This morning The Recorder is reporting that Bank of America and Citibank could lose $57 million because of a clerical error that could void the preferred status of BoA and Citibank:

A secured creditor must "perfect" its security interests with uniform commercial code filings and file updates every five years. The bank last submitted such a "continuation" in 2005, so another filing wasn't needed until 2010. On Oct. 1, a week after Heller said it would dissolve, the bank filed a "correction statement" saying the 2007 filing was a "clerical error." On Monday, the bank declined to discuss how or why the error occurred, or who made it -- the 2007 filing required no signature.

The error would nullify BoA's and Citibank's secured creditor status:

The firm had paid the banks $51 million since announcing its dissolution and would owe them almost $6 million more if they remain secured creditors.

Closing the loop on Heller's bankruptcy after the jump.

Thacher Proffitt & Wood made its dissolution official last month. Last Monday, the firm officially rescinded offers to approximately twenty 3Ls who were bound there after graduation.

One would-have-been Thacherite said no one was surprised to have the offers rescinded but that the soon-to-be law school graduates are still "bummed."

The "firm did it right." The partners in charge of Thacher's summer associate program called all of the 3Ls on Monday. With the firm bound for nonexistence by May, the reason for the call was fairly obvious. The partners offered to do anything they can to help: forward resumes on, provide references, resend offer letters, etc. (Though those not rescued by Sonnenschein may be a bit busy looking after their own job prospects.)

Law students who placed their eggs in the baskets of failing firms Thacher, Thelen Reid, and Heller Ehrman may no longer be looking forward to cap-and-gown day. One Thacherite-would-have-been talked to us about what it's like to see one's Biglaw prospects dissolve. "When you take an offer from a 150-year-old firm, you think it's pretty solid," said the UnThachered 3L.

Full interview with "NoMoreTP", after the jump.

Heller Ehrman's bankruptcy has been a long time coming. The firm made the news official on Sunday:

Today the Dissolution Committee of Heller Ehrman LLP, in Dissolution (the "Firm") authorized the Firm's counsel to file a Petition for Reorganization under Chapter 11 of the United States Bankruptcy Code. We took this step only after very careful and extensive analysis.

But the firm's Dissolution Committee also notes:

The Dissolution Committee's decision to conduct the continued wind down of the Firm under the jurisdiction of the Bankruptcy Court was not prompted by the Firm running out of money. On the contrary, thanks to the dedication and tireless efforts of the Firm's remaining employees who comprise the Liquidation Team, the cooperation of the Firm's former shareholders, and the positive responses received from hundreds of the Firm's former clients, collection of accounts receivable over the past three months has been strong. And going forward, we continue to expect collection of tens of millions of additional dollars.

After the jump, we post the full Heller memo and check in with Thacher Proffitt.

As Thacher Proffitt prepares to shut down, the "how did this happen" reports can begin. AmLaw Daily notes that while other firms had banner years in 2007, Thacher was already struggling:

Thacher entered 2008 already struggling financially. The firm had suffered a dismal 2007, with gross revenue growing only 1.6 percent to $194.5 million and profits per partner dropping 22.1 percent to $1.02 million. The year to come didn't treat the firm much better, especially come September, when several bank clients either collapsed or went into hasty mergers.

As we noted many times in these pages, a merger with King & Spalding had been the best hope for TPW to remain in business:

For months, Thacher had tried and failed to convince King & Spalding to acquire the firm outright. Discussions with the Atlanta-based firm to instead hire a chunk of its lawyers had plodded along for weeks. A deal to hire about 75 lawyers was close, but still not final, two sources at the firms say. With time running out for the 150-year-old firm, Thacher's lawyers began talking to others, including Sonnenschein.

At least Sonnenschein was able to step in a save a lot of jobs. But after the jump, things are still pretty somber over at TPW today.

The Thacher Proffitt people who were not picked up just now by Sonnenschein will soon be picking up unemployment checks. Multiple sources report that TPW is dissolving today. The official WARN notices will be sent out shortly.

People are being brought into a conference room, group by group, and being told of the bad news.

In keeping with WARN regulations, which require 60 days notice in a situation like this, TPW lawyers have 60 days from today during which they can still earn a paycheck. However, TPW attorneys have been told that they still have to show up to work for the next two months in order to get their pay.

Good luck with that. I see a flurry of "vacation memos" in the near future.

We can't emphasize how terrible we feel for the TPW litigators on their way out the door. Getting let go days before Christmas is only supposed to happen in the movies.

We'll update you as more details become available. In the meantime, somebody should probably fire up "Heller Drone."

RIP TPW.

Earlier: Breaking: Sonnenschein Saves 100 Thacher Proffitt Lawyers

It looks like Thacher Proffitt had a "plan B" in case the King & Spalding negotiations broke down.

We mentioned on Saturday that Sonnenschein was looking into acquiring some Thacher Proffitt lawyers. AmLaw Daily reported:

Within the past week, according to the partner, as King & Spalding neared a deal with Thacher for the structured finance group, it emerged that Sonnenschein Nath & Rosenthal was talking to Thacher lawyers.

Tonight we've got news that Sonnenschein is doing a little more than talking. A Sonnenschein spokesperson reports:

[On Monday morning] We will announce the tremendous addition of 100 lawyers from Thacher Proffitt & Wood.

Happy Holidays!

What a nice present for a bunch of TPW lawyers. On Friday it looked like they'd start 2009 updating resumes, now it looks like they will be making new friends.

Morale is pretty high at Sonnenschein as well. An internal email went around Sonnenschein this evening heralding the news:

With today's move, we dramatically enhance our national and international corporate and finance capabilities, and double the size of our New York office -- both of which have been strategic priorities for Sonnenschein.

These new colleagues accelerate our global growth strategy and reaffirm our continued commitment to client service. In particular, these lawyers bring highly regarded expertise in the fields of structured finance, banking, corporate, real estate and regulatory law. Also joining is a strong and complementary group of litigators, ERISA and employee benefits, and tax lawyers.

Read the full firm-wide email after the jump. We'll update you as more specifics become available.

It's the most wonderful time, of the year.

Update (12:00): The WSJ Law blog is now saying that what is left of TPW will dissolve, and the vote could be happening as early as today. TPW spokespeople could not be reached for immediate comment. Stay tuned ...

Update (12:21): Multiple sources have confirmed that Thacher Proffitt is dissolving today. WARN notifications will be sent around by the end of the day. For continuing coverage, click here.

Over the last week, we've been covering whether Thacher Proffitt's litigation department was going to survive into the New Year. The operating theory has been that Thacher Proffitt's corporate department would be part of a merger between TPW and King & Spalding, with litigation left out in the cold.

But now it looks like King & Spalding could be out of the game entirely. AmLaw Daily reports:

King & Spalding no longer is in the running to acquire the substantial portion of Thacher Proffitt & Wood that it had pursued in recent weeks, according to a lawyer familiar with the negotiations.

We've reported the widely held belief that TPW needs the K&S merger to go through in order to avoid dissolution:

The New York consultant and another individual familiar with the discussions say that if the deal falls through, Thacher Proffitt will likely go under.

Then again, the Treasury Department seems to think that Thacher Proffitt is going to stick around. And when was the last time they were wrong?

After the jump, we see if there is another option for TPW.

Hard facts are difficult to come by, especially when the firm does not respond to requests for comment. But a tipster reports that Thacher Proffitt & Wood did have an associates meeting yesterday (as expected). At that meeting, we understand that associates were informed that TPW's litigation department would close on December 31st.

No mention was made of any severance package that would be offered to displaced associates, nor was there discussion of any WARN obligations for the firm. TPW representatives did not respond to requests for comment last night.

Just the other day, we reported:

According to our tipsters, whether or not there is a rescue by King & Spalding, Thacher's litigation department won't be a part of it. Word on the street is that the head of litigation is leaving TPW tomorrow.

The head of TPW's litigation department is Richard Hans. Our sources tell us he is still with the firm during the merger negotations with K&S, but his contact information is no longer available on TPW's website.

We will keep you posted with any additional TPW news as it comes in. If you have info to share, please email us (subject line: "Thacher Proffitt"). Thanks.

Update (10:25 AM): Multiple tipsters report that Richard Hans is leaving TPW for DLA Piper, his former firm. Word is that he will be taking a few attorneys back with him.

Earlier: Nationwide Dissolution Watch: Is TPW Finally Done?

Last Thursday, we reported that King & Spalding might represent the last best hope for Thacher Proffitt & Wood. The Legal Times puts TPW's situation into the clearest possible terms:

[Thacher's] overall headcount is down more than 100 lawyers compared to last year -- and so are its profits. Profits per partner fell more than 22 percent in 2007 to $1.02 million, according to the Am Law 200.

The firm has had a constant stream of high-profile departures, including its vice chairman Thomas Leslie, who decamped for Greenberg Traurig in October, and Washington managing partner Richard Schaberg, who left for Hogan & Hartson's D.C. office last month. The New York consultant and another individual familiar with the discussions say that if the deal falls through, Thacher Proffitt will likely go under.

We don't have much more information about the K&S/TPW talks, but based on sources at Thacher, something significant is about to go down at the firm -- and dissolution is one possibility.

According to our tipsters, whether or not there is a rescue by King & Spalding, Thacher's litigation department won't be a part of it. Word on the street is that the head of litigation is leaving TPW tomorrow.

More after the jump.

Talks between Thacher Proffitt and King & Spalding, a story we broke here, remain ongoing. From the Legal Times:

Atlanta-based King & Spalding is in talks to acquire most, but not all of Thacher Proffitt & Wood's lawyers, say two sources aware of the discussions. In order to avoid dissolution, New York-based Thacher hopes to find a partner to acquire it, these sources say.

One New York legal consultant says the discussions have been ongoing for the past three to four months, and that the firms hope to reach an agreement by year-end. The consultant says King & Spalding is considering taking on about 100 of Thacher's 195 lawyers, but that it's not yet clear which practices and offices the 100 lawyers would come from. "There's a tremendous amount of uncertainty about who's going to be invited to the party," says the consultant, who asked not to be named.

Not sure we'd call it a "party." But the alternative to a K&S acquisition isn't appealing:

[Thacher's] overall headcount is down more than 100 lawyers compared to last year -- and so are its profits. Profits per partner fell more than 22 percent in 2007 to $1.02 million, according to the Am Law 200.

The firm has had a constant stream of high-profile departures, including its vice chairman Thomas Leslie, who decamped for Greenberg Traurig in October, and Washington managing partner Richard Schaberg, who left for Hogan & Hartson's D.C. office last month. The New York consultant and another individual familiar with the discussions say that if the deal falls through, Thacher Proffitt will likely go under.

It's worth noting that TPW has placed its New York headquarters up for sublease (as reported by Lindsay Fortado and David Levitt of Bloomberg). If TPW is seeking a subtenant for all five floors it leases at Two World Financial Center, then one has to wonder if the firm plans to continue operations (at least in its current form).

As for King & Spalding, it's growing strategically, despite the downturn. The firm recently snagged three energy partners from Kirkland & Ellis. KS hopefully has room in the lifeboat for Thacherites seeking a new home.

To Avoid Dissolution, Thacher Proffitt Talks With King & Spalding [Legal Times via WSJ Law Blog]
Thacher Proffitt Puts Up New York Office Space for Sublease [Bloomberg]
King & Spalding Adds Three Energy Partners in Washington, D.C. [King & Spalding]

It has been a while since we last checked in with the firm formerly known as Heller Ehrman. While many Heller partners have landed safely at firms like Orrick, Covington & Burling, and Winston & Strawn, some ex-Heller junior associates and staff are still twisting in the wind. The fact that markets everywhere are awash in legal resumes does not help.

Right now, former Heller people continue to fight with the firm and the firm's banks over money they claim is owed to them. As Thomas MacEntee explains:

We've been hearing the same tired line of nonsense from Heller's Dissolution Committee, Bank of America, and Citibank now since October. The Dissolution Committee passes the buck to the banks continuously and says "they won't let us" when it comes to paying employees. The banks remain silent and play with not only the monies coming in but the day-to-day survival of ex-Hellerites.

When a bank is refusing to release the money you need for rent, things can get pretty heated. But you'd think that Citigroup at least would be a bit more willing to meet its obligations to regular people, since regular people just bailed them out:

How is it that these banks can be handed billions of dollars and yet be allowed to assist Heller in violating federal and state laws? My thinking is that authorizing the payment of what is due ex-Heller employees would put money back in the economy, allow people to make purchases, etc. Am I the only one seeing this? Or do I look "through a glass, darkly" as the saying goes, and my perception of reality is somewhat imperfect?

More bad news for Heller, and discussion of a "give us our money" email campaign, after the jump.

Thelen attorneys in NYC and Hartford have a new landing spot. Robinson & Cole picked up 30 displaced Thelen attorneys. According to the Connecticut Law Tribune:

The move adds heft to Robinson & Cole's construction, real estate, employment and finance practice groups, among others.

"It's a smart move and good pick-up," said Connecticut-based law firm consultant Peter Giuliani, but not one that challenges Day Pitney's status as the leading law firm in the state.

Of course, the Robinson & Cole press release shows no signs of Pitney envy:

The addition of these accomplished attorneys to Robinson & Cole speaks to our strength as a regional firm and will add considerable value to expansion of our New York City office, expansion of our intellectual property practice, and the addition of a prominent construction practice, all goals of the firm's strategic plan," said Robinson & Cole's managing partner, Eric D. Daniels.

Meanwhile, back at the artist formerly known as Thelen, the situation continues to be fluid and confusing:

"At this point it is every group for themselves and not a coordinated top-down plan," said San Francisco-based Thelen spokesman Kevin Livingston. "Thelen really doesn't exist anymore. I barely know what is going on in San Francisco."

Heller Drone comes to the rescue of a disorganized Thelen response, after the jump.

The Recorder is reporting that Howrey will take on 40 lawyers from Thelen's prestigious San Francisco construction practice:

The group -- which Howrey characterized as "most of the construction practice" from Thelen -- includes Thelen Chairman Stephen O'Neal, construction practice head John Heisse II, D.C. office managing partner Andrew Ness, San Francisco partner David Buoncristiani (who handles matters for client Bechtel), Los Angeles partner Robert Thum and D.C. partner David Dekker. Most of the 18 partners and about 25 associates and of counsel are in San Francisco and D.C., and the rest are in New York and Los Angeles.

Hmm... Thelen attorneys, Chairman Stephen O'Neal, Howrey -- where have I heard that before?

Oh yeah! You'll remember that the Recorder initially broke the story on O'Neal's flirtations with Howrey.

Immediately after Thelen dissolved, we mentioned possible options for the firm:

Option 1 is the plan they have arguably been pursuing: breaking up the firm practice group by practice group to interested parties. As we reported yesterday, this is the best option to save associate jobs. However, that plan is dependent on Thelen's banks signing-off on the plan and maintaining their line of credit. Did Stephen O'Neal's aggressive and ultimately public pursuit of his own lifeboat at Howrey scuttle that option? Once everybody is told that the managing partner could be leaving in ten days, why would other potential suitors compete for full Thelen practice groups? Instead, it's easier to wait for an official dissolution and cherry-pick the rainmakers. This is what happened to Heller.

I'll pause until the Thelen people stop screaming and hitting things.

Read about other Thelen landing places, after the jump.

AIG, the American taxpayers' very own insurance company, has taken a lot of heat for their company retreat full of facials and frivolity.

But in our own world of dissolving law firms, Heller Ehrman's actions before the end have gotten far too little scrutiny. Yesterday, American Lawyer ran a story (subscription) about Heller's 2007 partner retreat:

When Heller Ehrman partners gathered at Santa Barbara's Bacara Resort & Spa in March 2007, there was already reason to be concerned about the firm's future. Several practice areas were slow. The firm's national and global ambitions were in disarray. And partners were increasingly skeptical about management's ability to address the problems. But that weekend they were determined to laugh at this somewhat worrisome predicament.

The final night of the retreat featured a $300,000 skit. Performers from the Los Angeles Opera, accompanied by a professional orchestra, portrayed Chairman Matthew Larrabee and other firm leaders frantically searching for a merger partner. "Some people were laughing, but I thought it was surreal," says one former shareholder (Heller's term for partner).

Heller people, here's some free legal advice: if you can get from this post to Matt Larrabee's house without thinking, it might be a crime of passion. But if you read through to the end of the post, you'll have entered the cooling down period and you're looking at murder 2.

Please, it's not worth it. San Quentin is a bad place. Just click on the jump.

On Friday, while much of the Thelen news was still focused on Nixon Peabody feasting on Thelen refugees, we heard an interesting tip from people at Morgan Lewis:

I hear we have acquired all or most of Thelen's corporate practice? I haven't seen any official announcements but I hear that a couple floors below me is total chaos.

Mmmm ... chaos.

Today we've gotten a (sadly) less chaotic number of new hires:

Morgan Lewis's New York office picked up 17 attorneys from Thelen. An email was sent Friday.

But are they heavy hitters?

I am aware of a larger group that consists of the really big hitters at Thelen in the construction group. Dekker, Buoncristiani, Heisse et al with huge books of business for core clients like Bechtel. Pillsbury has extended an offer to all these people, included Counsel and associates for a total of about 45 attorneys for mainly the SF Office [Some in DC and NY]

Strangely, MLB has rebuffed repeated requests to confirm or deny how many Thelen people they are bringing on (if any).

But once again, Thelen-East attorneys seem to be doing a lot better than their West Coast brethren. On the flip side, this weekend in NYC was cold and miserable while I'm sure the Sun once again bestowed its light and grace upon Californians. So they have that going for them.

Earlier: Nixon Peabody Picks Up 90 Thelen Attorneys (This is Different From a Merger How?)
Associate Bonus Watch: Morgan Lewis Pushes Back Bonus Decisions

We've previously reported that Nixon Peabody was acquiring 60 ex-Thelen attorneys, but only Thelen refugees located in Manhattan.

But now it is looking like Nixon is picking up 90 ex-Thelen lawyers (partners and associates), former Thelen support staff, and tripling its presence in Silicon Valley.

Yesterday's press release from Nixon reported:

The new attorneys are joining all four of Nixon Peabody's departments: business, intellectual property, litigation, and real estate. The firm also plans to hire a number of associates and staff from Thelen to help support the new partners. With the addition of these new attorneys from Thelen in Silicon Valley, which will triple in size, San Francisco, New York, Los Angeles, Washington, DC, and Shanghai, it is anticipated Nixon Peabody will have more than 825 attorneys worldwide in 19 cities.

After the jump, remember when Nixon and Thelen were supposed to merge?

Winston & Strawn is expanding with the help of Heller refugees. A tipster reports on the latest internal Winston communication:

[We] are extremely pleased to announce that the firm has added a number of former Heller Ehrman attorneys who will greatly enhance Winston's practices and international presence. Winston has acquired three partners in Hong Kong from Heller and Heller's international trade group in D.C. In addition, we welcome Joe Armao, a well-known environmental litigator, as a partner in our San Francisco office.

In Hong Kong, we are joined by capital markets and M&A partners Simon Luk and Michael Phillips and commercial litigation partner David Hall-Jones. Subject to local regulations*, these partners will be supported by additional associates and other professionals. Winston is also pursuing and fully expects to expand its presence in Asia with one or more offices in mainland China, likely to be in Shanghai and Beijing. We have begun the application process for this expansion. More details will follow as they become available.

In Washington, we have added four high-profile international trade partners: William Barringer, Daniel Porter, Christopher Dunn and James Durling, as well as associates Valerie Ellis, Matthew McCullough, Yu Li, and Ross Bidlingmaier. The international trade group will be supported by a number of non-lawyer trade professionals on the ground in Beijing.

Core practices primarily affected include complex commercial litigation, international arbitration and cross border deal-making capabilities. The firm has expanded materially in 2008 with the opening of the Charlotte office in January, the addition of prominent lateral attorneys to our existing offices and practices throughout the year, and this most recent expansion to Asia.

A press release will be available tomorrow morning on winston.com. An office page for our new Hong Kong location will be posted as well and will include address information and profiles of our new group.

We expect to take over existing Heller office space only as necessary. A full integration effort is underway; please take a moment to welcome our new team.

Regular readers of ATL will not be surprised by Winston capturing some top Heller talent.

Recent history after the jump.

The Recorder has published the people who will be in charge of winding down operations at Thelen:

The three members of Thelen's dissolution committee are David Graybeal, Douglas Davidson and Thomas Hill. The firm has also hired as outside counsel Peter Gilhuly, the Latham & Watkins bankruptcy partner who advised Brobeck, Phleger & Harrison on its dissolution half a decade ago.

We already know that some Thelen people have found a new home. It's been widely published that Nixon Peabody has sent offer letters to 60 former Thelen partners and associates.

But all of those offer letters were sent to attorneys in Thelen's Manhattan office. San Francisco associates haven't yet been picked up in droves. In fact, the New York focus of the dissolution committee members is causing some consternation with other partners at the firm:

Some former Thelen partners voiced frustration over Hill's inclusion as a member of the wind-down committee.

Hill was in a position of "running the numbers" in his former role, one former Thelen lawyer said, speaking on condition of anonymity. "You would think that would be a reason to keep him off the committee." People were not happy with the way Hill ran the office, the lawyer said, citing complaints that he didn't consider other's ideas and generally did not communicate.

Readers have cited Thelen's expansion beyond their traditional San Francisco roots as part of the problem. Now, a cadre of non-San Francisco based partners will be overseeing the end.

Four Attorneys to Guide Thelen's Demise [Law.com]

Earlier: Thelen Officially Dissolves

[Ed Note: This post was written for ATL by "Heller Drone," who created the blog Heller Highwater in response to a lack of information concerning Heller Ehrman's dissolution. We asked Heller Drone for helpful advice to offer Thelen associates and staff. Good luck to everybody dealing with these difficult circumstances.]

Being capsized is often something quite jarring and comes upon you suddenly and painfully, say like food poisoning or an episode of The View. And despite the fact that you can see that iceberg in the distance, a soon-to-be ex-staffer of a BigLaw firm can't always anticipate each and every wave that will buffet his or her lifeboat. Here are words of advice for our colleagues at Thelen and perhaps other firms which are in the process of dissolving:

Get Organized

You don't necessarily need a blog but it is a nice way of communicating to a large group without hosting a website on your domain, etc. Blogging is a very "turnkey" operation and with platforms such as Blogger or WordPress or Typepad you can be on your way to your first post in less than five minutes. Any stressed and harried soon-to-be unemployed staffer can do it.

Besides a blog, set up some form of networking such as Facebook or better yet LinkedIn. This will allow former staffers to communicate with each other once the firm's email system is offline.

Know Your Rights as an Employee

Do your research - and if you don't know where to start enlist a paralegal or associate to assist. Realize that labor laws differ by state and this includes vacation accrual, how to file a wage claim, etc. Make sure you understand clearly anything you are being asked to sign and ask to make a copy of the document, take it home and review it first if possible. Do not sign any of your rights away during what can be a very emotionally trying time.

More tips after the jump.

Thelen has officially announced they will dissolve.

According to the release, Thelen:

[B]reached a partner departure covenant that restricts the number of partners who may depart the firm within any twelve month period.

In other words, the bank pulled Thelen's line of credit, much like they said was not going to happen.

Most disturbingly, Thelen apparently does not think it is obligated under federal regulations:

Although not necessarily required, Thelen is seeking to pay its employees 60 days salary under federal and state WARN Acts. The firm is also seeking to pay all accrued vacation pay. The response to date from the bank is that it will fund employee salary through Nov. 30, but will not pay accrued vacation pay. Both of these issues are still under discussion.

We'll see how that flies in court, which is undoubtedly where this will end up.

Read the full press release after the jump.