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Co-founder of defunct firm LeClairRyan may be able to avoid tax liability after 4th Circuit decision on his exit

By Debra Cassens Weiss

February 12, 2025, 10:44 am CST

The co-founder and former CEO of the defunct law firm LeClairRyan may be able to avoid tax liability in connection with the firm’s collapse because of a ruling Friday by a federal appeals court.

The 4th U.S. Circuit Court of Appeals at Richmond, Virginia, ruled for former partner Gary LeClair in a Feb. 7 opinion, Law360 reports.

The Legal Profession Blog published highlights.

The 4th Circuit ruled that LeClairRyan’s operating agreement didn’t bar LeClair from withdrawing as a partner after a vote to dissolve in July 2019. Bankruptcy and federal courts had reached the opposite conclusion, which made LeClair liable for some tax obligations because he was considered a partner on the day that the firm filed for bankruptcy in September 2019.

The firm had included LeClair on a list of equity holders filed with the bankruptcy court. LeClair wanted to amend the list to remove his name.

The 4th Circuit remanded for a determination.

“We leave it to the bankruptcy court on remand to determine whether any equitable considerations warrant denial of the motion to amend despite LeClair’s correct interpretation of the operating agreement,” the appeals court said.

See also:

Too big too soon: How LeClairRyan went under

LeClairRyan bankruptcy trustee targets firm co-founder, compares firm to movie ‘Weekend at Bernie’s’

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