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LeClairRyan confirmed Wednesday that it is winding down, saying dissolution of the firm is ”in the best interests of our clients, colleagues and creditors.”

“The members of LeClairRyan PLLC have voted to commence an orderly wind-down of the firm’s business,” the firm said in a press release. “The firm, through its dissolution committee, is working in cooperation with its lender to ensure the continuity of client service until such time as the firm ceases to actively practice law and turns its attention to post-practice activities.”

The decision spells the end for an Am Law 200 firm that was in business for 31 years. LeClairRyan earlier this year had 21 offices and 225 attorneys. Its prominent clients over the years have included Ford Motor Co., United Airlines, FedEx and others.

The firm said Wednesday that it will continue to serve clients for a short period of time in current matters “to protect the interests” of clients, employees and creditors. “LeClairRyan is committed to ensuring a seamless transition for clients,” the firm said.

The announcement comes about a week after ALM reported that the Virginia-headquartered Am Law 200 firm was taking steps to dissolve, after months of partner defections. The firm’s gross revenue fell to $122 million in 2018, sliding from $142 million the year before.

The firm said it expects “remaining attorneys” will move to other law firms. An outside spokesperson for LeClairRyan declined to comment about the possibility of layoffs or a bankruptcy proceeding.

“On behalf of my colleagues, we are deeply saddened to make this announcement today,” now-former CEO C. Erik Gustafson said in a statement. “Through our transition, we will continue to focus first and foremost on the success of our clients, as we have always done. I am thankful to all of the clients who have chosen to work with our team over the last 30 years, and I am grateful for the exceptional lawyers and professionals who continue to work with dedication and determination towards winding down the firm in an orderly fashion.”

What’s Next

As LeClairRyan’s operating days dwindle, the firm is likely pursuing a variety of avenues to preserve as many assets as possible, including getting bills out and negotiating with landlords, according to restructuring experts.

LeClairRyan associates have been told their last day is Aug. 30 while headhunters have been brought in to negotiate deals with remaining groups, said Bill Brandt, a law firm restructuring expert, in an interview this week.

Brandt, who has advised on more than three dozen law firm failures, said he has spoken with the firm’s senior and junior staff but is not consulting for the firm.

The firm wants to do as much as it can and get as many people situated by the end of August in its dissolution, Brandt said, while there will be a number of people who stay on for months afterward to help “tidy up.”

“You have to get the bills out, get collections in, deal with the bank,” said Brandt, chairman of Development Specialists Inc. “There’s a drill you have to do.”

The must-dos in this period, Brandt said, including converting the work in progress into billing and then sending invoices; collecting all outstanding invoices; and giving client records back to clients or to lawyers taking the client matters with them to new firms. On the latter point, Brandt noted that it often costs firms “thousands of dollars” to store client records, and law firms can’t just dump them.

LeClairRyan’s joint venture with alternative legal services provider UnitedLex last year, which created a joint entity called ULX Partners, “adds another wrinkle” to the firm’s final steps, he said, but ultimately lawyers will join other firms and may take as many clients, associates and staff with them as they can.

UnitedLex, in a statement Thursday, said, “LeClairRyan is a client the company supported – and continues to support through this next transition.”

Feeling Squeezed

Every law firm dissolution will have different priorities, depending on its obligations for taxes, debts, pensions, vendors and landlords, noted Joff Mitchell, chief restructuring officer at Dewey & LeBoeuf during its Chapter 11 bankruptcy.

Brandt said some law firm dissolutions happen without going to bankruptcy court, but he suspects there’s a chance LeClairRyan may wind up there.

One of the last troubled Am Law 200 firms, Sedgwick, filed for bankruptcy in October 2018, after many partner defections.

But in the last five years, Dickstein Shapiro and Bingham McCutchen found other law firms that took on a bulk of their firms’ attorneys.

Groups of lawyers at LeClairRyan are in talks with various firms now, ALM has reported, but whether any of those firms can take on the majority of its remaining lawyers remains to be seen.

Mitchell, now managing director at AlixPartners, said hundreds of law firms have dissolved without bankruptcies. “Bankruptcy is a costly process,” he said. “If the firm is able to dissolve itself and meet the creditor obligations, then it ultimately doesn’t need a Chapter 11 bankruptcy process.”

Of course, even if a law firm plans to avoid bankruptcy, it can still be forced into court. Howrey, which dissolved in 2011, was hit with an involuntary Chapter 7 petition that year by several of the defunct firm’s creditors.

However it proceeds, LeClairRyan’s situation highlights the perilous positions of some firms in the Am Law 200, especially in the Second Hundred.

Brandt said firms in LeClairRyan’s size bracket—in roughly the 200-partner range—are in a tough position. “Those midrange Am Law firms” don’t have the geographic and practice base to pull in lot of clients, but they can’t manage themselves like a boutique, he said. “They are very vulnerable right now.”

“Law firms are the epitome of folks who assume they will never need help, so the amount of planning they do for a worst-case scenario is zilch,” Brandt said. “I find most lawyers are incredibly ill-prepared for the demise of any law firm.”

LeClairRyan took some unconventional steps in its final years, including its June 2018 partnership with UnitedLex. Under the deal, LeClairRyan outsourced about 300 of its employees to UnitedLex, forming a joint venture called ULX Partners to provide services to the firm, and eventually to other law firms.

But that didn’t appear to stave off financial problems. ALM reported that in recent months, amid the mounting defections, LeClairRyan considered a number of options, including the creation of a new law firm.

Some lawyers received offers to join the new firm, which would have been called Novellus, a source with knowledge of the plans confirmed.

Lizzy McLellan, Jack Newsham and Dan Packel contributed reporting.

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