The Dead Company Club

“Life’s a fragile thing Harry… One minute you’re chewin on a burger, the next minute you’re dead meat.”                                                                                                                –Jim Carey in “Dumb and Dumber”

Logic That Defies Logic

There’s death and then there’s senseless death. Last year Heller Ehrman was a top-50 law firm with revenues over $500 million. Now they’re dead. I’ve been trying to ignore this story but I can’t get over one fact: Heller filed bankruptcy to avoid paying what they owed their landlord, screwing their own employees as a result. And their logic? They did it because of the “fiduciary obligations to their creditors,” which include both the landlord and their employees.

Heller and Escher or Escher and Heller?

Escher drawings are endlessly complex and confusing, rarely what they seem to be at first glance. Heller’s end was pretty much the same. The landlord twitched, the court agreed, the banks balked, clients pounced and partners bolted, all scrambling for their own best interests. Heller hasn’t missed the chance to point fingers. “It’s unfortunate that the landlord filed…the partners hurt us when they defected…the bank didn’t have to blah blah blah.” Those actions were all contractually legal. And Heller’s response screwed their employees.

Would Management Please Show Some Backbone

Let’s be blunt. Firm management botched their jobs. Blaming anyone else is an academic argument for a lunch reunion of unemployed lawyers. The dominos fell like this: inept management, partner defections, decreased revenue, unpaid bills, malpractice awards, collection lawsuits, credit defaults, bankruptcy.

Big Legal Fees Result from Not Enough Money

Other firms’ litigation businesses have bloomed from the bankruptcy, filing suit against Heller on behalf of ex-employees. Clients are suing for breach of contract and ignoring their unpaid invoices from the firm. Heller has sued their banks. Former partners are being sued to return their capital they took when they left the firm. The Dissolution Committee has to collect enough money to pay the creditors. Meanwhile, the lawsuits pad other attorneys’ pockets.

What about the Employees?

Hey! Wait a minute – look over here! There are 1,000+ people who lost their jobs and are struggling to recover. Ex-employees haven’t gotten wages due or accrued vacation pay and don’t have COBRA benefits. Because the firm didn’t give WARN’s 60 day notice employees are also due penalty payments. But that’s no consolation when litigation and bankruptcy court stands between you and your money. How do you pay living expenses or hold off mortgage collectors today? Good luck getting a job: the legal industry isn’t hiring. There are hundreds still looking for jobs eight months after D-day. It sucks to be ex-Heller.

Checkmate

Eventually Heller will be just another failed law firm, a footnote in legal history. Other than those who went through the trauma, few will think about them again. Still it’s hard to ignore the irony: Heller got checkmated by their own legal contracts.

Heller employees have set up an informative support network at Heller Highwater.

How long did you wait to get paid what you were owed after your company filed bankruptcy?

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