June 10, 2023

DealBook: Dewey Hopes to Resolve Bankruptcy Quickly

As Dewey LeBoeuf began its bankruptcy proceedings on Tuesday, its advisers said their aim was to speed the failed law firm through Chapter 11.

Among the chief near-term goals of Dewey advisers is reaching an agreement to recover money from some of the firm’s former partners, many of whom departed earlier this year amid fear about their employer’s financial health. That exodus drained Dewey of revenue and the confidence that the firm would survive.

Albert Togut, a lawyer representing the Dewey estate, said in a hearing on Tuesday afternoon in federal bankruptcy court in Manhattan that the firm was working on a settlement, which could resolve a legal matter that could otherwise take years to figure out. He declined to give details after the hearing.

Still, a settlement is likely to take time. Mark C. Zauderer, a lawyer representing about 50 to 60 former Dewey partners, said in court that he and his clients had not heard what the basis of such claims would be.

Tuesday’s hearing underscored a significant moment for the American legal industry. Dewey is the largest law firm in the United States to seek bankruptcy protection, superseding the bankruptcy of Finley Kumble, which dissolved in 1987.

Mr. Togut was also involved in that firm’s bankruptcy case, which he said was marred by infighting among partners. He said he hoped to avert a similar fight. “That case is the poster child for what not to do if you can avoid it,” he said in court.

Speculation about Dewey’s imminent demise had percolated for weeks, as waves of partners decamped and negotiations to sell the firm to rivals failed.

Mr. Togut said that the firm had not filed bankruptcy until late Monday night because it had already begun steps in its dissolution. It has been closing all of its offices in the United States except for its Midtown Manhattan headquarters, and has reduced its staff to a skeleton crew charged with liquidating the firm. At its peak, Dewey had 1,400 lawyers in 26 offices around the world.

When it filed for Chapter 11 protection late on Monday, Dewey said that it had about $315 million in liabilities. Among its largest unsecured creditors is the Pension Benefit Guaranty Corporation, which has filed a lawsuit against Dewey for $80 million to cover the obligations of the firm’s underfunded pension plans. A committee of Dewey’s unsecured creditors has yet to be formed.

Another large creditor is the Paramount Group, the landlord of the office tower housing Dewey’s elegant, wood-paneled headquarters at 1301 Avenue of the Americas. Paramount is owned $3.8 million in unpaid rent on Dewey’s 10 floors in the luxury building. Dewey’s departure from the space could work to the landlord’s benefit because the firm had a long-term below-market lease, according to people briefed on the matter but were not authorized to discuss the matter.

Perhaps the most interesting name on the creditor’s list is Emily L. Saffitz, who is owed $417,000 for a “severance arrangement,” according to the filing. Ms. Saffitz, who left the firm in April to join Thompson Knight, had complained over how she was treated by a former Dewey partner and told the firm’s management, according to a person with direct knowledge of the matter who spoke anonymously because the details of the agreement were private.

Ms. Saffitz did not return an e-mail or telephone call seeking comment.

Legal industry experts expect Dewey and its former partners to be mired in bankruptcy-related litigation for years. One potential question is whether the fees generated by former Dewey partners at their new firms on cases that originated at Dewey belong to the new firms or to Dewey.

Last week, a federal judge in Manhattan, in a case involving the defunct law firm Coudert Brothers, ruled that proceeds from cases that had started at Coudert belonged to the Coudert bankruptcy estate, not to the firms where Coudert’s former partners had landed.

Article source: http://dealbook.nytimes.com/2012/05/29/dewey-hopes-to-resolve-bankruptcy-quickly/?partner=rss&emc=rss

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