NEW YORK, July 11 (Reuters) - Dewey & LeBoeuf offered on
Wednesday to drop potential claims against former partners if
they collectively shell out up to $103.6 million to the estate
of the largest U.S. law firm ever to declare bankruptcy.
Joff Mitchell, the chief restructuring officer for the
bankruptcy, told a New York hotel conference room packed with
former partners of the defunct firm they could avoid years of
costly litigation by accepting the offer.
If the former partners accept the deal, it would provide the
first big recovery for Dewey's creditors, who are owed $315
million. A settlement with the former partners, including the
major "rainmakers", would avert lawsuits against them.
It calls for the former partners, who left as the firm
teetered on the brink of collapse, to chip in varying amounts
depending on how much they were paid, among other factors.
"I think the plan is fair," Mitchell said. "Those that made
the least will contribute the least. The plan does not favor
those who are on the top."
Dewey once employed more than 1,000 lawyers in 26 offices
worldwide but declared bankruptcy in May.
Its downfall was spurred in part by hefty guarantees the
firm paid to certain partners. A key challenge for the estate is
to recoup, or claw back, some of those funds.
However, a deal wouldn't end the bankruptcy proceedings,
since the estate would also seek to recover money from former
clients and others to pay off its remaining debt.
Wednesday's meeting was held in a conference room in the
lower lobby of the Sheraton Hotel in midtown Manhattan, on the
same block as Dewey's former headquarters.
An estimated 60 former partners and their counsel filled the
room, while some 70 others joined by conference call. The
meeting lasted about four hours.
A Reuters reporter obtained details of the meeting.
Mitchell declined to comment when he was asked later about
the day's developments, as did Al Togut, the firm's primary
When Mitchell made the settlement offer in a PowerPoint
presentation, the reaction among the former partners was muted.
Many were taking notes and quietly chatting among themselves.
In interviews outside the conference room, several former
partners, all of whom asked to not be identified, said they
would give the offer serious consideration.
One described it as "rough justice." Said another: "The
prospect of litigation is worrisome to multiple groups of
Partners have until July 24 to accept the settlement,
Mitchell told the group. The proposed deal would cover claims
the estate has against hundreds of former Dewey partners, dating
back to January 2011.
Partners are being asked to pay anywhere from $25,000 to $3
Mitchell cautioned during the presentation that if the offer
was rejected, the matter would likely escalate from a Chapter 11
to a Chapter 7 bankruptcy -- in which case a trustee would be
appointed who would be empowered to seek clawbacks from the
former partners aggressively as part of a liquidation.
"There's only one opportunity to do this and that's now,"
said Mitchell, a managing director at restructuring firm Zolfo
Complicating the settlement talks are clashing interests
among the former partners. Some of those who were offered
lucrative salary guarantees claim they are owed money and want
that factored into the deal, two former partners said.
Partners without those guarantees, however, contend that
those contracts aren't valid, the two ex-partners said.
It is far from certain the Dewey partners will agree to the
"It would not be a safe bet to assume that our clients will
agree to it," said Mark Zauderer, a lawyer for 57 former Dewey
partners. "But they will certainly look at it."
(Reporting by Casey Sullivan and Nate Raymond; Additional
reporting by Nick Brown)
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