Citing widely held concerns voiced by former Dewey & LeBoeuf partners, the bankrupt law firm’s chief restructuring officer said in an email sent to partners Thursday that the deadline for agreeing to a proposed $103.6 million settlement has been bumped back two weeks and that revisions to the original plan will be announced next week.
The settlement, which in its present form asks former partners to pay between $25,000 and $3 million apiece in exchange for a waiver of future liability related to Dewey, was pitched July 11 by the firm’s wind-down team as being in the best interest of partners and creditors.
In the week since the plan was presented, however, former partners have grumbled over several aspects of the proposed settlement, and a consensus has not appeared to be forming in favor of the plan. Dewey’s leaders have said that unless promises of $50 million in contributions were received, creditors would not sign off on the deal and no one would obtain a release. Dewey, which filed for Chapter 11 bankruptcy protection at the end of May, owes some $225 million in secured debt and is facing hundreds of millions of dollars more in unsecured claims.
According to a copy of the email obtained by The Am Law Daily, Dewey’s chief restructuring officer, Joff Mitchell, told partners at around 6:15 EDT Thursday that after meeting with former partners and their counsel, “and hearing certain widely held partner concerns with which we agree,” the estate’s leadership team has modified the so-called partnership contribution plan, or PCP. “We have persuaded the secured lenders to give us time to explain these changes to you and are able to extend the deadline to sign on to the PCP by two weeks to August 7th.”
Until now, the deadline for signing on to the settlement had been set for Tuesday, July 24. With the estate’s budget set to expire July 31, the possibility of the bankruptcy being shifted to a trustee-run proceeding looms if additional revenue is not brought in.
According to Mitchell’s email, partners will be presented with the revisions to the PCP at a meeting tentatively set for July 26 at 3 p.m. Partners not in New York will be able to call in to the session or participate via the Internet.
Mitchell closes the email by saying he recognizes that partners are frustrated at the lack of response to some of their questions, “but we have a backlog of over 1,000 emails and limited resources.”
Partners who have spoken to The Am Law Daily over the past week have raised several reservations and complaints about the PCP, including that it seems to favor those who made the most money and more dramatically affects those in the middle to lower ranks. Others have said that partners still haven’t received a copy of the proposed release form, which makes it hard to make a decision on whether to sign on. Partners in Britain have complained that because they were part of a separate partnership, legally speaking, and are going through their own version of a Chapter 11 bankruptcy, the plan should not apply to them.
The plan seeks, among other things, the return of a percentage of income paid to partners in 2011 and 2012. Two former partners have complained that because they received long-delayed profits from prior years in 2011, they are being further penalized by the plan compared to partners who received their full pay in 2009 and 2010.