A handful of former Dewey & LeBoeuf partners who have so far refused to contribute to a settlement plan designed to help repay the bankrupt law firm’s creditors came in for stinging criticism in a Thursday filing made by the Dewey estate’s lawyers as part of an effort to dismantle claims those former partners continue to pursue.
In the wake of Dewey’s collapse and bankruptcy filing last May, many former partners felt the defunct firm owed them money—for compensation guarantees that had gone unfulfilled, capital contributions that would never be returned, and various other debts. Most of those lawyers have nonetheless agreed to set those claims aside and sign on to one of several settlements that will bring in at least $71.5 million earmarked for creditors owed hundreds of millions of dollars.
Several dozen former Dewey partners, however, continue to resist chipping in, and lawyers for the estate took aim at 18 of those holdouts in Thursday’s 28-page filing.
The filing—which seeks to reclassify the former partners’ claims to make them subordinate to those asserted by the firm’s general creditors, who are likely to get no more than 14 cents for each dollar they are owed—calls the ex-Dewey lawyers’ push to reclaim money "nothing more than thinly veiled attempts to fabricate a defense to the estate’s impending clawback litigation against the Respondents."
Dewey’s lawyers argue that claims for unpaid capital, deferred compensation, bonuses, and profit distributions should all be given the lowest priority, in accordance with Dewey’s partnership agreement. The filing lists eight former partners seeking a collective $4.46 million in unreturned capital contributions specifically, including a $1.8 million claim made by John Altorelli and a $591,840 claim from William Marcoux, both of whom are now at DLA Piper.
To bolster its argument that the estate should be reclaiming from the former partners, and not vice versa, the estate also included in the filing a list of payments made to a dozen of the partners in question in the 90 days prior to the bankruptcy, a period during which Dewey had already become insolvent.
The payments include $128,819 to Aldo Badini, now with Winston & Strawn; $105,686 to Altorelli; $157,913 to Alan Salpeter, now with Kaye Scholer; and $96,308 to Bennett Murphy, a bankruptcy lawyer in Los Angeles. (See the entire filing here).
Altorelli conceded Friday that he doesn’t expect to see any of the money he’s seeking, but says he’s going through the process as a way of preserving his rights. "I have to protect myself," he says.
Reached Friday, Murphy called the filing "shrill and sloppy" and said it was clear the estate was trying to sidestep his main arguments. Among the points he raises in filings of his own: That he shouldn’t be included in settlements between the estate and "former partners" because he was still officially a partner at the time of Dewey’s bankruptcy filing (Dewey’s lawyers label that argument a "blunderbuss attempt to manufacture a toehold of leverage in the face of impending clawback litigation"). Overall, Murphy says he’s optimistic: "I look forward to prevailing in bankruptcy court."
The parties are scheduled to appear March 28 before U.S. Bankruptcy Judge Martin Glenn, along with a number of other retired and former partners who have lodged claims against the estate. That hearing will come roughly a month after Glenn signed off on a Dewey liquidation plan that clears the way for creditors to begin getting repaid.