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Efficiently Winding Down a Complex Legal Business

A Case Study of The Aldridge Company’s Work for the Trustee in the Howrey Law Firm Bankruptcy

In 2011, the partners of Howrey LLP voted to dissolve the firm, which had expanded to become one of the largest antitrust and intellectual property practices in the world with more than 700 lawyers in 17 offices in the U.S., Europe and Asia. Faced with the monumental challenge of cost-effectively winding down the firm’s complicated IT infrastructure, the bankruptcy trustee turned to The Aldridge Company.

Jason Rudd, a partner with Diamond McCarthy LLP, calls it “an octopus.” He’s referring to the information technology (IT) systems of Howrey LLP, the once thriving law firm that dissolved in 2011 and entered chapter 11 bankruptcy. Diamond McCarthy is serving as trustee’s counsel and is guiding the orderly wind-down of the firm’s operations.

As in every bankruptcy case, the trustee in the Howrey bankruptcy, Allan Diamond, has focused on investigating the bankruptcy estate, gathering assets and converting the assets to cash to pay claims. The goal is to recover as much for the creditors as possible. Additionally, Diamond sought to preserve client data while he notified all former clients of the firm’s liquidation to provide clients the opportunity to retrieve their files.

The Howrey case involved approximately 10,000 former clients. As the trustee quickly realized, one of the biggest obstacles to an orderly and cost-efficient wind-down was Howrey’s complicated IT systems.

With a chief information officer who doubled as the firm’s executive director of operations and an IT staff that, at its peak, employed more than 90 people, Howrey had taken great pride in being perceived as a leader in legal technology. One news release stated, “To maintain its leadership position, Howrey has consistently placed a strong focus on the strategic use of technology to improve efficiencies.”

However, the firm’s many customized IT solutions and 300 physical servers with 200 terabytes of data operating out of hosted datacenters in Virginia and The Netherlands apparently failed to provide an early warning as cash flow sputtered.

In fact, Howrey’s IT department was still scaling up as the vultures were circling.

“It was jaw-dropping – that was my first reaction,” said Rudd. “They had the IT infrastructure for a firm with thousands of people but only a couple dozen were left. We were on a very limited budget as we began working to unravel this beast and we found out that just keeping the IT system operating was churning through $200,000 every month. We knew right away that we needed expert guidance to get the firm’s IT under control and shrink it.”

For many reasons, just flipping the switch and turning off Howrey’s IT systems was not an option. For instance, the trustee was investigating outstanding accounts receivable, which required access to billing and time-keeping data. An investigation was also underway into the circumstances that led to the dissolution of the firm to explore potential liability, which required access to e-mail and other records. Moreover, much of the firm’s data is the property of its former clients and is protected by attorney-client privilege, necessitating preservation and special handling.

The Washington Post described the challenge this way:

“Winding down a law firm’s data cache is especially complicated because virtually everything in it is owned by clients who have to be tracked down and contacted, whereas in bankruptcies involving other types of businesses, most of the data stored over the company’s life span is owned by the company itself. And because information retained by law firms is protected under attorney-client privilege, the estate must be particularly careful about returning or destroying the files so no one other than the client can access them.”

“We specialize in bankruptcy and insolvency situations and other forms of liquidations, but this one was unusually complicated because of the complexity of the systems, the amount of information, the sensitivity of much of the information, and the limitations imposed in terms of budget and timeline,” Rudd said. “In a lot of ways it was similar to our work on healthcare matters because Howrey’s client data required the same degree of sensitivity as patient records do.”

In January 2012, the trustee secured approval from the creditors committee to engage The Aldridge Company to develop and implement a plan to wind down Howrey’s IT systems while maintaining access to data and preserving client files. The Aldridge Company team quickly concluded that institutional memory would be essential and worked closely with the Howrey IT staffer who had remained to assist with the wind-down.

“Over the years, Howrey had developed customized solutions that would have taken us too much time to learn, so having that internal expertise was invaluable,” said Patrick Wiley, Chief Operating Officer with The Aldridge Company. “We started by separating the firm into its business units and approaching one application at a time. We asked ‘do we need it?’ If yes, ‘How do we shrink it?’ If no, ‘How do we preserve it?’”

Application-by-application The Aldridge Company facilitated the preservation of all data that might be needed, then they pulled the plug on anything not essential for the investigation or accounts receivable.

“We needed to be able to dissect the data without harming it and then shrink it down without losing data integrity,” Wiley said.

The Aldridge Company’s detailed analysis found that Howrey’s systems held approximately 200 terabytes of data and it all needed to be preserved for certain periods of time. They moved the firm’s U.S. servers to The Aldridge Company’s Managed Services data center in Houston, Texas. Due to concerns about European privacy laws, moving foreign client data to U.S. servers was not an option, so Aldridge used the Amazon cloud (Amazon Elastic Compute Cloud and Amazon Simple Storage Service) based in Europe to achieve their efficiency goals.

Between January 2012 and March 2012, The Aldridge Company shrunk Howrey’s hosted data center environment of 300 physical servers down to four physical servers running only 30 virtual servers on Howrey’s private cloud managed by The Aldridge Company.

“The Aldridge Company was extremely autonomous and we appreciated that Patrick and his team always came to the table with a solution – never just a problem,” said Rudd. “They were great communicators throughout the process. They constantly updated us and offered great advice, but perhaps most important in a situation like this that is prone to change, The Aldridge Company was flexible.”

The strategies implemented by The Aldridge Company successfully reduced the operational costs of Howrey’s IT systems from over $200,000 per month to $12,000 per month. The firm’s data was available for the ongoing investigation, but was significantly shrunk. Client data was preserved.

“The key in any bankruptcy is to maximize the value for all stakeholders by getting the most out of assets and minimizing costs,” said Rudd. “The Aldridge Company has been instrumental in making that possible.”

About The Aldridge Company
The Aldridge Company is a Houston, Texas-based technology management, consulting and outsourcing company. Founded in 1984, the company brings a winning combination of professional technical expertise, extensive capabilities and a strict focus on the importance of business processes. The Aldridge Company is a leading provider, consultant and integrator of information technology and cloud computing solutions. In 2011, the company was listed as No. 11 on the Houston Business Journal’s Fast Tech 50 list of fastest growing Houston technology companies.

The Aldridge Company provides enterprise-level management of servers, PCs, and networks, coupled with rapid and accurate technical support. In addition, it operates and manages data center facilities offering fully-redundant, secure hosting of servers that cross the spectrum of business disciplines. By offering a broad range of IT solutions in one organization, The Aldridge Company allows clients to benefit from having a single point of contact for the entire IT environment.

For more information about The Aldridge Company and how it can help transform your IT management and services, visit www.aldridge.com or call (832) 209-2940.

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