Aug 16 (Reuters) - Former partners of the defunct law firm
Dewey & LeBoeuf agreed on Thursday to pay at least $50 million
toward a settlement agreement, the minimum amount the firm's
advisers had been seeking in order to submit the proposal to
The settlement, if approved, could mark the first major
recovery for Dewey's creditors, who are owed at least $315
million, according to court filings.
Under the final settlement offer, former Dewey partners had
to contribute a minimum of $50 million by 5 p.m., Aug. 16, a
condition that was met by 2:45 p.m. Thursday, according to an
e-mail sent to former Dewey partners and obtained by Reuters.
The e-mail did not specify how much money had been raised
At least 300 partners out of a possible 672 signed the
accord, according to a person close to the matter.
The parties to the bankruptcy have been tangling for several
months over the terms of the settlement. The estate, under the
guidance of restructuring officer Joff Mitchell, has been trying
to compel former partners to return a portion of their
compensation to pay back creditors such as banks and
bondholders. Former partners, however, have argued that the
estate's conditions were unfair.
Some of Dewey's lower-earning partners, for example, said
they were being asked to return too much, while higher earners
and members of management were not required to return enough.
The deal, however, might not bring to an end to
negotiations. A committee representing former Dewey partners on
Thursday asked a federal bankruptcy judge to appoint an
independent examiner to investigate the settlement before it
gets court approval.
"Without such an investigation having been undertaken, there
is no way that the Debtor - nor anyone else, including the Court
- can formulate an informed view as to whether the PCP
(settlement) is within the realm of reasonableness," said David
Friedman, a lawyer representing the former partners committee,
in court records.
Friedman, in court documents, objected to the composition of
the Dewey wind-down team. He said the team was being managed by
lawyers who had advised the firm before its collapse and that
they gave high earners at Dewey preferential treatment when
devising the settlement.
A spokeswoman for Mitchell, Dewey's chief restructuring
officer and a senior managing director at Zolfo Cooper, had no
Dewey once employed more than 1,000 lawyers in 26 offices
worldwide, but in May it became the largest U.S. law firm to
file for bankruptcy. Its demise has been attributed to
compensation guarantees the firm made to a significant portion
of its partners.
The Dewey estate may still go after an additional estimated
$60 million from former Dewey partners in so-called unfinished
business claims, in which the trustee seeks to recover profits
on legal business former partners took with them to other firms.
Partners who did not sign the deal also could be vulnerable
to claw-back litigation unless they accept the deal after the
August 16 deadline and agree to pay a 25 percent penalty.
Some former partners said they accepted the settlement
simply to put the matter in the past. "I'm holding my nose but
I'm doing this," said one.
Another former partner said he was "optimistic" about
Thursday's announcement, despite having to pay a significant
amount of money.
"I would have been extraordinarily depressed if this
threshold hadn't been reached," he said.
(Reporting by Casey Sullivan and Nate Raymond)
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