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On Monday, in a new turn of events adding to the despair of Dewey & LeBoeuf employees, the Pension Benefit Guaranty Corp has filed a lawsuit against the firm in a federal court in Manhattan. The federally-owned U.S. government corporation is seeking a decree to terminate a big number of Dewey retirement plans. In its lawsuit, the PBGC said, “The continuing loss of revenue-generating partners and Dewey’s debt load has culminated in the imminent demise of Dewey.”
Last week, when the agency said it would seize control of three Dewey pension plans covering 1,776 future and current retirees, it came to light that the plans were underfunded by close to $80 million. According to the lawsuit, Dewey is quietly winding down outside bankruptcy proceedings and keeping stakeholders guessing.
Last week, when the pension authorities phoned Dewey, the firm told the agency that “two or three transactions” would be completed between Friday and Monday that could generate between $7.2 million and $9.7 million. The lawsuit did not specify the deals indicated, but the only transaction that took place within that time is the takeover of Dewey’s Poland office by Greenberg Traurig, with the deal being done in cooperation with the pension authorities.
On Tuesday, the attorneys from Dewey’s Italian offices had announced that they would be launching a separate law firm, Grimaldi Studio Legale, and would be hiring Vittorio Grimaldi a high profile mergers lawyer. The new Italian firm would have 130 lawyers in Rome, Milan and Brussels.
Another 11 private equity and real estate lawyers from Dewey’s New York office have announced that they would be joining Schulte Roth & Zabel. This elite group of equity and real estate lawyers includes attorneys Sanford Morhouse, (former co-chair of Dewey Ballantine).
The lawsuit by the pension authorities and their assumption that Dewey is trying to wind down outside bankruptcy seem to be true as associates and other staff had been kept guessing till the last moment. Though Dewey has announced recently on May 10 that this Tuesday would be the last day for most associates and last Friday for legal staff, the law firm is yet to appoint a dissolution committee. Strangely, there has been no vote to dissolve the firm. So, it seems a clear and organized attempt to liquidate without intervention from the courts and avoid the steep costs of a bankruptcy filing.
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According to analysts, despite all its maneuvering, Dewey may be forced into involuntary bankruptcy. Involuntary bankruptcies can be caused when creditors fear loss of their collateral and seek freezing of assets by a court. Last year, that is what happened with another law firm Howrey, which tried to liquidate without court intervention, but was stopped in its tracks when creditors filed a bankruptcy petition. Ultimately Howrey had to convert the case into a voluntary filing for bankruptcy.
