With just a day left for former Dewey & LeBoeuf partners to sign on to a proposed $90.4 million settlement deal aimed at helping repay Dewey creditors, the bankrupt firm’s advisers said Wednesday that only about one in four of the affected attorneys had agreed to participate. Despite the sluggish response, those advisers expressed confidence that enough former partners would step forward by Thursday’s deadline to ensure that the so-called partner contribution plan wins bankruptcy court approval.
The update came during a Wednesday afternoon meeting at the U.S. trustee’s office in lower Manhattan held to apprise unsecured creditors on the status of the Dewey bankruptcy. Over the course of the hourlong session, Brian Masumotoan attorney with the U.S. trustee’s office responsible for monitoring the less-than-three-month-old Chapter 11 casequizzed the firm’s advisers about the Dewey estate’s current financial condition, as well as what they think might happen if the partner contribution plan does not succeed.
Joff Mitchell of Zolfo Cooper, who is serving as Dewey’s chief restructuring officer, answered many of the questions. Mitchell was accompanied by Stephen Horvath, a former Dewey partner now serving on the dissolution team, and lead Dewey bankruptcy lawyer Al Togut of Togut, Segal & Segal, who arrived a few minutes after the meeting began. (“Yeah, I’m wet,” said Togut, his jacket and shirt drenched by a sudden downpour, when asked to state his name for the record.)
Masumoto started the meeting by asking about the status of the partner contribution plan, or PCP, which calls for 672 former firm partners to return between $5,000 and $3.5 million apiece in excess compensation received in 2011 and 2012, as well as additional money related to tax advances and unpaid capital contributions. The deadline for partners to commit to the plan has been delayed several times, with the most recent extension coming Tuesday afternoon. And while former partners now have until 5 p.m. EDT Thursday to decide whether to participate in the settlement, Togut indicated Wednesday that stragglers may still be able to sign on after that.
In exchange for their participation, former partners will receive a release from Dewey-related liability. The full extent of the release, however, won’t be known until a judge signs off on the deal, Togut said: “The more partners we get, the greater likelihood for getting a broad injunction and release.”
Without identifying anyone by name, Togut said during the meeting that “notable people believed to be part of the reason why this law firm failed … are expressly excluded from PCP participation. Claims against them will continue to exist, are not going to be dropped, and will be pursued.”
The proposed plan excludes Dewey’s longtime former chairman Steven Davis, who is currently the subject of an investigation by the Manhattan district attorney’s office. Davis has denied any wrongdoing.
