As a growing number of law firms look to contract with third-party vendors to outsource business operations, a $128 million lawsuit filed by LeClairRyan’s bankruptcy trustee against UnitedLex makes it clear that the risks to both sides can be high when a firm is already on thin ice, the American Lawyer reported. LeClairRyan’s trustee alleged in a suit filed in Virginia bankruptcy court on Tuesday that the terms of the deal with UnitedLex, which resulted in the creation of a joint venture to handle support services, served only to push the cash-strapped firm “further into insolvency.” Now UnitedLex itself faces substantial liability for allegedly sucking money out of the firm, at the expense of LeClairRyan’s other creditors. In June 2018, the two entities unveiled the launch of ULX Partners LLC, a joint venture that was intended to allow LeClairRyan and other law firms to outsource back-office operations and receive equity stakes in the new company. “If we don’t reach 10,000 employees in the next five years, then I’m not doing something right,” UnitedLex founder Dan Reed told The American Lawyer at the time. “Some people would view that as heretical, but it’s not.” But little over a year later, in August 2019, LeClairRyan announced its dissolution, following months of partner defections that had begun before the UnitedLex deal. The firm filed for bankruptcy five weeks later. And as its fate became increasingly apparent over the course of that summer, UnitedLex had nothing to say about the status of ULX.
