According to an email sent out on Friday morning of last week by the law firm of Dewey & Leboeuf, a conference call is scheduled for Tuesday afternoon that will discuss “the status of the bankruptcy proceeding, progress on the development of a global partner contribution plan, and other issues of interest.”
Partners at law firms are paid out of the profits of the law firm since they are joint owners of the business. When a law firm fails, the partners are subject to things called compensation clawbacks. These are when creditors and bankruptcy trustees aim to reacquire money that was handed out as the firm moved towards filing for bankruptcy.
For this case involving Dewey, the compensation issue will wind up being a little more difficult because the firm used a wide pay spread. Some of the partners were paid over $6 million per year while some other partners were paid less than $500,000. Other partners had a certain pay deal in place that guaranteed they receive a certain amount of money each year. The special pay deals were set for close to 100 partners at the firm.
Albert Togut, the bankruptcy lawyer for the firm, has said that the goal of the firm is to come to a partner settlement as soon as possible. Togut has been stating this goal since the very first hearing after Dewey filed for bankruptcy back on May 28. Dewey owes over $315 million to over 5,000 creditors. The firm’s creditors include pension regulators, banks, trade creditors and bondholders from staffing agencies to car services. The books for the firm are being reviewed by a consultant, who will then provide broad outlines for a settlement with partner contributions.
“We’re still assembling data,” Togut said. “We’ve had preliminary discussions with lenders and the unsecured creditors committee. Conceptually everybody is on board with what we’re trying to do.”
Experts in the industry are wondering what will happen to the partners and their money. For instance, will the partners have to pay a flat sum, or will they receive a number based on their individual circumstances with the firm? Also, could partners start filing their own lawsuits much like former partner Henry Bunsow did last week, for not being paid what they were promised by the firm?
“I don’t know any more than you do,” said lawyer Tracy Klestadt. Klestadt represents roughly 20 former partners from Dewey.
“We have many people who want more information, not less,” said Mark Zauderer. Zauderer represents a group of roughly 60 former partners from Dewey. “We’ll be happy to hear what they have to say.”