Petersburg hotel operator files $28M claim in LeClairRyan bankruptcy case

Petersburg Regency LLC seeks relief in insurance dispute

Published December 12, 2019 by Sydney Lake

Virginia hotel operator Petersburg Regency LLC filed a $28 million claim in the LeClairRyan bankruptcy case Thursday in Richmond, according to the federal court filing.

Petersburg Regency is seeking relief from an automatic stay in LeClairRyan’s handling of an insurance dispute from 2003’s Hurricane Isabel. An automatic stay ensures equality of distribution by preventing one creditor from seizing assets before others have the opportunity, according to the American Bankruptcy Institute Journal. In order to get relief from the automatic stay, the creditor — Petersburg Regency in this case — must file a motion.

Because the dispute occurred in New Jersey, Petersburg Regency argued for its relief, stating it would be a waste of the Richmond court’s time to litigate the claims and would “impose little or no burden on the Debtor or the Estate than would be imposed in liquidating the claims before this Court,” according to the federal court filing.

The New Jersey suit was filed by Keith McKenna of The McKenna Law Firm LLC in the Superior Court of Essex County, New Jersey, on behalf of the creditor, Robert T. Harmon, managing member of Petersburg Regency.

Harmon and Petersburg Regency owned the Ramada Plaza hotel in Petersburg at the time of Hurricane Isabel, having bought it for $1.8 million in 1998. Its $7 million in renovations, proximity to Fort Lee Military Base and capitalization rate made the hotel worth an estimated $14 million immediately prior to the hurricane damages in 2003, according to the claim.

The hotel used LeClairRyan to assist with claims against insurer Selective Insurance Co. over the storm damage, according to the May lawsuit.

The May lawsuit outlines three claims against LeClairRyan, including breach of contract, duty of good faith and fair dealing and professional malpractice. LeClairRyan “negligently advised” both Harman and Petersburg Regency, McKenna wrote in the claim.

The Richmond-based LeClairRyan, once the fifth-largest law firm in the state, shut down in October under Chapter 7 dissolution after filing for bankruptcy protection in September. At its peak, the firm employed more than 350 attorneys in 21 offices nationwide, reaching from New York to Los Angeles.