Law firms that hired partners from Dewey & LeBoeuf in the period leading up to its collapse last year must provide the defunct firm’s liquidation trust with information about how much work they inherited in taking on those attorneys, a federal bankruptcy judge ruled Tuesday.
U.S. Bankruptcy Judge Martin Glenn’s decision came over the objections of a host of firms that wanted him to delay the Dewey trust’s pursuit of so-called unfinished business claims until the U.S. Court of Appeals for the Second Circuit decides a case involving similar claims tied to the Thelen and Coudert Brothers bankruptcies. In that case, the Second Circuit recently asked New York state’s highest court to rule on whether bankruptcy estates in New York have an ownership right to fees generated by hourly assignments taken from a failing firm as it goes under.
In July, Texas attorney Allan Diamond, who is advising the Dewey bankruptcy trust, asked Glenn to allow him to subpoena 36 firms that took on Dewey partners amid the firm’s implosion. Diamond maintains that the subpoenas—and the information he hopes they will yield—are essential to developing a better understanding of the value of certain estate assets. More than two dozen of the firms he targeted filed a joint opposition to the subpoena request in October, calling it “invasive” and “premature and inappropriate” in light of the Thelen and Coudert Brothers appeals.
Glenn said during a Tuesday hearing that despite the uncertainty surrounding how New York law views unfinished business claims, he wants discovery into any such claims in the Dewey bankruptcy to proceed. “I’m concerned about freezing everything in place,” he said, noting that it could be six months before the New York Court of Appeals weighs in on the matter and even longer for the Second Circuit to issue its final ruling. “My strong view is that cases need to move forward.”
Glenn grew impatient when Willkie Farr & Gallagher partner John Longmire, speaking on behalf of the 28 objecting law firms, insisted the subpoenas would be “tremendously burdensome.”
“Don’t give me ‘tremendously burdensome,’” said Glenn, who added that anyone working in each firm’s accounting department could probably “press a few buttons” and find the necessary information. “[Diamond] may overstep in what he asks for, but don’t stand there and just tell me this’ll be burdensome.” Longmire countered that some of the information Diamond may seek via the subpoenas, such as the profitability of a particular matter, would likely require more than the push of a button to produce.
While details of what exactly the Dewey trust can request have not been finalized, Diamond said in court he plans to give the firms a list of assignments he believes the Dewey lawyers in question were working on when they left and to ask the firms to confirm which of the matters they picked up and how much revenue they have produced.
After ruling from the bench that he would allow the subpoenas—and telling Diamond he wants them to be “as narrowly tailored and focused as possible”—Glenn stressed that any firm that argues the requests are too cumbersome must give a detailed explanation of why that is so. “I need particulars and amounts,” Glenn said. (Longmire, who said during his remarks in court that he finds the unfinished business doctrine “unsustainable and illogical,” had no comment on Glenn’s ruling when reached after the hearing.)
Other firms that Diamond plans to subpoena include Arnold & Porter, Covington & Burling, DLA Piper, Hogan Lovells, Patton Boggs, Sidley Austin and Weil, Gotshal & Manges.
Kaye Scholer partner Aaron Rubinstein noted during Tuesday’s hearing that while his firm is also on the list, one of the partners is in Chicago and may be beyond the reach of New York law, and that the second received a waiver of unfinished business claims as part of his participation in a $70 million settlement the Dewey estate struck with former partners last year.
Dewey trustee Alan Jacobs declined to say after the hearing how many of the hundreds of former partners who signed on to that settlement have similar waivers.
Meanwhile, a handful of partners who have not yet settled with Dewey found themselves facing new litigation related to the bankruptcy this week.
In a series of complaints filed Monday, Dewey seeks the recovery of millions of dollars in compensation paid to nine partners from Jan. 1, 2009, until the day they left Dewey, as well as tax payments made on their behalf. The suits, which offer a detailed look at what led to Dewey’s collapse, mirror a complaint brought in mid-November against former partner WIlliam Marcoux.
The targets of the suits filed Monday and the amounts being sought are: Eric Blanchard ($1.4 million), Geoffrey Coll ($1.48 million), Glynna Christian ($394,981), John Keiserman ($595,499), Lawrence Larose ($1.67 million), L. Londell McMillan ($1.77 million), Mark Radke ($854,847), Fred Reinke ($814,312) and Anthony Shaw ($788,088).
Keiserman, who left Dewey in October 2010 and is now a partner at Katten Muchin Rosenman, had no comment. Shaw, who switched from being partner to counsel at Dewey at the beginning of 2010 and left for Arent Fox four months later, also had no comment. McMillan, a partner at Meister Seelig & Fein, said that while he hadn’t had time to fully read the complaint, “Dewey & LeBoeuf owes me and many of my former partners millions of dollars. The notion that I owe any debt is unconscionable and without merit.” (McMillan is already involved in Dewey-related litigation after suing Barclays Bank and a number of former Dewey leaders earlier this year in New York federal court over what he says is a fraudulent capital loan agreement taken out in his name.)
The other lawyers could not immediately be reached Tuesday.