The financial press reports that on Feb.27, a federal bankruptcy judge confirmed the plan that officially dissolved Dewey LeBoeuf, the once-venerable law firm that collapsed after financial problems led to an exodus of its partners.
Dewey’s liquidation plan lays out how its estate will compensate creditors, which have claims totaling about $550 million. At the heart of the proposal is an innovative arrangement under which about 450 former Dewey partners agreed to return a portion of their pay, raising about $72 million for creditors. By accepting the deal, former Dewey partners insulate themselves from future lawsuits connected to the firm’s demise.
Albert Togut, Dewey’s lead bankruptcy lawyer, who has been involved in a number of law firm bankruptcies, said that the winding down of Dewey had moved far more swiftly — and less contentiously — than previous liquidations of other large law firms.
Trustees will now begin the process of returning money to Dewey’s creditors, which include the firm’s lenders Citigroup and JPMorgan, as well as a car service company and an executive recruiter. A large portion of the recovery, in addition to the former Dewey partners’ contributions, will come from collecting Dewey’s outstanding legal invoices.
During the court session, Togut praised the former Dewey lawyers who signed on to the so-called partnership contribution plan, which he called “a template for future cases.”
The deal forced them to return a portion of their pay, in amounts based on a complex formula tied to their compensation. Those payments range from a minimum of $5,000 for retired partners to $3.5 million for the firm’s highest-paid lawyers.
Though the formal bankruptcy process has ended, the legal fallout from Dewey’s implosion is not over. In addition to a criminal investigation, several Dewey-related civil lawsuits are working their way through the courts. One former partner has sued Citigroup, accusing the bank of conspiring with Dewey to hide the law firm’s true financial condition in the months before its collapse.