Facts

Plaintiff Heller Ehrman LLP ("Debtor" or "Heller") filed a voluntary Chapter 11 proceeding on December 28, 2008. On October 31, 2011, the Debtor, through its Plan Administrator, Michael Burkart, filed a complaint against Greenberg Traurig LLP ("Greenberg"), as one of nearly one hundred adversary proceedings filed by the Administrator. Heller's complaint sought repayment of alleged preferences under Bankruptcy Code 547(b) and 550, disgorgement of legal fees under the Bankruptcy Code and Bankruptcy Rule 2014 and recovery for alleged professional negligence in connection with Greenberg's pre-petition representation of Heller.

PLAINTIFF'S CONTENTIONS:
Heller contended that Greenberg had acted negligently prior to Heller's bankruptcy filing by allegedly failing to conduct a timely lien search to determine the status of certain security interests (and alert Heller that certain liens were unperfected), to advise Heller that the waiver of claims for unfinished business in Heller's Dissolution Plan (the "Jewel Waiver") allegedly was unenforceable and avoidable, and to disclose alleged conflicts of interest. Heller also contended that Greenberg had received preference payments in the 90 days prior to Heller's bankruptcy filing and that Greenberg was also required to disgorge some of the legal fees it had received pursuant to its employment applications to the Bankruptcy Court.

DEFENDANTS' CONTENTIONS:
Greenberg contended that the payments to it were not preferences since they were received in the "ordinary course of business" and were for "new value." Greenberg also contended that it had no obligation to disgorge legal fees since its employment applications had been proper and since they and the payments made to Greenberg had been approved by the Bankruptcy Court. Greenberg denied any negligence or liability for alleged negligence since the scope of its engagement has been expressly limited and did not include conducting lien searches. Further, Greenberg noted, it had followed the express instructions of its client Heller, which was fully knowledgeable and sophisticated as to all aspects of creditor's rights and the pertinent facts. Greenberg further noted that, when aware of the status of its secured creditors' liens, Heller itself determined and directed how it wished to proceed. Greenberg contended that the Jewel Waiver was enforceable and that, in any event, Heller had made a fully informed decision as to its validity based on Heller's own analysis before including the Jewel Waiver in Heller's Dissolution Plan. Greenberg also noted that it had disclosed the alleged potential conflicts of interest about which the plaintiff complained, and that those potential conflicts had been knowingly waived by Heller.

Damages

Heller sought alleged damages in excess of $80 million.

Result

Following Mediation before former Bankruptcy Judge Ralph R. Mabey, the parties reached a settlement agreement. Under it, without admitting any wrongdoing or liability, Greenberg agreed to repay or pay $4,900,000 based on its desire to avoid the financial and other burdens and uncertainty of litigation. The Court approved the settlement on May 31, 2013.