Court Okays Bonus Plan for Dewey Employees

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On Monday, U.S. Bankruptcy Judge Martin Glenn approved the bonus plan for Dewey employees, despite the objections of U.S. Trustee Tracy Hope Davis. The bonus plan, which allows Dewey to pay up to $700,000 in retention and incentive bonuses to the firm’s dwindling employees, would encourage them to stay on. The U.S. Trustee had objected to the plan on the grounds that the firm had failed to prove that the bonus plan was “economically feasible” or justified.

However, Judge Glenn said that the costs were reasonable given the situation the firm would be left in, if the fewer than 50 employees still remaining with the firm had to leave. As to the objection of Davis, the judge wrote, “The [U.S. Trustee] may not substitute its business judgment for that of the Debtor’s.”

The rapid collapse of the once 1,400-lawyer firm has been attributed to both managerial lapses and a high exodus of partners and employees who left fearing demise and weakened the resilience of the firm, denying it any scope of revival. Since, Dewey filed for Chapter 11 bankruptcy in May, the remaining employees are working with the knowledge that the sooner they finish the work of winding down the firm, the closer they are to losing their own jobs. This is hardly a work-conducive environment. The Dewey bonus and incentive plan would help the remaining employees to work on despite adverse circumstances. The headcount at the firm had already dropped to an alarming 52, when the Dewey management pitched the bonus plan, and since then, another four people have left undeterred by the prospects of losing incentives.

  

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The facts were duly noted by the court and Judge Glenn said Dewey’s ability to collect receivables and wrap up business “will be a much less achievable goal if it is unable to stem the tide of employee departures.”

However, Judge Glenn rejected one aspect of the retention plan, which would have provided up to $100,000 in discretionary funds to pay employees. The court did not outright reject the component but held that the firm could ask for the same again after providing specific guidelines as to how such discretionary funds would be distributed.