The future course that failed Dewey & LeBoeuf’s bankruptcy proceedings will follow could be decided as early as Friday, when the judge overseeing the Chapter 11 case is scheduled to continue hearing arguments as to why he should either approve a proposed $72 million settlement with former partners or reject it and install a neutral examiner to manage the matter.

At a three-hour hearing Thursday held before a standing-room-only crowd, two groups of retired Dewey partners that aim to upend the settlement argued that in its haste to finalize the plan, the Dewey estate failed to pursue the maximum amount of money that could be recovered from former partners and focused its attention too narrowly in determining who to blame for the firm’s downfall.

In its current iteration, the proposed settlement — which would claw back compensation given to partners in 2011 and 2012, as well as tax advances and other payments — provides a waiver of Dewey-related liability to those who have agreed to participate, meaning the firm cannot sue them in the future and that they cannot bring claims against the estate over Dewey-related grievances. Longtime Dewey chairman Steven Davis was not allowed to participate in the settlement, and Dewey’s advisers have said the estate is considering bringing claims against him and two top firm managers who reported to him: former executive director Stephen DiCarmine and former chief financial officer Joel Sanders.

If the settlement fails to win the court’s approval, Dewey’s lead bankruptcy lawyer, Albert Togut, and chief restructuring officer, Joff Mitchell, have said publicly they fear that secured lenders owed some $250 million will lose patience and cut off their funding — a development that would likely force the conversion of the bankruptcy from a Chapter 11 case to a trustee-run Chapter 7 proceeding. Togut has also repeatedly told former partners that if that happens, they would likely have to pay back much more that the sums current being asked of them.

David Friedman, a lawyer for an official committee of former partners, said Thursday that Togut’s continued assertion that this was the cheapest deal possible may have led many retirees to sign on to the settlement out of fear rather than because it was in their best interest. At one point during the hearing, U.S. Bankruptcy Judge Martin Glenn cut that line of questioning off midstream while Friedman pressed Mitchell on the subject.

Mitchell took his turn on the witness stand after Paul Gender, who testified in connection with his role as chairman of Dewey’s three-member official unsecured creditors committee. Gender, an executive vice president of equipment lessor Winthrop Resources Corp., says the firm’s estate owes his company $43 million.

Friedman led much of the questioning Thursday, pressing both Gender and Mitchell on exactly how much work they had done to investigate potential claims against Dewey executive committee members; whether they had calculated the precise date at which Dewey was clearly insolvent or undercapitalized; to what extent they assessed the ability of partners to pay the settlement amounts; and, in the case of Gender, what influences had led the unsecured creditors’ committee to lend its support to the proposed settlement. Dorsey & Whitney partner Annette Jarvis, who represents an ad hoc committee of retired partners, also had an opportunity to question the witnesses.

Glenn’s bench was piled with several massive binders stuffed with Dewey-related documents throughout the hearing, though only a few of those documents were directly referenced. Among those cited was a previously unseen email sent by former Dewey partner Martin Bienenstock, now the chair of Proskauer Rose’s business solutions, governance, restructuring and bankruptcy group.

The email, which Friedman tried to present as proof that the Dewey estate is too cozy with former partners who stand to benefit from a quick settlement deal, was addressed to Mitchell; Togut; Janis Meyer, a former Dewey partner who sits on the wind-down committee; David Pauker, an executive at Goldin Associates who helped draw up the so-called partner contribution plan; and Schulte Roth & Zabel partner Michael Cook, who represents Bienenstock. It was sent on July 12, the day after the contribution plan was officially presented to former firm partners.

“While DL owes me over $5.5 million … I will nevertheless accept the offer even though I believe I have zero liability and can prove it,” Bienenstock states in the email.

Elsewhere in the email, Bienenstock addresses whether the partner settlement should wait until an official Chapter 11 plan, which will guide the way the bankruptcy pays off creditors and completes its liquidation, is filed. As of Thursday, the Dewey estate has until Dec. 31 to file its plan. “I have zero patience to await a Chapter 11 plan and all its opportunities for shenanigans and delay,” Bienestock wrote in the email. “I doubt the lenders will fund Chapter 11 too much longer. But, even if they do, I hope you will promptly move for approval of the settlement while [Dewey & LeBoeuf] controls the estate’s causes of action. This is the only way it can work and the only way it can be done soon. It doesn’t matter if [Ed] Weisfelner’s clients [the unsecured creditors committee] objects. You can prove with examples like mine that the settlement is more than reasonable. To put that off in the hopes of embedding it in a plan is nonsense.”

In the email, Bienstock also disputes the idea that Dewey will have any chance of recovering money related to matters former partners have taken to their new firms. Before launching into his reasoning, he writes: “Finally, please get real about the unfinished business claims.”

Reached Thursday via email, Bienenstock said “I sent the email and stand behind it.”

Others with questions at Thursday’s hearing included Ned Bassen, a Hughes Hubbard & Reed partner who represents Davis, DiCarmine and Sanders. Bassen twice raised the point that even though the Dewey estate’s advisers seem eager to pin the entire fall of Dewey on his clients, they have not met with any of them even though all three have requested meetings.

Davis, DiCarmine and Sanders have all sought in court filings to protect their ability to defend against any claims that may be brought against them. As part of that effort, they hope to begin tapping into funds they say should be available to them under a $50 million insurance policy Dewey had with XL Specialty Insurance Co.

Davis has not worked since Dewey went bankrupt, Bassen says. DiCarmine, meanwhile, has begun taking graduate classes at Parsons The New School for Design, and Sanders, as Recorder sibling publication The Am Law Daily previously reported, is moving to Florida to take a new job as chief financial officer at Fort Lauderdale-based Greenspoon Marder.

Glenn interjected only a few times Thursday, primarily when urging attorneys to get to the point or move on to a new question. He offered no inclination as to which way he might rule on the settlement or the request to appoint an examiner.

Asked after the hearing how he thought it had gone, Mitchell said: “I have no idea where it stands. I was in the same room as you.”

When the proceedings resume Friday morning, the questioning of Mitchell is scheduled to wrap up and Pauker of Goldin Associates is to take the stand.

Sara Randazzo is a reporter with The Am Law Daily, a Recorder affiliate.