On February 15, with Dewey & LeBoeuf entering what would prove to be its death spiral, the firm quietly settled a $3 billion malpractice suit filed against it in Missouri three years ago by state insurance regulators who accused predecessor firm LeBoeuf, Lamb, Greene & MacRae of participating in a conflict-riddled scheme to push General American Life Insurance Co.at one time the Show Me State’s largest life insurerinto insolvency and, ultimately, the hands of fellow LeBoeuf Lamb client MetLife.
The abrupt dismissal of the case less than a month before it was to go to trial came amid a stream of partner departures and mounting concerns about the firm’s financial condition, but it is hard to know whether resolving it added to the fiscal woes that ultimately doomed Dewey to oblivion. That’s because, three months later, the settlement’s termsand details about how much money the firm agreed to pay outremain shrouded in secrecy.
The Missouri Department of Insurance’s Web site lists the settlement amounts paid by three other defendants targeted in related suitsaccounting firm KPMG ($18 million), Morgan Stanley ($95 million), and Goldman Sachs (just over $100 million)that have contributed to $1.425 billion in distributions that General American’s holding company had dispersed to some 300,000 policyholders as of September 2009. (A final distribution for an undisclosed amount is scheduled for later this year.)
No such information is available about the suit against Dewey. All that the insurance department Web site says on the subject is that as of February 2012, “The Dewey & LeBoeuf case has been resolved.” Contacted for comment by The Am Law Daily, insurance department spokesman Travis Ford declined to elaborate on that single sentence. A mid-February court filing simply says the case has been dismissed with prejudice by stipulation and that the parties must bear their own costs.
One person familiar with the settlement would only say the amount Dewey agreed to pay was less than KPMG’s $18 million settlement figure and should be covered by the firm’s professional liability policy. According to a second source familiar with the firm’s operations, that policy has a $300 million cap and a $2 million deductible, was brokered by AON, and was issued by Bar Insurance and Reinsurance, a company incorporated in Bermuda that provides professional liability insurance to an unspecified number of large law firms. Richard Howe, a Bar Insurance director and of counsel at Sullivan & Cromwell in New York, declined to confirm that Dewey is among the firms served by the insurance group.
Whatever the sum, it’s possible given Dewey’s impending liquidation that the Missouri insurance departmentand, by extension, the General American policyholders on whose behalf the suit was filedwill join the list of parties lining up to be paid by the rapidly vanishing firm. That list already includes Dewey’s bank lenders, the holders of $125 million in bonds the firm issued in 2010, vendors, landlords, former employees, retirees, and partners who have moved to new firms as Dewey collapsed.
The case may also have created another potential creditor: Shook, Hardy & Bacon, which served as Dewey’s defense counsel in the matter and whose bills are likely substantial. After all, as one December 2011 court filing states: “Put plainly, this is a big case. There have been literally millions of pages of documents exchanged in discovery, over one thousand exhibits, and dozens of depositions taken which cover thousands of pages of transcript.” Shook Hardy chair John Murphy declined to comment on whether his firm has been paid for its work on the matter.
A LAST-MINUTE LAWSUIT
The Missouri insurance department did not sue Dewey & LeBoeuf until long after it had sued, and settled with, Goldman Sachs, KPMG, and Morgan Stanley over their dealings with the company. (The insurance department also unsuccessfully tried to pursue Lloyd’s of London and former General American officer Leonard Rubenstein.)
Indeed, Dewey claims in court filings that it was taken aback by the suit because Albert Riederer, a former state appellate judge and prosecutor serving as deputy special liquidator in connection with the General American receivership, had said the firm would not be the target of litigation. (Riederer said publicly in 2006 that “the heavy lifting on the legal issue is winding to a close.”)
