A group of retired Dewey & LeBoeuf partners whose objections threatened to drag out or even derail the defunct firm’s bankruptcy proceedings have reached a settlement that Dewey lawyers say should clear the way for the speedy approval of a pending Chapter 11 plan.
The settlement, detailed in Thursday court filings, has been offered to 125 retired Dewey partners—most of them tied to legacy firm LeBoeuf, Lamb, Green & MacRae—who are being asked to repay the bankruptcy estate a portion of the money they received from the firm in 2011 and 2012, including tax advances, payments from nonqualified retirement plans, and of counsel and special counsel compensation. (In cases involving retirees who have died, those partners’ beneficiaries are to make the payments.)
The retired partners also agreed to forsake future claims against the Dewey estate; abandon some $80 million in proofs of claim filed in the bankruptcy; assign any claims against former Dewey partners, employees, or firm leaders to the estate; and drop their appeal of a $70 million partner contribution plan signed on to by a majority of the firm’s former partners. The settlement requires the approval of U.S. Bankruptcy Judge Martin Glenn, who has already approved the partner contribution plan.
David Bicks—a retired Dewey partner who is now in an of counsel capacity at Duane Morris and was among the most vocal dissenters—said in an interview Friday that it was simply time to move on.
"The best course was for both sides to lay down arms and avoid the travail and cost of continued litigation," Bicks says, adding that as the bankruptcy moved forward, "it became clear that the projected recoveries to the estate would provide little or no upside for the retirees or other creditors." ( As The Am Law Daily has previously reported, Dewey’s creditors—who say they are owed $600 million—could receive pennies on the dollar.)
Joff Mitchell of Zolfo Cooper, who is serving as Dewey’s chief restructuring officer, said Friday that the estate was "delighted" to have reached an agreement with the retirees. "It’s really taken away . . . what would have been complications to confirmation and also ongoing substantial litigation costs to defend the appeals and defend [against] the objections," Mitchell said. While the exact amounts each retiree will pay the estate are not yet final, he added, court filings show that a total of at least $315,000 must be collected for the settlement to succeed.
With the dispute resolved, Dewey’s Chapter 11 plan laying out how the firm’s creditors are to be repaid could be approved as soon as February 27, when a confirmation hearing is scheduled. Once the plan wins court and creditor approval, Mitchell and lead Dewey lawyer Albert Togut, of Togut, Segal & Segal, will make way for a pair of liquidation trustees to step in and complete the wind down of the estate.
Thursday’s filings indicate the settlement between the estate and the retired partners followed six months of "hard-fought litigation and negotiation."
Bicks and his fellow objectors—represented by both an ad hoc committee and an official committee appointed by the U.S. trustee’s office—had repeatedly balked at the way Dewey was unwinding its operations after entering bankruptcy last May. The retirees’ overriding argument was that unlike other former partners who quickly established new income streams by moving to new firms, they relied heavily on retirement income from Dewey and would suffer disproportionately under the Chapter 11 plan taking shape.
The settlement’s terms call for the Dewey estate to pay no more than $1.35 million in legal fees to Kasowitz Benson Torres & Friedman, which is representing the official committee of former partners. Kasowitz partner David Friedman, who is acting as lead counsel in the case, did not immediately respond to a request for comment. Annette Jarvis, a Dorsey & Whitney partner representing the ad hoc retirees’ committee, also did not immediately respond Friday.
Thursday’s settlement marks the latest effort by Dewey’s advisers to recoup whatever they can for the estate. On February 1, the estate staged a live auction to sell off some of the firm’s art collection in Washington, D.C. Sibling publication Blog of Legal Times was on hand for the event, which raised $528,120 (20 percent of that will go to the auctioneer). A second auction is scheduled for February 22 that will feature vintage movie posters—including an Italian version for Marlon Brando’s "On the Waterfront"—from the firm’s collection.
Dozens of less-valuable items in the firm’s art collection have also been sold in recent months in a rolling auction, bringing in $35,267 once handler’s fees have been deducted, according to a filing made earlier this week in the bankruptcy.