Dewey & LeBoeuf is still on track to receive final confirmation of its bankruptcy plan by the end of February after the judge overseeing the firm’s Chapter 11 case approved two key documents late Monday, paving the way for Dewey’s creditors to weigh in.
The so-called disclosure statement and Chapter 11 plan, totaling about 150 pages, lay out how the Dewey estate intends to maximize its remaining assets and how much creditors owed some $600 million can expect to be paid. Recoveries to unsecured creditors are expected to be minimal, according to court hearings.
U.S. bankruptcy court judge Martin Glenn expressed serious reservations at a hearing last week about several of the two documents’ provisions, including those detailing how much liability former firm partners would have with regard to Dewey-related claims if they had signed on to a partner contribution plan that asks them to contribute between $5,000 and $3.37 million apiece in exchange for assurance the Dewey estate will not sue them in the future. (In a footnote to the disclosure statement, Dewey’s advisers say they plan to raise $67.8 million from the former partners, a lower amount than previously reported because it takes incentive discounts into account.)
The revised plan now says that claims not belonging to the Dewey estate can still be brought, but emphasizes that former partners can only be found liable for their proportionate share of any such claims.
Glenn also took issue with what he considered the estate’s incomplete plan to return client files and unwillingness to pay for the cost of destruction for unclaimed files. Dewey amended its plan to say it has gotten budget approval to shred the unclaimed portion of approximately 345,000 boxes of files kept in a storage facility.
In his Monday order, Glenn set a schedule that gives creditors until February 11 to vote on the plan, and gives any party with an interest in the Dewey bankruptcy until February 13 to file objections. A confirmation hearing is scheduled for February 27.
Dewey & LeBoeuf went bankrupt May 28. Read our past coverage of the bankruptcy plan here and here.