The battle between LeClairRyan and one of its former attorneys continues, even as the law firm has collapsed into bankruptcy.
Michele Craddock, who successfully fought a gender discrimination case against the once-sizable firm prior to its demise, is still fighting to collect on the $1.02 million in damages awarded to her in the matter last year by an arbitration panel.
Some legal back and forth over attorney’s fees caused a delay in the case and LCR fell into bankruptcy in early September before the law firm ever paid out.
Now Craddock, who worked for the firm from 2003 to 2015 and since has gone into private practice with her husband and former LCR attorney John Craddock, is fighting to have the last leg of her dispute play out outside the confines of bankruptcy.
She filed for a relief from stay, which would allow her to not have to wait in line with other creditors to get what she’s owed. The arbitration award, which includes around $342,000 for Craddock and $678,000 for her attorneys, is to be paid by insurance policies that LCR maintains it had in place to cover such a dispute and that money should not be part of the bankruptcy estate.
However, Craddock’s attorney say the firm to this point has refused to share the insurance documents that prove the policy was in place as asserted during the case.
If insurance doesn’t cover it, Craddock would likely become one of LCR’s largest unsecured creditors and would be forced to get in line with the rest of those owed money by the bankruptcy estate.
Further delaying the matter, LCR’s bankruptcy case is now headed for a conversion from Chapter 11 to Chapter 7, as approved by a federal judge in Richmond last week. The case will convert Oct. 4, allowing a trustee to take the reins of what’s left of the firm and dig for assets to be paid back to creditors.
The conversion, however, could ultimately clear a smoother path for Craddock’s efforts, as it will be up to the Chapter 7 trustee as to whether to push back against Craddock’s motion or let her pursue it outside of the liquidation process.
Since filing for Chapter 11 on Sept. 3, LCR’s bankruptcy has been handled by attorneys from Hunton Andrews Kurth, as well as a two-person dissolution committee made up of former LCR attorneys.
A Chapter 7 trustee will take over those responsibilities and begin to formally liquidate the scraps of the firm, which largely consist of accounts receivables.
The 30-year-old firm, which shut down in the face of mass defections, lists a range of 200-999 creditors owed between $10 million and $50 million combined. The firm claims assets of $10 million to $50 million. It has yet to file a full report of its debts and assets.
Its largest secured creditors are lender ABL Alliance, which loaned the firm $15 million in 2017, and ULX Partners, a joint venture LeClairRyan created last year with legal services technology firm UnitedLex.
Craddock was represented in the gender discrimination case by Harris Butler of Butler Royals. Her filings in the LCR bankruptcy matter are being handled by Mike Wilson of Michael Wilson PLC.