November 2, 2011 9:33 PM
Problems Finally Force Florida's Ruden McClosky to File for Bankruptcy
Posted by Brian Baxter
After more than two years of partner defections, layoffs, office closings, and mounting financial difficulties, Ruden McClosky filed for Chapter 11 protection Tuesday in its hometown of Fort Lauderdale.
The firm, which has eight offices in Florida, plans to sell a substantial portion of its assets to Greenspoon Marder, another Fort Lauderdale–based firm, according to sibling publication the Daily Business Review.
Founded in 1959, Ruden McClosky had vociferously denied that it would consider dissolving, even as a flood of lateral departures caused the firm to suffer financially. Ruden McClosky responded to the loss of lawyers by shaking up its leadership and pursuing potential mergers with Cleveland-based Benesch, Friedlander, Coplan & Aronoff over the summer and Greenspoon Marder last month.
Ruden McClosky, which once boasted more than 200 lawyers, was hit hard by the collapse of the Florida real estate market and saw its head count dwindle to its current total of 66 lawyers. In its bankruptcy filing, the firm lists both debts and assets of between $10 million and $50 million.
The DBR reports that the firm's remaining partners voted Monday night to approve the bankruptcy filing and to proceed with the sale to Greenspoon Marder, which is prepared to bid $7.6 million to acquire Ruden McClosky's accounts receivable and work product out of Chapter 11. If approved by bankruptcy court judge Raymond Bay, the sale of Ruden McClosky's assets to Greenspoon Marder is expected to close by December 1.
The deal with Greenspoon Marder was contingent on 58 former Ruden McClosky equity partners accepting payouts of 30 percent on $3.5 million in outstanding equity payments, according to DBR. Ruden McClosky had stopped making payments to former partners in January, and many of those same partners faced a Monday deadline to reach a deal on the remaining $3.5 million obligation so that the agreement with Greenspoon Marder could proceed. The sale to Greenspoon Marder was structured as a sale, rather than a merger, so that the successor firm wouldn't acquire any of Ruden McClosky's liabilities, according to a lawyer familiar with the Chapter 11 case.
But the South Florida Business Journal reported Wednesday that the plan to pay dozens of former Ruden McClosky partners had collapsed prior to the firm filing its Chapter 11 petition, and that they would have to file claims with the bankruptcy court in order to recoup what they are owed. Lawrence Gordich, a former Ruden McClosky partner who left the firm last year to open his own shop in Miami, is representing a group of ex-partners in the case. Gordich did not respond to a request for comment.
Bankruptcy partners R. Scott Shuker and Mariane Dorris of Orlando-based Latham, Shuker, Eden & Beaudine are advising Greenspoon Marder on its bid to acquire the Ruden McClosky assets, according to court filings. The DBR reports that Greenspoon Marder will grow to 140 lawyers and 400 staff members after taking on what remains of Ruden McClosky, with the exception of the bankrupt firm's ten-lawyer Tampa office, which will join an as-yet-unidentified firm. The Ruden McClosky name will disappear following the bankruptcy.
Paul Singerman, a name partner at Miami-based Berger Singerman, is advising Ruden McClosky in the bankruptcy proceedings, along with partner Leslie Cloyd. Court filings made by Berger Singerman show that it received a $75,000 retainer from Ruden McClosky on October 19 and another $150,000 retainer from the firm on October 31. Singerman is billing at $595 an hour, while Cloyd is billing at $555 per hour. Other Berger Singerman lawyers are billing the debtor between $225 and $625 an hour, with associates and of counsel billing at rates ranging from $225 to $455.
Berger Singerman states in court filings that it would be "an unmanageable and burdensome task" to contact all current and former Ruden McClosky clients to completely eliminate the possibility that the two firms shared clients or adversaries. Berger Singerman lists several engagements in which it has worked with Ruden McClosky lawyers—such as the bankruptcy case of storage company Trafford Distributing Center—and states that its attorneys found no major conflicts between the two firms' clients.
Ruden McClosky's largest secured creditor is Wells Fargo, to whom the firm owes $4.6 million. Court records show that Jonathan Helfat, a bankruptcy partner with Otterbourg, Steindler, Houston & Rosen in New York and Fowler White Boggs partners Donald Kirk and Scott Underwood in Tampa are representing Wells Fargo in the case.
Ruden McClosky's second-largest unsecured creditor is Judy McClosky, the widow of firm founder Donald McClosky, a longtime South Florida lawyer and lobbyist who passed away in September at age 84. Judy McClosky is owed $388,661 as part of a deferred compensation agreement, according to bankruptcy court records. Court documents show she is represented by her son, Gregg McClosky, a name parter at McClosky, D'Anna & Dieterle.
According to a list of Ruden McClosky's 20 largest unsecured creditors, the firm owes almost $820,000 to six law firms: Criden & Love ($340,000); Greenspoon Marder ($217,082); DeMahy Labrador Drake Victor Payne & Cabeza ($185,643); Jones, Foster, Johnson & Stubbs ($42,929); Downey & Downey ($17,703); and Hill Ward Henderson ($16,196).
Ruden McClosky is the second notable Florida firm to close its doors this year. Yoss LLP, a successor firm to Adorno & Yoss, once the nation's largest minority-owned law firm, dissolved in March after its former founding partner's law license was revoked. That began a downward spiral of layoffs, partner departures, and office closures.
In May, one of the nation's largest asbestos litigation firms, Kelley & Ferraro, emerged from bankruptcy in Miami after settling a dispute with an ex-partner's widow. White & Case represented Kelley & Ferraro during that firm's Chapter 11 proceedings.Make a comment