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01/24/14

Top Bankruptcy Law Firm Files for Bankruptcy Protection



Frego & Associates, one of Michigan's biggest bankruptcy firms has filed for bankruptcy protection under Chapter 11, and the move seems to be a sensible one. However, the irony of the situation has not been lost on the media, and publishers ranging from big ones like the Wall Street Journal to specialized ones like the ABA Journal have covered the news.

Apparently, the financial woes of the law firm stem from a lawsuit filed by Frego's former law partner Brodsky, over happenings that took place when they used to run the law firm of Frego & Brodsky together. A receiver was put in charge of shutting down Frego & Brodsky following Brodsky's lawsuit, and it is to fend off and manage the claims of the receiver that Frego has sought bankruptcy protection for his new firm.

According to records, Frego & Brodsky was formed in 2004 with Brodsky paying more than $120,000 to purchase a 50 percent stake in the law firm. Brodsky claimed in his lawsuit that apparently, after selling the stake, Frego started to suffer from seller's remorse and began overloading Brodsky with work. The lawsuit also alleges that Frego had started excessive spending of the firm's money, which affected profits.

Brodsky went for a hip surgery in 2009, and when he returned he found that the locks at the firm's main office had been changed and he was informed that he has been ousted from the firm. Brodsky filed the lawsuit alleging that Frego did not have the power to fire him and seeking $220,000 in fees paid to Frego's new firm as a result of business that originated in the firm in which Brodsky was an equal partner.

However, Frego seems unfazed by the turn of events and he told WSJ's Bankruptcy Beat that his law firm plans to continue filing about 100 Chapter 7 or Chapter 13 cases each month, while negotiations would continue at the bankruptcy court to settle reasonably and at lower costs to the firm.

The firm is also planning to use its present bankruptcy filing to reorganize its advertising strategy, hoping that an order from the bankruptcy judge would allow the firm to break its existent advertising contracts and bring costs under control. Another point to note is that even though the firm has 11 bankruptcy lawyers on its payroll, it is not handling its own bankruptcy.

Frego & Brodsky, PLC

    


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