While few in the legal industry were surprised by the Chapter 11 filing by Dewey & LeBoeuf in May of this year, many were shocked that a firm of such size and stature could unravel at such speed.
It seems that the bankruptcy proceedings are continuing at a similar pace. This week it was announced by Thomson Reuter’s News & Insights that a $71.5 million settlement between former Dewey & LeBoeuf’s partners and the law firm’s estate has been approved by the bankruptcy judge in charge of the case. The decision comes less than five months after the firm’s dissolution, and provides creditors, who are owed in the vicinity of $500 million, their first and largest recovery in the bankruptcy so far.
It has been estimated that more than 400 of the 670 former partners have so far opted to participate in the settlement, which requires former partners to pay portions of their compensation from 2011 and 2012. In exchange, partners who opted in are released from future liability and litigation over debts. Individual payments reportedly ranged from $5,000 to $3.5 million.
Bankruptcy judge Martin Glenn concluded the settlement was in the best interests of both the estate and its creditors by avoiding years of potential litigation between Dewey’s estate and former partners. He concluded the settlement ultimately “will lead to a quicker wind-down in Chapter 11, and – more importantly – a quicker and more certain distribution to creditors.”
Glenn also rejected a request from a group of retirees and former partners from legacy firm LeBoeuf Lamb Greene & MacRae who opposed the settlement on the grounds that it favoured higher paid partners. Judge Glenn adjudicated that the settlement was independently negotiated with no evidence of one particular party favored over another.
Dewey’s wind-down team now hopes that the judge’s decision will prompt other partners who have yet to accept the settlement to reconsider. The team has offered to waive a late penalty fee for partners who now decide to opt in.
Details of the settlement revealed top contributors include corporate partner Berge Setrakian (who agreed to pay $3.5 million), Washington, D.C.-based white-collar defense rainmaker Ralph Ferrara ($3.36 million), and Mort Pierce, Dewey Ballantine’s former chairman ($1.02 million).
However, the firm’s senior management team – Chairman Steven Davis, executive director Stephen DiCarmine, and former chief financial officer Joel Sanders, were not allowed to participate in the settlement. According to reports by Legal Week, the Dewey estate may pursue claims against them.
The settlement also does not include an estimated $60 million of revenue and work in progress that former partners took with them to new firms at the time of, or prior dissolution, which trustees may seek to recover.
To access a full copy of Tuesday’s ruling by Judge Martin Glenn please follow this link. The final details of Dewey & LeBoeuf’s Chapter 11 reorganisation are scheduled to be decided in November.
Posted by Tricia Pelton