Update, 8/17/2012, 11 a.m. EDT: A statement from Dewey’s chief restructuring officer Joff Mitchell has been added to the eighth paragraph below.
A proposed $90.4 million settlement with former Dewey & LeBoeuf partners designed to raise much-needed cash for the bankrupt firm’s creditors is set to move forward, according to an email sent to those partners Thursday afternoon and obtained by The Am Law Daily.
“I am pleased to advise that, as of 2.45pm today, we have received signed settlement agreements with commitments for over $50m from former Dewey partners,” Dewey’s chief restructuring officer, Joff Mitchell of Zolfo Cooper, wrote in the two-sentence email. “The threshold for us to take the Partner Contribution Plan to the Creditors and the Bankruptcy Court for approval has now been crossed.”
In a second email sent later Thursday afternoon, Mitchell reminded partners that “For those of you that have yet to sign your settlement agreements, remember that if you miss the deadline and want to join the settlement at a later time, there is a 25% premium on your PCP contribution amount.”
Mitchell sent the emails ahead of a 5 p.m. EDT deadline for them to sign on to the settlement plan—and a day after he and lead Dewey bankruptcy counsel Al Togut met with the firm’s unsecured creditors to update them on the status of the Chapter 11 case. Dewey filed for bankruptcy protection May 28.
At Wednesday’s meeting—which was held at the U.S. Trustee’s Office in lower Manhattan—Mitchell and Togut expressed confidence that the plan would garner the required support by Thursday’s deadline, while acknowledging that only about 160 of 672 potential participants had signed on to that point.
Speaking after the meeting, Mitchell said he was “heartened” by the commitments the Dewey estate had received as of Wednesday and noted that many of those who appeared uninterested in taking part in the settlement were not among the firm’s top earners. By Thursday afternoon, the number of participants had surpassed 300, with more still signing on.
The partner contribution plan calls for former partners to return between $5,000 and $3.5 million apiece in excess compensation received in 2011 and 2012, as well as additional money related to tax advances and unpaid capital contributions. In exchange for making payments to the estate—and if the plan wins court and creditor approval—participants will receive waivers from Dewey-related liability. Those who opt out could well wind up being sued by the Dewey estate.
In a statement, Mitchell called the settlement’s apparent success a “key milestone we are pleased to have reached,” characterizing it as “an early settlement that can deliver meaningful recoveries to creditors and let former partners put this behind them.” If approved, the speed of such a settlement will be a first in law firm bankruptcies; typically, clawback claims seeking the return of compensation from former partners can drag on for years.
The settlement is still far from being finalized. An official committee of former Dewey partners, represented by Kasowitz Benson Torres & Friedman partner David Friedman, filed a motion Thursday asking the bankruptcy court to appoint an examiner to scrutinize the partner contribution plan. “Regardless of whether the PCP delivers the right economic outcome, it plainly is the outgrowth of a flawed process,” the motion says, arguing that Dewey’s advisers have inherent conflicts of interest because they have been working for Dewey since before it went bankrupt.
The Thursday emails from Mitchell arrived in partners’ in-boxes shortly after legal blog Above the Law posted a story with what it characterized—without identifying the source—as a partial list of the firm’s top earners in 2011 and 2012, how much they made, and how much they are being asked to contribute to the settlement.
For more on Dewey’s partner contribution plan, read The Am Law Daily‘s extensive previous coverage: