Bankruptcy trustee seeks clawback of bonuses paid before before law firm closed
A bankruptcy trustee claims a Missouri law firm paid bonuses to its shareholders and employees before a $10.5 million malpractice judgment that led the law firm’s closure in December 2014.
The law firm, Green Jacobson of Clayton, Missouri, paid a total of about $3.78 million in “bonus payroll” payments after receiving that amount in attorney fees in a class action filed on behalf of TWA pilots, according to the court filing by bankruptcy trustee David Sosne. The bonus payments were made in September 2014 though the malpractice case was set for trial in less than two months, said Sosne, who is seeking to claw back more than $2 million. The St. Louis Post-Dispatch and the St. Louis Business Journal have reports on Sosne’s legal filings.
Law firm president Martin Green was paid $1.3 million, which included more than $300,000 in a loan repayment, while vice-president Jonathan Andres was paid $750,000, according to this complaint (PDF) by Sosne. His complaints against Green, Andres and their new law firms contend the bonus payments were made to hinder, delay or defraud law firm creditors and the money should be returned.
The legal filings say two other law firm owners, Joe Jacobson and Allen Press, were also paid $750,000 each, but Sosne has not filed clawback complaints against them.
Sonse also alleges that Green Jacobson made a $134,000 payment to its landlord that allowed Andres and Green to obtain rent-free office space when they formed their own law firms.
Green Jacobson had a $5 million professional liability policy that was reduced for the cost of defending the malpractice case, the trustee said. At the time of the malpractice judgment, less than $2.6 million was left on the malpractice policy, Sonse says.
The plaintiff in the malpractice case, SKMDV Holdings Inc., filed an involuntary bankruptcy petition against the law firm in March.
