The deadline for former Dewey & LeBoeuf partners to sign on to a proposed $90.4 million settlementwhich, if passed, will be the quickest such settlement ever reached in a major law firm bankruptcyhas been pushed back until August 13, according to a lawyer familiar with the news.
This is the second time the plan’s deadline has been delayed. Presented to partners on July 11, the settlement originally came with a July 24 deadline, but Dewey advisers extended it until Tuesday after presenting a revised plan on July 26 in response to widespread criticism that the initial proposal didn’t do enough to penalize former firm leaders.
Under the current proposal, nearly 700 former partners are being asked to pay the Dewey estate between $5,000 and $3.5 million apiece to offset excess compensation they received in 2011 and 2012, as well as additional money related to tax advances and unpaid capital contributions. In exchange, they receive a waiver from all liability related to the firm and agree not to sue anyone over Dewey-related grievances.
The additional delay comes amid continuing discussions between the two sides, according to the lawyer who received an email from the estate’s advisers Monday.
Reuters reports that the email said discussions were expected to be resolved by the end of day Tuesday, with revised settlement proposals going out as soon as possible after that.
Dewey’s chief restructuring officer Joff Mitchell and Dewey’s lead bankruptcy counsel Al Togut did not immediately respond to requests for comment Monday.
Since Dewey’s May 28 bankruptcy filing, Togut, Mitchell, and others working on the case have placed heavy emphasis on the settlement as a quick means of bringing cash into the estate. But even if every partner agrees to the deal, which seems to be an unlikely outcome based on conversations with former partners, Dewey’s secured creditors will still be short the some $225 million owed to them.
Those same creditors have agreed to finance the case, but the current budget is set to run out on August 15an extension from an initial cutoff of July 31.
Others who have asked for more time in the bankruptcy process include restructuring firm Development Specialists Inc., which on Friday made a filing requesting court permission to continue working on the case until the end of the month. DSI was supposed to conclude its work August 3, according to the filing. “Continuing to provide such services is the most economic and efficient manner of winding down the debtors estate,” wrote DSI’s president William Brandt in the court request.
In other bankruptcy updates, the Dewey estate filed a request Monday seeking permission to legally abandon 30 contracts the once vibrant firm needed to run its day-to-day business. The request comes on top of 128 contract rejections that the court has already approved. The latest contracts include employment agreements with Dennis D’Alessandro and Joel Sanders, both former high-level executives at the firm; former executive director Stephen DiCarmine; and longtime former chairman Steven Davis, who was ousted from the firm’s top spot in April following the opening of an investigation by the Manhattan District Attorney’s office into Davis’s actions.
Through a lawyer, Davis has denied any wrongdoing, and the current status of the investigation is unknown. Another recent filing in the Dewey bankruptcy, however, indicates that the investigation is still in progress; Lankler Siffert & Wohl, which has been advising Dewey on the criminal matter, says it is due approximately $50,000 for work done since the firm went bankrupt.
Earlier court filings show that Sanders, who served as Dewey’s chief financial officer, took home $2.9 million from Dewey in 2011 and the first half of 2012 (including expense reimbursements). The same filing shows that DiCarmine made $2.9 million in the same timeframe. Individual partners, referenced by employee identification numbers, collected between a few hundred thousand dollars and $6.7 million, according to the 355-page filing.
Even as Dewey seeks approved to scrap contracts with its former employees, the firm’s remaining 48 employees recently received court approval to collect a total of $700,000 in bonuses if they continue to work on the firm’s wind down.
