

(Note that Heller Ehrman, like most private companies, did not have a policy to payout any accrued but unused sick time upon termination of employment. As a result, the settlement does not include any payment for accrued but unused sick time.)

If the settlement award to any given employee included payouts in addition to his or her priority award, subsequent “non-priority” payouts are expected to be made in various installments over a period of several years. With regard to these non-priority payouts, we will be in the same bucket as hundreds of other non-employee creditors, such as landlords, Williams Lea, etc. How much of our respective non-priority awards will eventually be received by us will be determined by how much money the unsecured creditors’ committee is successful at obtaining from various entities who owe money to the Heller Ehrman estate.

Because of the multi-year process of liquidating the Heller Ehrman estate, make sure you keep your address current with the Bankruptcy Court.

Are there ongoing efforts by Blum Collins to collect the interest, penalties and any other Warn Act fees due to us?

Blum Collins’s role in this matter concluded with the adoption of the settlement. And note that bankruptcy court rules do not permit the payment of interest.

With regard to the payment of waiting-time penalties, the settlement does allocate $7 million in waiting-time penalty awards to the employee class, but this is treated as a subordinated payout. As a result, it is unlikely that the Heller Ehrman estate will have any funds left to pay any waiting-time penalties.

It just seems like such a lot of fees paid to counsel for such a small return for the class. Thoughts?

Note that the employee class likely will eventually receive several million dollars in wage payments from the Heller Ehrman estate once the multi-year installment payouts conclude.

The fees paid to Blum Collins were paid by the Heller Ehrman estate, not out of the employee-class awards directly. With regard to the appropriateness of the amount of those fees ($950,000, which covers both fees and Blum Collins’s expenses), that is a subjective matter, a full discussion of which is beyond the scope of this reply.

Likewise, with regard to the appropriateness of how the settlement was structured, that also is a subjective matter beyond the scope of this reply, other than to note that the employee class needed to vote on accepting the proposed settlement, and in so doing, did accept the proposed settlement by a margin well in excess of the required super-majority percentage.

©2010, copyright Thomas MacEntee


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