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.
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