Howrey Creditor Can't Target Equity Holders In Class Action

By Kurt Orzeck (April 8, 2013, 10:31 PM EDT) -- A California bankruptcy judge ruled Monday that a Howrey LLP unsecured creditor cannot bring a class action in federal court to try to hold the firm's former equity security holders accountable for its downfall.

Denying Howrey Claims LLC's motion, the judge said the creditor hadn't established cause to modify the automatic stay protecting Howrey from litigation while the firm is in bankruptcy, and hadn't established just cause for relief.

The ruling is a setback for the creditor, which hoped a federal court would hear its allegations that Howrey's equity holders had funneled the firm's funds to themselves in the years leading...

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