Judge Approves $71.5 Million Dewey Settlement With Former Partners
The judge overseeing Dewey & LeBoeuf's Chapter 11 proceedings on Tuesday approved a settlement plan under which ex-Dewey partners will repay the defunct firm's estate $71.5 million, making the bankruptcy the first in which a major law firm has managed to resolve claims against a majority of its former partners within mere months of dissolving.
In his 27-page ruling, U.S. Bankruptcy Judge Martin Glenn also firmly rejected a call from two groups of retired partners affiliated with predecessor firm LeBoeuf, Lamb, Greene & MacRae that he appoint an examiner to review the settlement. In refusing that request, Glenn said bluntly that the retirees' motion "was filed for an improper purpose as a litigation tactic to try to derail approval" of the plan.
Roughly 450 former Dewey partners have so far agreed to pay the estate sums ranging from $5,000 to $3.37 million apiece based on money they received from the firm in 2011 and 2012. In exchange, those who have agreed to participate in the settlement will receive a waiver of most Dewey-related liability, though the so-called partner contribution plan does not protect them against suits that may be brought by third parties or former partners who do not sign on.
Lead Dewey bankruptcy lawyer Albert Togut championed the plan since the day after Dewey filed for Chapter 11 bankruptcy protection May 28. It was presented to former firm partners on July 11 and, after several rounds of revisions, approved by a quorum of those partners many of them begrudgingly by Aug. 16.
In his ruling, Glenn emphatically supports the plan's construction and execution, saying it "will lead to a quicker wind-down in chapter 11, and more importantly a quicker and more certain distribution to creditors." He also says he found no evidence to support allegations raised by both an ad hoc committee of retired LeBoeuf Lamb partners and an official committee of former partners that the negotiations that produced the settlement were the "product of collusion" between interested parties. The dissenting groups' assertions were based, in part, on the fact that Togut, as well as Dewey's chief restructuring officer, Joff Mitchell, were hired before the firm went bankrupt, as well as the continued presence of two former Dewey partners, Janis Meyer and Stephen Horvath, on the firm's wind-down committee.
Three Dewey leaders former chairman Steven Davis, former executive director Stephen DiCarmine and former chief financial officer Joel Sanders were not allowed to participate in the settlement, and the estate has said repeatedly that it intends to pursue claims against the trio.
Ned Bassen, a Hughes Hubbard & Reed partner who is representing Davis, DiCarmine and Sanders in connection with the bankruptcy, said via email that his clients were pleased that Glenn addressed their concerns that they not be blamed for more than their proportionate share of the firm's demise. Bassen also pointed to a footnote in the ruling in which Glenn wrote that, "The court has no basis to conclude and does not conclude that there are any viable claims that can be pursued against Davis, DiCarmine and Sanders, or what defenses they may be able to assert." (Glenn's ruling comes a day after The Wall Street Journal reported that the Manhattan district attorney's office is continuing its investigation into the circumstances surrounding Dewey's fall).
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