This month is a rough one for former Thacher-ites. Many are still jobless. The last of their WARN-mandated paychecks have come. And first year associates are being reminded that they still owe the firm money, and the firm wants it now.
Legal Times reports that Thacher Proffitt & Wood is putting a call out for the $10,000 loans the firm made to first year associates to cover their moving and bar expenses in 2008. The members of Thacher’s dissolution committee place the blame at the bank’s doorstep:
Omer “Jack” Williams, a former Thacher managing partner who left retirement to chair Thacher’s seven-member dissolution committee, says associates knew the money was a loan when they took it. “In the exit interviews, we made it clear we anticipated they would pay their loans back,” he says.
Former managing partner Paul Tvetenstrand, now a partner with Sonnenschein Nath & Rosenthal, says Citigroup — which held the firm’s debt — made the decision to go after the money. “The bank has asked for those loans back. It’s not the firm. The firm is in dissolution,” he says. Williams says the committee wasn’t explicitly ordered to pursue the associates for repayment by the bank, but “the situation is the bank is our secured creditor, for better or for worse. And our main obligation as the dissolution committee is to collect all receivables.”
Hasn’t Thacher done enough to ruin the lives of its 33 first year associates, asks one of those in the payback bind. One of the Thacher debtors wrote in an e-mail to us:
This ‘exit interview’ was really just them collecting our Blackberrys and then telling us they were doing us a favor by not making the balance of the loan due immediately. But they said they expected us to make the same payments ($833.33 a month) until the balance was paid. I told them that offer was completely ridiculous – you expect me to pay the same amount when I’m making nothing as I was when I was making 3K/week? You guys are crazy. Every other first year that took the loan had pretty much the same meeting – some people were actually brought to tears.
We believe that case law is on our side from the minimal research we have done. It is our understanding that a loan like this is made in anticipation of employment – so cessation of employment is not a justifiable reason for calling the loan. Furthermore, it’s not as if I have this money in some interest-bearing account somewhere – it cost me a lot to move out here and to take the bar and to get set up. We were essentially used in a scheme to keep the firm sale-able: they wanted it to appear like everything was running smoothly while they were courting buyers.
The Legal Times estimates the total to be collected from the 33 former associates at $300,000 to $350,000. That’s a drop in the bucket compared to the $32 million total that the firm owes Citibank.
More angry reactions, after the jump.
The former Thacher associate, now job searching and locked into an expensive NYC lease, had more angry words about the loan call:
If they had been straight with me about the fact that: (1) they were planning on leasing out the WFC office space since summer (2) they were actively courting buyers at the time I began work and (3) those buyers essentially saw 1st years as ‘expendable’ (their word, not mine) in any deal, then I would have had hesitated to lock myself into an expensive lease that I cannot now get out of.
Another ATL reader suggests that Sonnenschein step in and pay up. All of the former Thacher partners on the dissolution committee were part of the group saved by Sonnenschein back in December:
Thacher obviously no longer cares about its reputation, but Sonnenschein likely still cares about its own reputation… I’m fairly sure it would cost every Sonnenschein/Thacher partner less than $1,000 to do the right thing.
Of course, that’s why Sonnenschein “saved” a bunch of Thacherites, rather than merging the firms. It didn’t want to deal with the TPW debt.
Legal Times points out that other firms have forgiven these loans when laying off first years:
Meanwhile, other firms that have recently laid off associates say they’ve chosen to forgive the balance on such loans. And firms that gave an outright stipend to associates who, in some cases, worked only a short period say they consider the money spent. Eric Bernthal, the D.C. office managing partner of Latham & Watkins, which last week laid off 190 associates firmwide, said via e-mail that the firm would not “under any circumstances” seek to get back the bar stipend it paid associates.
Jason Costa, a spokesman for DLA Piper, says the firm isn’t requiring recently laid-off associates to pay back salary advances. Peter Benvenutti, a member of Heller Ehrman’s dissolution committee and the authorized representative of the firm in its bankruptcy filing, says Heller gave loans, but won’t pursue repayment. “It’s a foolish thing to spend resources on going after people who probably don’t have a lot of money to begin with,” he says.
As the Legal Times points out, the bank and dissolution committee are struggling to get former clients to pay up on their bills. So they’re going after “pin money” from first years.
Thacher Pursues Former Associates Over Bar Loans [Legal Times]