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 the partners.
“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 obtained by The American Lawyer. “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, Mitchell reminded partners, “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 percent premium on your PCP contribution amount.”
Mitchell sent the emails ahead of a Thursday 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 in the U.S. trustee’s office, Mitchell and Togut expressed confidence that the plan would garner the required support while acknowledging only about 160 of 672 potential participants had signed on at that point.
By Friday, commitments topped $70 million from more than 300 partners.
The proposed settlement, which comes less than three months after the firm declared bankruptcy, is designed to help repay creditors owed $250 million in secured debt and at least $300 million more in unsecured claims.
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.” Through a spokeswoman, Mitchell declined additional comment Friday.
Creditors still need to approve the deal, and as of Thursday, one group in that camp appears to be putting up some resistance.
A filing by an official committee of former partners, composed primarily of retired partners from Dewey legacy firm LeBoeuf, Lamb, Greene & MacRae, asked U.S. Bankruptcy Judge Martin Glenn to appoint a neutral examiner to analyze the settlement and make sure it is in the best interest of creditors.
The filing comes in response to a motion by a separate committee of retired LeBoeuf Lamb partners, asking that the case be put into the hands of a Chapter 11 trustee or examiner. Unlike that group’s request, the official committee, represented by Kasowitz Benson Torres & Friedman partner David Friedman, said it believes it is premature to have a Chapter 11 trustee installed.
In his motion, Friedman argued members of the team winding down Dewey’s affairs — which includes two former partners, bankruptcy counsel at Togut, Segal & Segal and the restructuring firm Zolfo Cooper — are fundamentally conflicted because all were hired during Dewey’s pre-bankruptcy downward spiral and “were actively engaged in many of the debtor’s most controversial pre-petition actions.”
The creditors argue that the settlement favors higher paid partners and business generators at the expense of retirees and long-ago departed partners. Those partners have been pressured, according to the motion, “on no basis other than the veiled threat that a ‘release is valuable.’ ”