Caution: Lawsuits Ahead

With the arrival of Allan Diamond in Dewey & LeBoeuf LLP’s liquidation, former partners and their new law firms should hang onto their hats—and their wallets.

Diamond and his firm, which have filed more than a dozen unfinished business lawsuits in the bankruptcy of Howrey LLP, have now been retained to investigate similar claims in Dewey’s bankruptcy case, court papers show. In such lawsuits, a bankrupt law firm stakes a claim in the profits from work that its former partners took to their new law firms.

A noted litigator who isn’t afraid to take a hard line, Diamond and his team at Texas law firm Diamond McCarthy LLP are now reaching out to Dewey’s former partners in an effort to resolve issues outside the courtroom. Diamond, who couldn’t immediately be reached for comment Thursday, has done the same for Howrey’s former partners and their new firms, only filing lawsuits against those with whom settlement talks didn’t pan out.

Still, the Howrey case has earned Diamond somewhat of a bad cop reputation compared with the lawyer who led Dewey’s bankruptcy case, Al Togut. Togut quickly reached a settlement with many former Dewey partners over money they received while the firm was struggling. Instead of suing them to recover all the funds he could, Togut cut a deal to recover just a portion. The settlement, however, didn’t include unfinished business claims, nor did all partners sign on to the agreement, which is where Diamond and his law firm come in.

Togut alluded to Diamond’s reputation as a tough litigator at a bankruptcy conference outside of Washington, D.C., last month. All lawyers in a firm that goes bust want a clean break, he said, which should make it easy to cut a deal with partners like the Dewey settlement. But what if partners are reluctant to settle?

“Then you say, let me introduce you to Allan Diamond,” Togut said.

Write to Jacqueline Palank at [email protected]. Follow her on Twitter at @PalankJ.