Dewey & LeBoeuf leaders’ desire for a swift flight through bankruptcy continued Wednesday, with a somewhat chaotic day of bankruptcy-related events taking place to keep the proceedings moving along.
A noon meeting to appoint an unsecured creditors committee, held in a midtown Manhattan hotel, was unexpectedly cut short at about 3:15 p.m. so that many of the major players in the Chapter 11 case could dash more than 50 blocks downtown to a 4 p.m. hearing where bankruptcy judge Martin Glenn was scheduled to reconsider the Dewey estate’s request to access the cash collateral it deems necessary to continue the work required to wind down the firm’s operations.
A day after sharply refusing Dewey’s request to use the cash held by primary secured creditor J.P. Morgan Chase, Glenn agreed to release those funds — $8.6 million of which Dewey’s wind-down committee estimates it will need to spend over the next three weeks — to the bankrupt firm’s estate. The judge said he would revisit the issue of what kind of lien J.P. Morgan Chase could place on the funds in the event they aren’t repaid.
Glenn’s ruling came some four hours after the organizational meeting of unsecured creditors kicked off in a conference room at the Sheraton New York Hotel — a session that ended before an official committee of unsecured creditors could be formed or counsel to that committee could be appointed. The parties were expected to resume that unfinished business following the bankruptcy court hearing.
Several of the 55 or so attendees at the noon meeting — which came less than 48 hours after Dewey filed for Chapter 11 protection in the largest law firm bankruptcy in U.S. history — said they had never seen such a session called so quickly. Typically, several of those on hand said, an organizational meeting convened to create a creditors’ committee and choose financial and legal advisers doesn’t happen until a week or two after a bankruptcy filing.
The meeting at the Sheraton started much like Tuesday’s initial hearing before Glenn, with Dewey lawyer Albert Togut of New York bankruptcy boutique Togut, Segal & Segal recounting the firm’s version of how it wound up being forced to seek Chapter 11 protection.
The introductions also included remarks by Brian Matsumoto, a lawyer with the U.S. trustee’s office, and Joff Mitchell of Zolfo Cooper, the Dewey estate’s chief restructuring officer. Mitchell mentioned that only two partners are currently employed by Dewey, executive partner Stephen Horvath III and general counsel Janis Meyer, who have committed to stay on for three months and six months, respectively, to help with the firm’s liquidation.
Mitchell echoed Togut’s comments by emphasizing that those overseeing the winding down of Dewey’s operations hope to complete the bankruptcy process quickly and civilly. “We can all fight and argue and spend an awful lot in professional fees,” he said, or the parties involved can try to cooperate with one another.
After a brief question-and-answer period during which Mitchell said he couldn’t say how much money those working on the wind-down are being paid, those in attendance — a group that included creditors and their counsel, former Dewey partners, and lawyers and financial advisers vying for roles advising the unsecured creditors’ committee — were told to stay close by while Matsumoto and his team conducted interviews to determine who should sit on that committee. Such panels typically include between three and nine creditors representing a cross-section of the types of claims being asserted.
Among those eager to make the list: Diamond Personnel, a staffing agency owed $740,519 that has already sued Dewey over its unpaid bills. “We’re hoping to participate in steering this sinking ship,” Leslie Berkoff, a partner at Moritt Hock & Hamroff representing Diamond Personnel, told Legal affiliate The Am Law Daily as people waited in clusters around the room.
Another party angling for a spot on the committee was equipment lessor Winthrop Resources Corp., which is owed $35.5 million, according to court filings. Despite the fact that Dewey listed Winthrop as a secured creditor in those filings, the company hopes to gain a spot on the unsecured creditors’ committee. They were represented by Robert LeHane of Kelley Drye & Warren at the meeting.
Two creditors lingering in the back of the room were overheard discussing how much Dewey owed them (more than $200,000 apiece). The pair turned out to be executives from competing car service companies, Intaboro and Dial Car, both of which provided cars in the New York area to Dewey and its predecessor firms for decades. Dial Car vice president Jeffrey Goldberg said the firm routinely ordered hundreds of cars a day, and that once his company started having trouble collecting on its bills, calls to Dewey’s finance office went unreturned.
Firms with lawyers present who were seeking the assignment as the committee’s counsel included Edwards Wildman Palmer, Brown Rudnick, McCarter & English and New York bankruptcy and litigation boutique DiConza Traurig Magaliff.
McCarter & English, whose partners David Adler and Joseph Scholz were in attendance, would be in familiar territory. The pair recently helped secure a decision in New York federal court related to the bankruptcy of another law firm, Coudert Brothers, that opens the doors to Coudert recovering money from former partners for work brought with them when the firm went under in 2006.
The decision could have major implications for Dewey, though Togut has now publicly insisted twice that the Dewey estate is attempting to settle disputes with former firm partners quickly and without litigation. “What partners want is to be free of the bankruptcy,” Togut said to the group gathered at the Sheraton on Wednesday, adding that he expects some partners will jump at the chance to settle early, while others are likely to put up more of a fight.
He did not specify the nature of any claims the firm may be considering bringing against former partners.
New York Law Journal reporter Christine Simmons contributed reporting.
Sara Randazzo is a reporter for The American Lawyer, a Legal affiliate based in New York. This article first appeared on The Am Law Daily at www.americanlawyer.com. •