Update, 9/14/2012, 1:00 p.m. EDT: Information from filings made late Thursday by Dewey’s former executive director Stephen DiCarmine, former chief financial officer Joel Sanders, and former chairman Steven Davis have been added to the 13th, 14th, and 15th paragraphs below.
In a rash of filings Thursday made before a late-afternoon deadline, several parties connected to Dewey & LeBoeuf came out either for or against a proposed settlement plan that would collect $71 million from ex-Dewey partners in exchange for a release from Dewey-related liability.
Those opposed to the plan include an ad hoc committee of retired partners from Dewey predecessor firm LeBoeuf, Lamb, Greene & MacRae and an official committee of retirees created by the U.S. Trustee’s office as part of the Chapter 11 proceedings. Both groups have previously expressed concerns about the fairness of the proposed settlement and have asked U.S. Bankruptcy Judge Martin Glenn to appoint a neutral third party to oversee the case so that all parties are treated equitably.
The oppositions came the same day that an official committee of unsecured creditors, as well as informal groups of former Dewey partners, pledged their support for the settlement.
In its Thursday filing, the unsecured creditors committee, represented by Brown Rudnick partner Edward Weisfelner, explained that after “extensive analysis and deliberation,” it had decided that even though the amount of money being clawed back from former partners could be greater, the so-called partner contribution plan “is likely to generate a larger and quicker net return for the Debtor’s unsecured creditors than would otherwise be attainable through prolonged, expensive and uncertain litigation.”
The settlement’s approval, the committee said, is a necessary step toward arriving at a Chapter 11 plan and, ultimately, resolving the bankruptcy, which Dewey initiated May 28. At the same time the unsecured creditors said they oppose the participation in the settlement of former Dewey partners Stephen Horvath and Janis Meyer. Both have stayed on to help wind down Dewey’s operations and are being offered the same liability waiver as the rest of the plan’s participants without being asked to contribute any money. The unsecured creditors committee also opposes a provision in the plan that would allow money collected from partners in the United Kingdom to go toward the firm’s liquidation in that country rather than staying in the U.S.
Weisfelner notes in the motion that nearly 20 percent of the ad hoc committee, which is collectively opposed to the deal, signed on to it.
Meanwhile, in moving to block the settlement, the two former partners’ committees argue, among other things, that it should be filed in conjunction with a Chapter 11 plan rather than as a stand-alone motion. They also contend that the settlement was created by advisers with an inherent conflict of interest and that not enough analysis has been done to guarantee that the deal is fair.
In a dig at Dewey’s advisers, the official partners’ committee’s motion reads, “Although the PCP Motion is peppered with platitudes about the ‘complexity’ and ‘uncertainty’ of litigation (as if any litigation were simple and easy), the Debtor fails to provide any analysis—and, indeed, concedes that it performed none—regarding potential tort claims against former partners or when the Debtor became insolvent.”
The ad hoc committee’s motion contains its own shot at those currently shepherding Dewey through Chapter 11: “While the Debtor extols the virtues of an unprecedented settlement, the plain reason a settlement of this sort is ‘unprecedented’ is that it does not comply with the settlement standards imposed by Rule 9019 of the Federal Rules of Bankruptcy Procedure . . . and because it asks this Court to render a premature, impermissible advisory opinion.”
Dewey’s chief restructuring officer, Joff Mitchell, declined to comment Thursday.
Dewey’s advisers, as well as its largest secured lender JPMorgan, have spoken out against the ad hoc committee in filings opposing their motion to move the bankruptcy into the hands of a trustee. Thursday, former Dewey heavyweights Ralph Ferrara and Martin Bienenstock, now with Proskauer Rose, filed a one-page motion agreeing with JPMorgan’s stance on the matter.
Kenneth Freeling, a former partner from Dewey’s Doha, Qatar, office now with K&L Gates in Doha and Washington, D.C., filed a separate opposition to the partner contribution plan, arguing that the liability release it offers is overly broad. Freeling argues that by not signing on to the settlement, he should still be able to bring claims against those who did and object to the bankruptcy plan.
Three of Dewey’s former leaders, all of whom are barred from participating in the settlement, also raised limited objections to the partner contribution plan Thursday. In separate but nearly identical filings, former Dewey executive director Stephen DiCarmine, former chief financial officer Joel Sanders, and former chairman Steven Davis seek to protect their rights, which they say could be threatened by the proposed release given to partners who participate in the settlement.
While acknowledging that they are likely to be ensnared in future litigation, the three men believe they should not be held responsible for the harm that befell Dewey and that if they are, they “should not be liable for more than [their] proportionate share.” (The filing cites comments made by Dewey’s lead lawyer, Albert Togut, in an August 15 Am Law Daily article as proof that the firm’s estate plans to target them.) The three contend that as currently written, the liability release would unfairly prohibit any partners who participate in the settlement from cooperating with the former leaders in the event they must defend themselves in any future Dewey-related actions.
Davis, DiCarmine, and Sanders also argue in their respective filings that the names of those seeking to participate in the settlement should be made public. So far, they each say, the estate has cited “unspecified reasons of ‘confidentiality’ ” as justification for withholding those names. “ To the extent the Debtor seeks to seal the identities of the Participating Partners, it would need to file a motion to seal the participant list and carry a heavy burden of establishing its need to do so, which it has not done,” all three filings state.
On another front, UniCredit, a German bank and former Dewey client, said in a filing of its own that it is owed $118 million by the bankrupt firm and is opposing the partner contribution plan to the extent that it affects malpractice insurance held by the estate.
Dewey filed a motion on August 29 seeking the court’s approval of the plan. A hearing on the plan and the related motions is scheduled for September 20.