By Casey Sullivan
Oct 9 (Reuters) - A U.S. bankruptcy judge approved a $71.5
million settlement on Tuesday between former partners of Dewey &
LeBoeuf and the estate of the law firm whose demise in May
constituted the largest law-firm bankruptcy in U.S. history.
The settlement requires former Dewey partners to pay
portions of their compensation, ranging between $5,000 and $3.5
million individually, in exchange for a release from potential
lawsuits over the firm's debts. As of Tuesday, roughly 400 of
670 former Dewey partners had opted for the settlement.
U.S. Bankruptcy Judge Martin Glenn said the settlement is in
the "best interest" of the Dewey estate and creditors because
the deal ultimately prevents years of costly litigation between
Dewey's estate and former partners. Glenn said the settlement
"will lead to a quicker wind-down in Chapter 11, and - more
importantly - a quicker and more certain distribution to
The decision concludes less than five months of
back-and-forth negotiations between creditors, former Dewey
partners and the defunct law firm's estate over the structure of
the settlement. It also gives creditors who claim they are owed
more than $500 million their first and largest recovery in the
A group of retirees and former partners opposed the
settlement, complaining the pact favored high earners. They took
issue with the fact the deal was crafted by consultants who
advised the firm on business matters before the it folded in
May. They asked Judge Glenn to appoint an independent examiner
to investigate the deal's fairness.
But Judge Glenn said on Tuesday he was satisfied with the
Dewey wind-down team's work. He said the settlement was
negotiated with partners independently "at arm's length" and
noted that no evidence was brought to light that suggested any
one party was favored over another. As such, he said an examiner
did not need to be appointed to further investigate the
Some objectors had argued that the deal's architects did not
properly investigate the value of particular claims by lawyers,
questioning how much each settling partner actually sacrificed.
They also said the wind-down team failed to establish accurately
when Dewey became insolvent - a fact that could determine how
far back the estate could go to claw back compensation from
Glenn accepted the Dewey wind-down team's estimate that
Dewey became insolvent in 2012, but that insolvency would be
more difficult to prove for 2011 and even harder for 2010. Glenn
said finding the exact date of insolvency would be both
difficult and expensive.
Joff Mitchell, Dewey's chief restructuring officer, said he
hopes Judge Glenn's decision will prompt other Dewey partners
who have not accepted the settlement to reconsider. Mitchell
said he was prepared to waive a late penalty fee of 25 percent
of their contribution for partners who decide to opt in.
The final plan for Dewey's Chapter 11 reorganization is
scheduled to be filed in November, Mitchell said, months before
a hearing that will reveal how the payments will be distributed
Top contributors to the settlement include Berge Setrakian,
a corporate lawyer now at DLA Piper, who pledged $3.5 million;
and white-collar defense lawyer Ralph Ferrara, the firm's former
vice chairman now with Proskauer Rose, who agreed to pay $3.36
Morton Pierce, another former vice chairman of Dewey, now
with White & Case, is slated to pay $1.02 million. Pierce, a
prominent mergers and acquisitions lawyer, had been the chairman
of Dewey Ballantine, which merged in 2007 with LeBoeuf, Lamb,
Greene & MacRae in 2007.
Other top lawyers at Dewey participating in the settlement
include Martin Bienenstock, Dewey's former bankruptcy head now
also at Proskauer, who agreed to pay $643,000. Richard Shutran,
Dewey's former corporate head who moved to O'Melveny & Myers, is
slated to contribute $665,000.
Pierce declined to comment on the settlement. Setrakian,
Ferrara, Bienenstock and Shutran were not immediately available
One partner left out of the settlement was Dewey's former
chairman, Steven Davis, who the Manhattan District Attorney's
office is investigating for possible financial improprieties,
according to people familiar with the probe. Others who were not
allowed to participate are former chief financial officer Joel
Sanders and former executive director Stephen DiCarmine, who
some former partners consider culpable in Dewey's collapse.
Ned Bassen, a lawyer representing Davis, DeCarmine and
Sanders said he was satisfied with Glenn's ruling since the
judge did not come to any conclusion on whether there is a basis
for claims against his clients.
The settlement does not exempt partners from an estimated
$60 million of so-called unfinished business claims, in which a
trustee of the Dewey estate can seek to recover profits on legal
business former partners took with them to other law firms.
David Friedman, a lawyer representing a committee of former
partners who objected to the settlement, did not respond to a
request for comment. Neither did Annette Jarvis, a lawyer
representing a group of retirees who objected to the settlement.
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 largely attributed to
compensation guarantees the firm made to a significant portion
of its partners.
The case is In re Dewey & LeBoeuf, U.S. Bankruptcy Court,
Southern District of New York, No. 12-12321.
For Dewey: Al Togut and Lara Sheikh of Togut Segal & Segal.
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