The number of employees left working on the winding down of Dewey & LeBoeuf‘s operations dwindles by the day, and the bankrupt law firm’s own counsel doesn’t blame them.
“There’s no future in working for Dewey & LeBoeuf,” Albert Togut, Dewey’s lead lawyer, said at a hearing in Manhattan bankruptcy court Wednesday afternoon. “There is every reason for the people remaining to leave. The only reason for them to stay is this application.”
The application that Togut was referring to—and that Judge Martin Glenn balked at approving absent more information—would see up to $700,000 in bonuses set aside for the firm’s remaining 48 employees as an incentive for continuing to work on the case. When it filed for Chapter 11 protection on May 28, Dewey had 150 employees. Court filings show that number quickly dropped below 90 and then below 50.
In its current form, however, the bonus proposal hasn’t yet won the support of either Glenn or the U.S. Trustee’s Office, the government agency overseeing the bankruptcy process. “These plans are a hot-button issue,” Glenn said at one point during targeted questioning about the plan’s details.
Among the issues still unresolved by the time the hearing ended: exactly how much the remaining employees will be offered based on their annual salary and how Dewey proposes to allocate up to $100,000 from a “discretionary fund” whose existence Glenn also questioned. The plan would allocate $250,000 in contingency-based bonuses for those working on collecting unpaid bills. Unlike the bulk of the proposed bonus pool—$450,000, which is to be drawn from the Dewey estate’s budget—the contingency-related funds would be diverted from fees currently going to collections agent On-Site Associates.
To address those questions, Glenn ordered Dewey’s lawyers to present to the court by close of business Thursday a list of salaries and potential bonuses each employee could receive before he will consider approving even a portion of the estate’s motion.
In a preview of that list, Togut’s colleague Scott Ratner told the court that one employee earning an annual salary of $450,000 could earn $17,000 in bonus pay and that another making $250,000 on an annual basis could pocket $34,000. The bonus plan excludes Dewey “insiders,” the term used for former executive partner Stephen Horvath III, former general counsel Janis Meyer, and former finance director Frank Canellas, who have all continued to work for the estate. Recent filings show that Horvath has received $190,000 in pay since the firm went bankrupt, as well as $23,563 in expense reimbursements. Meyer has taken home $56,000, and Canellas has collected $33,333.
The remaining employees, Ratner said, are helping collect on what Dewey filings say is $205 million in accounts receivable, as well as assessing the firm’s remaining furniture and physical assets, preparing filings for the court, sifting through claims against the estate, and aiding in returning client files. All told, it’s “not simply a task of attorneys sitting in their offices and citing sections of the bankruptcy code,” Ratner said. “That’s more a process of people at Dewey searching, obtaining, retrieving, and organizing what could be in many cases very complicated financial data.”
Thursday is shaping up as another busy day for the Dewey team, which is scheduled to present a revised settlement plan to some 700 former partners who have worked at or received retirement payments from the firm over the past two years. Dewey’s initial plan called for partners to pitch in between $25,000 and $3 million in exchange for a waiver of any Dewey-related liability. The plan, which at this point requires the estate to recover at least $50 million of the proposed $103 million settlement in order to get creditor approval, has been revised by the Dewey team in the wake of “conversations with many partners over many days in many meetings,” Togut said at the opening of Wednesday’s hearing.
A deadline to agree to the so-called partnership contribution plan has been bumped from July 31 to August 7 in light of the revisions. The initial deadline was set because the estate’s current budget is due to run out at the end of the month, but Togut said he and the others overseeing the bankruptcy have had “constructive conversations” with the firm’s secured lenders—which are owed at least $231 million, according to recent filings—and hope to receive an extension.
Beyond all the squabbling over the employee retention plan, Dewey faced little resistance during Wednesday’s hourlong hearing (which, unlike past hearings, didn’t draw much of an audience beyond a handful of journalists and a smattering of spectators). Glenn approved half-a-dozen motions, including one to officially wind down Dewey’s German office and appoint German law firm Thierhoff Muller & Partner to advise on that process. According to court filings, the German operations still hope to collect $1 million in accounts receivable and are in the process of laying off 12 remaining employees.
One motion involving Dewey’s plans for disposing of hundreds of thousands of boxes of client files, which was hotly contested during a hearing earlier this month, was tabled until August 23. Between now and then, Dewey will continue returning files to clients who request them, and Togut said the firm is seeking advice from an ethics expert on the proper way to dispose of those that aren’t collected.
The estate is also pushing to set an early September deadline for any creditors who believe they have claims to assert against the firm.