Attorneys representing former Dewey & LeBoeuf chief financial officer Joel Sanders and the firm’s erstwhile executive director, Stephen DiCarmine, filed a limited objection to a settlement reached last week that would protect former Dewey chairman Steven Davis from most future claims stemming from his alleged mismanagement of the now-defunct firm.
As Recorder sibling publication The Am Law Daily reported last week, the settlement’s terms call for Davis to pay the Dewey estate $511,145, and for the firm’s insurer, XL Specialty Insurance Co., to contribute $19 million to the pot of money bound for creditors. If approved by the court, the deal would give Davis the same protections against Dewey-related liability enjoyed by former firm partners who have agreed to participate in a $71.5 million partner contribution plan and would also preclude the estate from suing any former Dewey leaders, including Davis, DiCarmine and Sanders. (As The Am Law Daily noted earlier this week, the settlement gives Davis six years to pay his debt and allows him to walk away from any balance still remaining as of 2019.)
Hughes Hubbard & Reed partner Ned Bassen, who represents DiCarmine and Sanders, told The Am Law Daily last week that his clients were considering filing a limited objection to the settlement ahead of Thursday’s 5 p.m. deadline. And, in documents filed with the bankruptcy court Thursday afternoon, the duo did just that, asking the court to either reject or modify the deal settlement. On behalf of his clients, Bassen also filed a motion to strike a declaration in support of the settlement filed by Dewey liquidation trustee Alan Jacobs on the basis that he "lacks personal knowledge of the salient facts" crucial to the settlement because of his late entry into the case.
Among the issues DiCarmine and Sanders raise in the limited objection: the amount XL has agreed to pay the estate — $19 million — was allegedly decided "arbitrarily" and would deplete the insurance money available to cover pending claims as well as those that might yet arise. The former Dewey leaders also claim the proposed settlement includes "improper nonconsensual third party releases" that were previously eliminated from both the partnership contribution plan and the firm’s Chapter 11 liquidation plan and allegedly limit DiCarmine and Sanders’ "ability to defend themselves in future litigation."
"We’re trying to protect and preserve our clients’ rights with respect to the settlement," Bassen told the The Am Law Daily. "That’s why we filed the objections; plus the fact that there is, in our view, no rhyme or reason to the amount of the settlement."
Additionally, Bassen says Jacobs "does not have personal knowledge of a number of the matters that are set forth in his declaration, and that’s not proper." In the motion to strike Jacobs’ declaration, DiCarmine and Sanders assert that certain matters mentioned in Jacobs’ declaration — which was filed Monday — were discussed in meetings that either were held before Jacobs took charge as liquidation trustee or in meetings at which Jacobs was not present. As the motion points out, Jacobs notes in his declaration that settlement negotiations were handled by the creditors’ committee and the collateral agent prior to his appointment as trustee.
Brown Rudnick partner Edward Weisfelner, who represents Jacobs, did not immediately respond to a request for comment. A settlement is scheduled to be discussed at a hearing scheduled for May 13.
Tom Huddleston Jr. is a reporter with The Am Law Daily, a Recorder affiliate.