Dewey & LeBoeuf’s bankruptcy advisers expect to file a Chapter 11 bankruptcy plan by Thanksgiving Day in which they will lay out how the estate’s paltry funds will be divided among creditors, lawyers for the estate said in court Wednesday.
The plan will offer estimates of how much money the firm will have to pay out and how it should be split between secured lenders owed some $260 million and unsecured creditors owed between $300 million and $500 million more. Lead Dewey lawyer Albert Togut said Wednesday the estate expects to have a hearing Jan. 3 on Dewey’s disclosure statement, which the court must approve before a reorganization plan can move forward. If all goes well, Togut said, a confirmation hearing on the plan should happen by the end of February.
News of the bankruptcy plan’s imminent arrival came during a hearing Wednesday held to discuss the Dewey estate’s attempt to disband a U.S. trustee-appointed committee formed at the start of the six-month-old Chapter 11 case to protect the interests of Dewey retirees. Dewey’s advisers argue that the committee has served mainly to drain estate funds while making few if any meaningful contributions to the bankruptcy’s proceedings.
“It’s an understatement that the former partners committee has not been a positive force in the case,” Togut said to U.S. Bankruptcy Judge Martin Glenn, who is overseeing the case.
The committee made up of two retirees apiece from legacy firms Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae has been among the most vocal critics of a $71.5 million settlement plan struck by the estate and former Dewey partners that frees participants from future claims brought by the estate in exchange for cash payments ranging from $5,000 to $3.37 million. The group unsuccessfully tried to persuade Glenn not to approve the settlement, which he did on Oct. 9. The former partners subsequently appealed Glenn’s decision in Manhattan federal court, arguing that certain aspects of the deal require further scrutiny, including into whether it benefits Dewey insiders at the expense of others. An ad hoc committee of retirees, represented by Dorsey & Whitney, has raised similar objections and is also appealing Glenn’s decision.
“We do think they filed the appeal as another tactical device to maintain the necessity of their existence,” Edward Weisfelner, a partner at Brown Rudnick who represents the bankruptcy’s official creditors committee and supports the estate in disbanding the former partner group, said during Wednesday’s hearing. Typically, only one committee is appointed in a bankruptcy with the scope of Dewey’s, several attorneys said in court Wednesday.
Glenn seemed skeptical of Togut’s intentions, saying at one point during the hearing, “What you’re trying to do is pull the rug out from under the committee who opposed the [partner contribution plan].” Glenn said that while he believes he was correct in approviong the settlement, he is not “infallible” and a judge assigned to the appeal may reach a different conclusion about the deal.
Glenn heard arguments for more than an hour and a half from lawyers representing constituencies in favor of disbanding the former partners group including JPMorgan Chase, the estate’s largest secured lender as well as from U.S. trustee lawyers who named the committee and David Friedman of Kasowitz Benson Torres & Friedman, who represents the group.
Much of the debate centered on whether or not Glenn actually has the legal power to break up the committee, or if that power rests solely with the U.S. trustee’s office, a government agency tasked with monitoring the bankruptcy process. Glenn also pressed the parties to explain who exactly the former partners committee represents and what they plan to do next. (Glenn also asked U.S. trustee Tracy Hope Davis, whose office takes the position that Glenn is not empowered to break up the committee, to file papers by Tuesday saying whether or not she wants the group disbanded).
“I just want to get a deal done for these retirees,” Friedman said. “That’s all I want to do.” Through the end of October, Friedman has billed $1.275 million for his firm’s work on the case, according to Togut, a number he said he finds outrageous in the face of a $542,000 budget allocated to the group out of JPMorgan’s cash collateral.
Glenn also said he is “very concerned about the costs and what this additional committee is doing,” but noted that he hasn’t yet signed off on any fee requests from legal advisers working on the case. (Friedman countered that several other legal advisers have also blown past their budgeted amounts).
Added Kenneth Eckstein, a Kramer Levin Naftalis & Frankel lawyer who represents JPMorgan: “This case has been on life support from day one and continues to be on life support.”
