The bankruptcy court judge overseeing Dewey & LeBoeuf’s Chapter 11 case said Thursday that he could issue his decision either approving or rejecting a proposed settlement between former Dewey partners and the defunct firm’s estate as early as Tuesday.
U.S. Bankruptcy Judge Martin Glenn told Dewey advisers during an uncharacteristically brief hearing that while he wasn’t making any promises, he hopes to rule by Tuesday or Wednesday on the so-called partner contribution plan, under which roughly 450 former firm partners have agreed to repay the estate a total of $71.5 million in exchange for waivers from Dewey-related liability. The settlement sum—cobbled together from individual payments ranging from $5,000 to $3.37 million—represents income the participating partners received from Dewey in 2011 and 2012, as well as tax advances and unpaid capital contributions.
“We’re waiting for you,” lead Dewey bankruptcy lawyer Albert Togut, of Manhattan boutique Togut, Segal & Segal, replied when Glenn asked him about any updates on the bankruptcy’s status. Togut also mentioned that the estate now has permission from its secured creditors to fund the bankruptcy using cash collateral through November 4.
The only formal business addressed during Thursday’s hearing in lower Manhattan, which lasted less than 10 minutes, involved Glenn’s approval of the Dewey estate’s request that it be allowed to pay two of its remaining 37 employees bonuses as incentives for continuing to work on the bankruptcy. Director of billing Lourdes Rodriguez—who court documents show has created invoices for $54 million in work-in-progress begun when Dewey was an operational law firm and is working to invoice another $46 million in bills—will receive $50,000. Collections manager Lisa Sucoff, who the estate credits with collecting more than $50 million in unpaid bills to date, will get $5,000.
Earlier this week, Dewey’s advisers dropped their request to pay a third bonus in the amount of $165,000 to former Dewey finance director Frank Canellas, who has continued to serve that function for the estate since Dewey’s May 28 bankruptcy filing. The U.S. trustee’s office and an official committee of former partners opposed the bonus payment, saying Canellas is too involved in firm management to be qualified for such a perk. Michael Driscoll, a lawyer with the U.S. trustee’s office, said during Thursday’s hearing he is concerned the estate will try to revive the Canellas bonus issue in the future, given that it has now moved twice to reward him with extra compensation. Glenn dismissed Driscoll’s concerns, saying he would address the matter in the event it actually arises.
As Togut stated in court, progress has mostly stalled in what had been the fast-moving bankruptcy since Glenn took the settlement under consideration on September 21 following a two-day hearing. If he does not approve the plan, the Dewey bankruptcy is likely to be converted a trustee-run Chapter 7 proceeding.
As The Am Law Daily reported Wednesday, at least 76 of the partners who have signed on to the settlement have made contingency plans in case Glenn rejects it, filing proofs of claim with the bankruptcy court detailing how much money they believe Dewey owes them. Those claims would be largely voided if Glenn approves the settlement.