Robert B. Van Arsdale, Esq., AUST, VSB 17483

Shannon Pecoraro, Esq., VSB 46864

Office of the U.S. Trustee

701 East Broad Street

Suite 4304

Richmond, VA 23219

(804) 771-2310

UNITED STATES BANKRUPTCY COURT

EASTERN DISTRICT OF VIRGINIA

RICHMOND DIVISION

In re:

LeClairRyan, PLLC,

 Debtor.

Case No. 19-34574-KRH 

Chapter 11

 

NOTICE OF MOTION TO CONVERT CASE TO CHAPTER 7

AND NOTICE OF HEARING

PLEASE TAKE NOTICE that the United States Trustee has filed with the Court a Motion to Convert this Case to Chapter 7 (the “Motion”). 

Your rights may be affected. You should read these papers carefully and discuss them with your attorney, if you have on in this bankruptcy 

case. (If you do not have an attorney, you may wish to consult one). Under Local Bankruptcy Rule 9013-1, unless a written response to the 

Motion is filed with the Clerk of Court and served on the moving party within seven (7) days prior to the date set for a hearing on this matter, the 

Court may deem any opposition waived, treat the Motion as conceded, and issue an order granting the relief requested. 

The hearing will be held before The Honorable Judge Kevin R. Huennekens, Courtroom 5000, United States Courthouse, 701 East Broad 

Street, Richmond, Virginia 23219 on September 26, 2019 at 2:00 p.m. at Courtroom 5000. 

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If you do not want the Court to grant the relief sought in the Motion, or if you want the Court to consider your views on the Motion, then 

within seven (7) days prior to the date set for a hearing on this matter, you or your attorney must:

( X ) File with the Court, at the address shown below, a written response with supporting memorandum pursuant to Local Bankruptcy 

Rule 9013-1. You must mail or otherwise file it early enough so that the Court will receive it on or before the due date identified

above.

Clerk of Court

United States Bankruptcy Court

701 East Broad Street – Suite 4000

Richmond, VA 23219

You must also mail a copy to:

Robert B. Van Arsdale, Esquire

Assistant U.S. Trustee

Office of the U.S. Trustee

701 East Broad Street - Suite 4304 

Richmond, VA 23219

If you, or your attorney, do not take these steps, the Court may deem any opposition waived, treat the Motion as conceded, and issue an 

order granting the requested relief without further notice or hearing. 

Respectfully submitted,

John P. Fitzgerald, III

Acting United States Trustee

Region Four

by:/s/Robert B. Van Arsdale

 Robert B. Van Arsdale

 Assistant U.S. Trustee

by: /s/ Elisabetta Gasparini

 Elisabetta Gasparini

 Trial Attorney

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UNITED STATES BANKRUPTCY COURT

FOR THE EASTERN DISTRICT OF VIRGINIA

RICHMOND DIVISION

In re:

LE CLAIRRYAN PLLC,

 

 Debtor.

Case No. 19-34574-KRH

Chapter 11

 

 

UNITED STATES TRUSTEE MOTION TO CONVERT CASE TO CHAPTER 7 

John P. Fitzgerald, III, Acting United States Trustee for Region Four (the “UST”), moves the Court for an order converting the abovereferenced case. The UST files this motion under 11 U.S.C. §§ 1112(b)(1) and (4)(A) and the authority granted to him by 28 U.S.C. § 586 and 11 

U.S.C. § 307. In support of this motion, the UST respectfully states:

FACTUAL BACKGROUND

1. On September 3, 2019 (the “Petition Date”), LeClairRyan PLLC (the “Debtor”) filed a voluntary petition under Chapter 11 of the 

Bankruptcy Code. 

2. The Debtor remains in possession of its assets and continues to manage its business as debtor-in-possession pursuant to Bankruptcy 

Code Section 1107(a) and 1108. To date, no trustee or examiner has been appointed in this Chapter 11 case.

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3. To date, the Debtors have yet to file schedules, and the deadline to do so was extended until October 17, 2019. ECF Doc. No. 35.

4. The Debtor was founded in 1988 and became a national law firm, which, until recently, operated through approximately 25 offices 

around the country. See Declaration of Lori D. Thompson, Esq. In Support of Chapter 11 Petition and First Day Motion (the “First Day 

Declaration”), ECF Doc. No. 35 at ¶ 8. 

The Dissolution Committee and Wind-Down of Debtor

5. On July 29, 2019, the Debtor’s members voted to dissolve the firm and, since then, the Debtor has been managed by the Dissolution 

Committee. Id. at ¶ 10. The Debtors’ members originally appointed Christopher J. Lange, Lori Thompson, Richard W. Bowerman, Esq. and C. 

Erik Gustafson to the Dissolution Committee. Id. at ¶ 24. Mr. Gustafson resigned after approving the commencement of the Chapter 11 case and

negotiating the Services Agreement between the Debtor and Ms. Thompson and Mr. Lange. Id. Mr. Bowerman has also since resigned from the 

Dissolution Committee. Id. 

6. In April of 2018, the Debtor entered into a joint venture with UnitedLex Corporation (“UnitedLex”) to form ULXP Partners, LLC 

(“ULXP”) in order to engage in the business of providing an alternative staffing model for law firms. Id. at ¶ 13. The Debtor remains a member 

of ULXP. Pursuant to the joint venture, ULXP hired more than 300 administrative and legal support professionals from the Debtor. Id. The winddown team is comprised of certain employees of ULXP. Id.

Debtor’s Assets and Liabilities

7. While no schedules are yet on file, the First Day Declaration discloses that the Debotor’s assets consist principally of cash, accounts 

receivable, and work-in-progress. Id. at ¶ 14. The Debtors also may have potential claims and causes of action against various parties, including

Chapter 5 causes of action. Id. 

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8. As of the Petition Date, the Debtors’ unsecured liabilities consist primarily of obligations to landlords, vendors, employees and other 

creditors. Id. at ¶ 15. 

9. As for its secured creditors, the Debtor is indebted to ABL Alliance LLP and to ULXP. In December of 2017, the Debtor entered 

into Loan and Security Agreement with ABL Alliance LLP in the amount of $15,000,000. Id. at ¶ 17. The amount outstanding on the ABL Loan 

as of July 19. 2019 was approximately $9.8 million and as of the Petition Date, it had decreased to approximately $6.8 million. 

10. In December of 2018, the Debtor entered into an Outstanding Deferred Loan Promissory Note by which the Debtor agreed to pay 

ULXP the principal amount of $8,000,000 for deferred fees owed by the Debtor to ULXP under the Master Services Agreement. Id. at ¶ 20. 

First Day Motions and Orders

11. As part of the First Day Motions, the Debtor sought approval of, among other things, settlement procedures concerning the potential 

discount and settlement of accounts receivable. See ECF Doc. No. 8. An interim order approving the sealed settlement procedures was entered on 

September 4, 2019. See ECF Doc. No. 42. 

12. The Debtor also sought authority to assume executory contracts with Ms. Thompson, Mr. Lange, and On-Site – a collection agent. 

See ECF Doc. No. 12. An interim order approving the assumption of those contracts was entered on September 6, 2019. See ECF Doc. No. 52. 

13. The Debtor further sought an order authorizing the use of the cash collateral and granting adequate protection. See ECF Doc. No. 

13. An Interim Order Authorizing the Debtor’s use of cash collateral was entered on September 4, 2019 (the “Interim Cash Collateral Order”). See 

ECF Doc. No. 41.

14. The Interim Cash Collateral Order authorized the use of cash collateral pursuant to the Budget attached as Exhibit B. 

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15. Upon information and belief, the collections during the first week were significantly below projections while the expenses continue 

to quickly diminish the available cash.

ARGUMENT

Section 1112(b) of the Bankruptcy Code governs the conversion or dismissal of a Chapter 11 case and grants bankruptcy courts the power 

to promptly administer Chapter 11 cases on their docket. It provides that, on request of a party in interest, and after notice and a hearing,

[t]he Court shall convert a case under this chapter to a case under chapter 7 or dismiss a case under this chapter, whichever 

is in the best interest of creditors and the estate, for cause unless the court determines that the appointment under section

1104(a) of a trustee or an examiner is in the best interest of creditors and the estate.

11 U.S.C. §1112(b)(1). “Cause” is defined in 11 U.S.C. § 1112(b)(4) to include:

(A) Substantial or continuing loss to or diminution of the estate and the absence of a reasonable likelihood of rehabilitation;

11 U.S.C. § 1112(b)(1). Courts are given broad discretion in determining what may constitute sufficient cause for the dismissal or conversion of a 

case. Toibb v. Radloff, 501 U.S. 157, 165 (1991).

Section 1112(b)(4)(A) has two components, both of which must be satisfied for “cause” to exist for dismissal or conversion to Chapter 7. 

The first is that there must be a substantial or continuing loss or diminution to the estate. In other words, there must be continuing losses or a 

negative cash flow after the filing of the bankruptcy petition. In re Landmark Atlantic Hess Farm, LLC, 448 B.R. 707, 713-14 (Bakr. D. Md. 

2011); In re Park, 436 B.R. 811, 816 (Bankr. W.D. Va. 2010). The second prong requires the movant to show that the debtor has no reasonable 

likelihood of rehabilitation. The determination under the second hurdle is “not whether a debtor can confirm a plan, but whether the debtor has 

sufficient business prospects”. In re Landmark Atlantic Hess Farm, LLC, 448 B.R. 707, 715 (Bakr. D. Md. 2011) (holding that where chapter 11 

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debtor which had no business other than holding purchase money note and deed of trust, whose assets were fully encumbered by loan that it had 

obtained to acquire these assets, and whose only feasible Chapter 11 plan was one of liquidation did not have any “reasonable likelihood of 

rehabilitation”). As a court has noted:

Rehabilitation is a more demanding standard than reorganization, and is defined by whether the debtor will be able to reestablish his 

business on a firm, sound basis . . . Where a debtor proposes a plan of pure liquidation, there is no likelihood of rehabilitation. Thus, 

rehabilitation depends upon establishing a cash flow from which current obligations can be satisfied.

In re Hunter, 597 B.R. 287, 293 (Bankr. M.D. N.C. 2019).

There is no hiding that this case consists of a wind-down. And there is no hiding that it is the Debtor and the lender’s intent that the case 

will eventually convert to Chapter 7. The only question is when that will be. The Debtor has ceased operation and the “Dissolution Committee” –

now consisting of only two ex-members of the firm, are orchestrating the wind-down with the help of about eight other employees. Against this 

backdrop, the Debtor is attempting to collect the remaining accounts receivables. 

According to the approved interim Budget, the Debtors were to collect a total of $4,425,000 in cash receipts during the first four weeks of 

the case, with $1,306,000.00 collected the week ending September 6, 2019. Pursuant to the Interim Budget, the payroll, taxes and benefits 

amounted to $421,000 as of the end of the fourth week. Moreover, the projections reflected that as of the fourth week of the case, the available cash 

would amount to $452,000 – a substantial decrease from the initial cash available during the first week of the case of $932,000. See Interim Cash 

Collateral Order at Exhibit B. Upon information received, the report for the first week shows that the projected collections are significantly lower 

than what had been projected by over 40%. While the fee collections have not been coming in at the rate originally expected, the operating 

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expenses continue at the tune of approximately $228,000.00 a week (or $910,000 during the first four weeks), with the largest expense being paid 

to ULXP.

Not only is the cash flow diminishing, but the expenses are only going to increase if the case continues in Chapter 11. The UST may have to 

appoint a creditors’ committee in the near future and the Debtor is seeking to assume executory contracts at the hearing on September 26, 2019. 

Clearly, the Chapter 5 actions are the crux of this case, and, as previously stated, all parties are in agreement that the case should be converted to 

Chapter 7 in the near future. The case should be converted that a Chapter 7 Trustee can be put in place in an attempt to stop the hemorrhaging, 

make decisions about what contracts to assume or reject, and start paving the road to recoveries from avoidance actions. Delaying conversion 

would only saddle the estate with additional administrative expenses and render the transition to a Chapter 7 harder as the few employees left will 

continue to leave leaving the trustee with little to no historical knowledge or support.

WHEREFORE, the United States Trustee moves this Court to convert to chapter 7 granting such other and further relief as may be deemed 

just and proper. It is also respectfully requested that, insofar as this motion presents no novel legal concepts, and the basis of the motion is found in 

the pleading itself, the Court waive the requirement for a separate memorandum of law in support of this motion as provided for in Local Rule 

9013-1(G).

Respectfully submitted,

JOHN P. FITZGERALD, III

ACTING UNITED STATES TRUSTEE 

REGION FOUR

By: /s/Robert B. Van Arsdale 

Robert B. Van Arsdale

Assistant United States Trustee

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CERTIFICATE OF SERVICE

I hereby certify that on September 12, 2019, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system 

which will send notification of such filing to all ECF registrants in this case. I further certify that the foregoing was served on September 12, 

2019, on the following parties email if an email address is indicated, or by mailing a copy first class postage prepaid to the addresses below

where no email address is shown:

/s/Robert B. Van Arsdale

 Robert B. Van Arsdale

 Assistant U.S.Trustee

Name1 Name2 Address Email address

60 State TRS (DE) LLC 320 Park Avenue, Floor 17 

New York, NY 10022 Ahillman@oxfordproperties.com

ABL Alliance, LLLP Attn: Douglas M. Foley, Esq. McGuireWoods 

Gateway Plaza

800 East Canal Street 

Richmond, Virginia 23219 dfoley@mcguirewoods.com

Bank of America Attn: Brian Warren 1111 E. Main Street 

Richmond, VA 23219 brian.m.warren@baml.com

BCal, LLC c/o Beacon Capital Partners 200 State Street, 5th Floor 

Boston, MA 02109 Accountantmontgomery@avisonyoung.com

BPP Lower Office REIT Inc. BPP Connecticut Ave LLC - BLDG 

ID: 26870

P.O. Box 209259 

Austin, TX 78720-9259 christopher.lyons@transwestern.com

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Carlyle Overlook JV, LLC 711 High Street

Des Moines, IA 50392 Erin.Albert@cushwake.com

Christopher J. Lange, Esq. 5615 Riverside Drive

Richmond, Virginia 23225 Christopher.Lange@leclairryan.com

ConvergeOne, Inc. 3344 Highway 149

Eagan, MN 55121 Esalley@convergeone.com

EYP Realty LLC P.O. Box 844801

Los Angeles, CA 90084-4801

James.Ishibashi@brookfield.com

GLC Business Services, Inc. 28 Prince Street

Rochester, NY 14607 mhayes@glcbs.com

HSBC Attn: Stacy J. Schwartz 531 Broad Hollow Road - Suite 130 

Melville, NY 11747 stacy.j.schwartz@us.hsbc.com

Integreon Managed Solutions 

(ND) Inc.

3247 47th Street South 

Fargo, ND 58104 murray.joslin@integreon.com

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Name1 Name2 Address Email address

Iron Mountain Record 

Management

448 Broadway

Ulster Park, NY 12487 Noe.lebeau@ironmountain.com

Latham & Watkins LLP 885 Third Avenue

New York, NY 10022-4834 Eric.Pike@lw.com

Matrix One Riverfront Plaza LLC CN 4000 Forsgate Drive 

Cranbury, NJ 08512 farias@matrixcompanies.com

NetRight Intermediate LLC iManage LLC 540 W. Madison Street, Suite 2400

Chicago, IL 60661 Jessica.Martens@imanage.com

New Boston Long Wharf, LLC 75 State Street, Suite 1410

Boston, MA 02109 Brenda.Keegan@cbre-ne.com

On-Site Associates, LLC 505 Montgomery St., Floor 11 

San Francisco, California 94111 gabodeely@onsiteassociates.com

Page White Farrer Limited Bedford House, 21 John Street 

Holborn, London WC1N 2BF 

United Kingdom Robert.Hawthorn@pagewhite.com

Parmenter Realty Fund III, Inc. 701 Brickell Avenue, Suite 2020

Miami, FL 33131 nreser@parmco.com

Poe & Cronk Real Estate Group, 

Inc.

10 S. Jefferson Street, Suite 1200

Roanoke, VA 24011 slawrence@poecronk.com

Post Oak Realty Investment 

Partners, LP

13355 Noel Road, 22nd Floor 

Dallas, TX 75240 Kim.Bishop@brookfieldproperties.com

Spilman, Thomas & Battle, PLLC Attn: Lori D. Thompson, Esq. 310 First Street, SW, Suite 1100

Roanoke, Virginia 24011 LThompson@spilmanlaw.com

Super-Server, LLC 707 East Main Street, Suite 1425

Richmond, VA 23219 cjohnson@proxios.com

Thomson Reuters Master Data Center P.O. Box 673451 

Detroit, MI 48267-3451

cristina.romualdez@thomsonreuter.com; 

jose.carvajal@thomsonreuter.com

Thomson West-6292 P.O. Box 629

Carol Stream, IL 60197-6292 jose.carvajal@thomsonreuter.com

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Name1 Name2 Address

Amegy Bank of Texas c/o Corporation Service Company 211 E. 7th Street, Suite 620

Austin, Texas 78701

Banco Santander Santander Holdings USA, Inc. Attn: 

Corporation Service Company

100 Shockoe Slip, Fl 2

Richmond, Virginia 23219-4100

Boston Private Bank Attn: Officer, Director, or Manager Ten Post Office Square Boston, Massachusetts 02109

Independent Bank Attn: Gary R. English 8751 Sudley Road

Manassas, Virginia 20110

Plains State Bank 19404 Kenswick Drive

Humble, Texas 77338-8147

ULX Partners LLC Attn: Jennifer Mistal 4405 Cox Road, Suite 200 Glen Allen, Virginia 23060

ULX Partners LLC c/o Philip W. Goodin, Esq. UnitedLex Corporation

6130 Sprint Parkway, Suite 300 Overland Park, Kansas 66211

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