UnitedLex still faces $128M lawsuit from LeClairRyan trustee

U.S. Bankruptcy Court judge rules lawsuit can move forward

Published July 21, 2021 by Katherine Schulte

UnitedLex’s motion to dismiss a $128 million lawsuit filed by LeClair Ryan PLLC trustee Lynn Tavenner was denied by a U.S. bankruptcy judge on Tuesday, according to The American Lawyer.

In 2018, Richmond-based LeClairRyan struck a deal to outsource about 300 of its support workers through a partnership with enterprise legal services provider UnitedLex, which created ULX Partners LLC. The workers were intended to perform back office support tasks for LeClairRyan and other law firms, with LeClairRyan holding a 1% stake in the venture. At the time of the firm’s failure, LeClairRyan still owed UnitedLex more than $8 million related to the venture.

In August 2019, LeClairRyan, once Virginia’s fifth-largest law firm, announced that it would be shutting down. It filed for bankruptcy in September 2019 and entered liquidation proceedings a month later. Tavenner is its Chapter 7 trustee.

Federal Judge Kevin R. Huennekens of the U.S. Bankruptcy Court for the Eastern District of Virginia ruled that an unauthorized practice of law allegation — specifically that a non-lawyer had been given control of LeClair Ryan — and a misappropriation of funds allegation  — that client funds were mismanaged by firm leaders and UnitedLex employees— supported statutory and common law civil conspiracy claims. Huennekens ruled that other allegations in the suit, including converting the business from a professional corporation to a professional limited liability company, were not illegal on their own.

Tavenner alleged that UnitedLex’s alleged unauthorized practice of law and misappropriation of funds cost LeClairRyan at least $41.7 million, for which she is seeking triple damages.

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