LeClairRyan to pay $20M settlement in bankruptcy of client investigated for alleged kickbacks
LeClairRyan has agreed to pay $20.375 million to resolve claims related to its legal advice to a medical lab company that filed for bankruptcy after a federal investigation into whether it paid kickbacks to doctors.
LeClairRyan does not admit any wrongdoing in the proposed settlement filed on Sept. 1 in the bankruptcy of Health Diagnostics Laboratory, report Bloomberg Big Law Business, the Richmond Times-Dispatch and Richmond Biz Sense. Health Diagnostics paid $47 million to resolve the Justice Department investigation.
LeClairRyan co-founder Dennis Ryan had left the firm in 2012 to become executive vice president at Health Diagnostics. The federal investigation concerned the company’s payment of “processing and handling fees” to doctors that used its services. According to Richmond Biz Sense, bankruptcy court records show part of the bankruptcy trustee’s inquiry into the firm’s representation concerned its discussion of those fees.
The proposed settlement made “vague reference to possible malpractice claims” but did not include any details, according to Bloomberg Big Law Business. It also states that the settlement does not resolve any claims the trustee may have against Ryan.
The settlement agreement “resolves, on terms beneficial to the bankruptcy estates, potentially complicated litigation over the LeClairRyan claims, the continued pursuit of which would be costly, time consuming and may pose the risk of an unfavorable result,” according to the motion for approval of the settlement (PDF).
LeClairRyan’s chief legal officer Bruce Matson released a statement to the Times-Dispatch and Richmond Biz Sense. “We do not believe LeClairRyan is responsible for the actions that led to the government investigation or bankruptcy of HDL,” the statement said. “We believe we provided sound legal counsel to the company at all times during our engagements based upon the issues and information shared with our legal team by HDL.”
The statement added that, although the law firm believes it did nothing wrong, the settlement is in the best interests of the firm and Health Diagnostics. “Unfortunately, the pursuit of litigation claims against law firms has become quite commonplace as one of the ways trustees try to raise funds to pay off claimants in bankruptcy cases,” the statement said. “Fortunately, we have insurance to cover these types of matter(s) and the claims is within our coverage limits so it will be covered completely by our insurance providers.”
