The legal battle between the asbestos litigation law firm Kelley & Ferraro LLP and the widow of one of the firm’s namesake partners took a turn this week when the firm filed for bankruptcy in Florida.
Kelley & Ferraro filed for Chapter 11 reorganization on Wednesday, Jan. 26, in a move that partner Tom Wilson said is aimed at resolving the nearly 5-year-old civil litigation pending against it.
The timing was not coincidental, Mr. Wilson said, as Wednesday was the day civil proceedings brought by Lynn Kelley, widow of firm co-founder Michael Kelley, were to resume in Cuyahoga County Common Pleas Court. Mr. Wilson said the bankruptcy filing automatically stayed the civil proceedings.Currently, it’s business as usual at Kelley & Ferraro, Mr. Wilson said. He said the firm filed for bankruptcy protection from creditors to do what’s best for its clients.The petition was filed in the Southern District of Florida, U.S. Bankruptcy Court, in Miami. Partner James Ferraro lives in Florida, and Mr. Wilson said bankruptcy counsel advised Kelley & Ferraro to file there.Ms. Kelley’s lawyer, Bill Wuliger, claimed Thursday that the firm’s filing in Florida isn’t “kosher” because the firm operates in Cleveland.The bankruptcy filing is “extremely injurious” to Ms. Kelley and her son, and to the law firm and its clients, Mr. Wuliger contended. He called it an “atomic bomb on the Kelley family.”“We’re angry, we’re upset, but we will survive and we will eventually, I believe, rectify the wrongs that have happened,” Mr. Wuliger said.
Legal battle goes back nearly five years
The legal feud between Ms. Kelley and Mr. Ferraro began in April 2006, four months after Michael Kelley died. Ms. Kelley alleged Mr. Ferraro was not following the company contract he signed with her late husband and claimed, among other things, that Mr. Ferraro had cut off her salary and refused to dissolve the firm and divide the assets as the contract required.A jury found in favor of Mr. Ferraro on all counts and found in favor of Kelley & Ferraro on all counts but one, for which it awarded Ms. Kelley $4.2 million. Mr. Wuliger appealed the decision to a state appeals court, contending there were errors before, during and after the trial.The Eighth Ohio District Court of Appeals ordered in June 2010 that the firm be dissolved, per the partnership agreement, and ordered a new trial held regarding the damages Ms. Kelley suffered, if any, as a result of Mr. Ferraro’s breach of contractual and fiduciary duties.According to Mr. Wuliger, the contract requires 40% of the firm’s revenues to be paid to the Kelley estate. Ms. Kelley, he said, is owed well over $35 million and has received a couple hundred thousand dollars to date.Kelley & Ferraro’s bankruptcy filing names Ms. Kelley and Mr. Ferraro as creditors, of whom there are an estimated 50 to 99. It estimated the firm’s assets and liabilities each at more than $1 million, up to $10 million. There should be funds available for distribution to unsecured creditors, the filing indicated.Messages left for White & Case LLP, the Miami law firm representing Kelley & Ferraro, were not returned Thursday or Friday morning.