Large Firm Unexpectedly Closes Its Doors, Leaves Nearly 700 Jobless

This is a complete catastrophe. Which firm just left hundreds of lawyers and clients in the lurch?

Law firms come and law firms go, but if they go suddenly and unexpectedly, they leave complete catastrophes in their wake. Lawyers and staff members will find themselves out of work overnight, and thousands of case files will be left in limbo. A law firm’s closure is never a pretty situation, and unfortunately, hundreds of attorneys and legal professionals are currently experiencing the horror that goes hand-in-hand with a a firm’s failure.

As we mentioned previously, Butler & Hosch, one of the country’s largest foreclosure firms, abruptly closed up shop late last week, leaving all of its employees, not to mention its clients, totally in the lurch. The firm broke news of its impending doom with a surprise 5 p.m. call from its wind-down attorney and an after-hours email from its CEO and senior partner, who announced that he’d resigned from his positions, effective immediately.

Unlike some of the recent law firm failures we’ve covered (see, e.g., Dewey and Bingham), it doesn’t look like compensation guarantees played a role in the decimation of Butler & Hosch. Instead, it seems that through a series of acquisitions and mergers, the firm grew much too large, much too quickly. Bob Hosch, the firm’s former head honcho, detailed exactly what happened in his firmwide email (available in full on the next page):

Beginning in 2013, for the first time, BH made the decision to grow, not from within, but with strategic acquisitions of members of its competitive set. Market conditions presented several attractive suitors. The first such acquisition involved a competitor in distress, which was acquired out of a Delaware bankruptcy case. This strategic acquisition resulted in the integration of several platforms, including Cal-Western Reconveyance in Arizona, California, Idaho, Nevada, Oregon, Texas, Utah, Washington, as well as RTS Pacific in Alaska, Arizona, California, Idaho, Montana, Nevada, Oregon and Washington.

The last strategic acquisition presented the most exciting opportunity and BH’s biggest challenge: a merger of equals. Following its closing on February 1, 2015, BH now had a national footprint spanning 27 States and the District of Columbia.

As a direct result of the latest merger, BH was (i) actively prosecuting 50,000 to 60,000 foreclosure files at any given moment, (ii) employed nearly 700 attorneys, paralegals and back office staff, and (iii) had access to 90% of the foreclosure industry in the United States.

Having a presence in 27 states and D.C. wasn’t enough for the Florida-based firm, which already had offices in Orlando, Miami, and Tampa. Butler & Hosch also felt the need to open offices in Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Texas, and Virginia. In addition, many of the firm’s files had been picked up from former Florida foreclosure kingpin David J. Stern (who was forced to abdicate his throne when his firm closed thanks in part to its participation in the great robo-signing scandal of 2011).

Here’s what Bob Hosch had to say about his firm’s downfall: “The challenge was to integrate the merger of equals while spurring growth in a declining market environment in our industry. BH failed to meet this challenge and I too share in that failure. I am sorry. Thank you again for your past support and loyalty to BH during its nearly 35 year legacy.”

Sorry, Bob, but your plaintive apologies aren’t going to help the hundreds of legal professionals who have been left without work thanks to your tireless efforts to control the foreclosure market. We’d say that Butler & Hosch could expect a WARN Act lawsuit in its future because the firm didn’t provide the appropriate 60-day notice prior to laying off its entire workforce, but in this case, according to Roy Kobert of GrayRobinson, the firm’s wind-down attorney, no one was being laid off — the firm was merely unable to make payroll. That’s a very creative legal argument there, Roy. Per Julie Kay’s report from the Daily Business Review, as could be expected, Korbert had no comment as to whether Butler & Hosch had actually violated the WARN Act. Here’s more from the DBR:

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The law provides exceptions for “unforeseeable business circumstances,” which may apply to Butler & Hosch, according to labor and employment lawyer Brian Lerner of Kim Vaughan Lerner of Fort Lauderdale.

“That’s a heavy burden to meet,” he said. “This is one where I suspect employees would line up for a class action. Everyone is affected by the same issue.”

The firm’s millions of dollars in debt to creditors and potential WARN Act liabilities to its former employees are just the beginning of its future woes. What’s going to happen to the thousands of cases that are now sitting in dockets across the country without attorneys to litigate them? According to our tipsters, there’s “no clear plan to cover court [appearances] and foreclosure cases [are] already getting dismissed because of it.” For the time being, foreclosure defendants who are underwater on their mortgages can breathe a sigh of relief, but we imagine it won’t be long until other foreclosure firms take over those cases.

In the meantime, a website that’s still very much under construction with very little information for Butler & Hosch’s vendors, creditors, and employees has been set up at http://www.bandhassignee.com/. We wish the hundreds of lawyers and legal professionals affected at Butler & Hosch the best of luck while they seek new jobs.

If your firm or organization is reducing the ranks of its lawyers or staff, whether through open layoffs or stealth layoffs or voluntary buyouts, please don’t hesitate to let us know. Our vast network of tipsters is part of what makes Above the Law thrive — we’ll never ignore you. You can email us or text us (646-820-8477). Thank you very much!

(Flip to the next page to see the full firm closure memo from Bob Hosch.)

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Foreclosure Firm Butler & Hosch Shuts Down [Daily Business Review]
Hundreds lose their jobs as Butler & Hosch law firm closes [Orlando Sentinel]

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