Pillsbury Agrees on $10M to Settle Trustee’s Malpractice Claim
Pillsbury Winthrop Shaw Pittman has agreed on $10 million to settle a bankruptcy trustee’s claim that the law firm failed to disclose a conflict of interest in its representation of SonicBlue.
The deal calls for the law firm to pay $7.65 million to SonicBlue creditors and give up $2.4 million in outstanding fees, according to the Recorder and the Daily Journal (sub. req.). A bankruptcy judge will consider the settlement at a hearing on March 31.
Pillsbury was kicked off the bankruptcy case two years ago for failing to disclose that some of its lawyers had assured three hedge funds before the filing that they would be paid ahead of other creditors. The bankruptcy trustee contended Pillsbury could have been responsible for any shortfall in payment to the hedge funds, so it would have been motivated as SonicBlue counsel to make sure they were paid in full.
Los Angeles bankruptcy lawyer J. Scott Bovitz told the Daily Journal that the settlement represents “a very substantial hit in a very public bankruptcy case. This is as big a recovery as I’ve heard of in 25 years.”
The settlement comes soon after the law firm’s announcement that it is laying off 55 lawyers and 100 other staffers.
