Nine professional firms entered Manhattan bankruptcy court Monday hoping to continue advising the Dewey & LeBoeuf estate in connection with the largest law firm bankruptcy in U.S. history. And while none emerged unscathed, six of the nine—including lead bankruptcy counsel Togut, Segal & Segal—received the court’s approval to forge ahead in their efforts on behalf of the defunct firm.

The first two hours of the late afternoon hearing were marked by a number of heated exchanges, with U.S. Bankruptcy Judge Martin Glenn initially raising questions about virtually all nine of the advisory firms’ applications but ultimately approving each in some form except for one submitted by Proskauer Rose.

Dewey’s attempts to employ Proskauer—which has worked for the firm and its predecessors, Dewey Ballantine and LeBoeuf, Lamb, Greene and MacRae, for 14 years—to advise on labor and employment matters had been colored by Proskauer’s hire of 63 partners, attorneys, and staff from Dewey in the weeks before its demise, according to Glenn and attorneys opposed to the idea of the firm taking a role in the bankruptcy.

“I don’t mean to seem trite, but in the context of this case, what we do not only has to be right, but has to seem right,” argued Edward Weisfelner, a Brown Rudnick partner representing an official committee of Dewey’s unsecured creditors. Weisfelner, whose own employment application was approved later in the hearing, emphasized the point that Proskauer had an inherent conflict in doing any work for the estate because of the former Dewey employees on its payroll.

Despite urgings from Dewey counsel that the former Dewey employees now at Proskauer would be shielded from involvement in the bankruptcy by an ethical wall, Glenn denied the motion to hire Proskauer. He did, however, tell the lawyers they could submit a revised application detailing specific matters on which they propose Proskauer advise and additional case law showing that such representation would not be improper.

In approving the applications for several other firms, including Zolfo Cooper (to serve as chief restructuring officer), On-Site Associates (to help collect accounts receivable), Goldin Associates (to help advise on potential contributions from former partners into the estate), and Togut (as bankruptcy counsel), Glenn ruled—over several objections—that any retainers these firms currently have must be tapped before they receive any additional payment from the estate.

Glenn also balked at allowing Dewey to continue employing crisis communications firm Sitrick and Company, which began working for Dewey in mid-March.

“They have finished their work,” Glenn said declaratively, though he did approve Sitrick’s retention motion, which allows the firm to seek fees for the work it has already done.

Glenn also approved the application to employ D.C. law firm Keightley & Ashner, which had been advising on issues related to Dewey’s underfunded pension plans, but with the caveat that any additional work Dewey hopes to have the firm perform must be approved by the court and creditors’ committees before Keightley takes on the assignment.

The Dewey estate will have a busy few weeks between now and the end of July, when its current budget is set to run out and it must find a new influx of cash to keep the bankruptcy from being converted to a trustee-run Chapter 7 proceeding. “We do not know what lies beyond July 31,” Togut partner Scott Ratner said to underscore the significance of the looming deadline.
 

Togut himself briefed the court on a proposal the estate hopes will function as a financial life preserver—a so-called partnership contribution plan, or PCP, that would see partners contribute money to the estate as repayment for, among other things, being paid more than they were due. Details about the plan, which Togut has mentioned repeatedly since the start of the bankruptcy process, are expected to emerge Wednesday at a scheduled meeting during which former partners will be told the specific sums they will be asked to pay.

Weisfelner objected to the fact that Wednesday’s meeting has been scheduled, saying it is premature and that the firm’s creditors are unhappy with the process used to come up with the partner contribution plan. “As of today, there is no meeting of the minds,” he said.

In other developments, Glenn agreed during Monday’s hearing to partially approve a motion concerning how to dispose of Dewey’s hundreds of thousands of boxes of client files. Though he signed off on the estate’s proposed process for telling clients about how to retrieve their files, he directed Dewey lawyers to seek guidance from an outside ethics committee on the proper way to physically dispose of files that aren’t retrieved.

“Can you just send client files to The New York Times and they can do what they want with them?” Glenn asked hypothetically to support his contention that the motion in its current form did little to ensure the safety of confidential information. (Though not part of the motion, Dewey counsel also confirmed to the court that they owe storage companies holding those client files $500,000 in fees from before the firm went bankrupt.)

The last motion on the table Monday, still being argued more than three-and-a-half hours after the hearing began, sought Glenn’s approval for the rejection of 20 Dewey office leases around the world. Counsel for leaseholders of Dewey offices in New York and Washington, D.C., expressed concern that Dewey hasn’t properly vacated the premises, saying that keys haven’t been turned over and sublessors still occupy some of the buildings.

As counsel for one landlord put it: “It looks like someone got up in the middle of writing a brief and left the office.”