Update, 8/30/12, 3:50 p.m. EDT: The third paragraph has been updated to reflect the most current dollar amount that the Dewey estate hoped to recover from former partners.
In a slew of motions filed late Wednesday, the advisers steering Dewey & LeBoeuf through bankruptcy launched an aggressive campaign to keep control of the case and to win court approval of a proposed settlement with former partners designed to repay the defunct law firm’s creditors a sizable chunk of the hundreds of millions of dollars they are owed.
The Dewey team lays out how far it believes the case has progressed since the firm filed for Chapter 11 protection on May 28—and how far it still has to go. In part, the advisers rely on what has become their mantra throughout the proceedings: that Dewey, the largest law firm ever to fail, will also be the quickest to clean up.
“The Debtor has sought, from the very start of this case, to achieve the most efficient, desirable, intelligent, and rapid solution possible for the resolution of partner issues,” Dewey bankruptcy counsel Albert Togut states in one of the motions filed Wednesday. That solution has called for what advisers have referred to as a “rough justice” settlement using a swiftly, though carefully, drawn formula that asked for a total of $89 million from 670 former partners in exchange for a waiver of Dewey-related liability.
Dewey’s Wednesday filing acknowledges how hard the plan was for partners to agree to, noting that it was presented as many of them were trying to revive their careers while worrying about loans from capital contributions to the firm and potentially negative tax consequences that could stem from the firm’s fall. Former chairman Steven Davis was not given the opportunity to participate in the settlement, and Dewey’s advisers have indicated they intend to pursue claims against him.
Court filings show that commitments of more than $71 million from approximately 430 former Dewey partners were gathered, surpassing the $50 million minimum the estate said it hoped to reach before presenting the plan to the court. The money is to go toward helping repay creditors owed some $250 million in secured debt and at least $300 million more in unsecured claims.
“Implementation of the PCP will avoid years of costly and uncertain litigation, and millions of dollars in administrative expenses,” Togut argues in one of the motions. “It provides certainty. It allows partners to go on with their lives and for creditors to get a quick return on their claims. It avoids years of litigation that would clog the Bankruptcy Court’s already crowded calendar.”
In a second set of motions filed Wednesday, the Dewey estate, primary secured lender JPMorgan Chase, and an official committee of unsecured creditors oppose an earlier effort by an ad hoc committee of 54 retired partners from Dewey predecessor firm LeBoeuf, Lamb, Greene & MacRae—and some spouses—to have a trustee or neutral examiner placed in charge of the Dewey bankruptcy. In its August 8 motion, the LeBoeuf Lamb group argues that Dewey’s current wind-down team is riddled with conflicts of interest and that its decisions continue to be made to benefit “insiders” who contributed the most to the firm’s late-May collapse.
“Our view is that this is filed by a bunch of disgruntled retirees,” Edward Weisfelner, a Brown Rudnick partner who is advising the official creditors committee, said in an interview Wednesday. “And I understand there are emotional issues here, but the fact of the matter is, this filing was motivated to prevent them from having to pony up a settlement amount. . . . There’s no way the appointment of a trustee or examiner benefits anybody in the estate at this stage.”
Earlier this month, an official committee of retired LeBoeuf Lamb partners came out partially in favor of the ad hoc group, agreeing that a neutral examiner could be helpful in vetting the partner contribution plan.
Annette Jarvis, a Dorsey & Whitney partner who is counsel to the ad hoc committee of retired partners, did not immediately return a request for comment Wednesday. A spokeswoman for Dewey’s chief restructuring officer declined comment on the latest batch of filings.
Weisfelner said his group, though largely supportive of the partner contribution plan, still has a few issues they are working through, including one related to the participation in the settlement of former Dewey partners Stephen Horvath and Janis Meyer, who have stayed on to help run the bankruptcy. Under the plan’s terms, Horvath and Meyer receive a liability release, as do all the other participating partners, though they are not being required to repay the estate any money.
“What I am concerned about is making sure I have available to me whatever assistance I need in getting this case finished by way of institutional memory,” said Weisfelner, adding that he is also reviewing issues related to the participation in the plan of partners in the United Kingdom, Germany, and Italy in the plan.
September 20 is is likely to be the next big day in the Dewey bankruptcy proceedings, with U.S. Bankruptcy Judge Martin Glenn scheduled to consider the requests to hand the case to a trustee and to approve the partner contribution plan.
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