Largest Law Firm Bankruptcy in U.S. History

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William Marcoux has been sued by the bankrupt Dewey estate, according to the American Lawyer. The bankruptcy lawsuit includes six claims against former Marcoux, including avoidance and recovery of distributions as efficaciously fraudulent transfers, breach of contract, and inequitable enrichment for tax payments. It looks like this may be the first in a series of suits against the former Dewey & LeBoeuf partner. Marcoux, a former Dewey equity partner and executive committee member is one of the several dozen other past Dewey partners who decided not to join a $70 million settlement; joining would have shielded him from such contention.

The problems began almost instantly after the firm’s creation through the merger of Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae in 2007. The complaint says, the mergers’ revenue deteriorated “by a staggering $146 million” from 2008 to 2009, and dropped by another $49 million the subsequent year.

  

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The complaint was made by Trustee Alan Jacobs, who took on the role of liquidating the firm’s assets in March. He said in the complaint that he is seeking the return of $3.6 million in partner distributions made to Marcoux between Jan. 1, 2009 — this is when he says the firm was already impoverished in Feb.2012, when he departed the firm to join DLA Piper /a> At that time $128,000 in unpaid capital benefactions and $816,000 in tax payments Dewey made on William Marcoux’s behalf.

Marcoux filed a proof of claim in Dewey’s bankruptcy asserting that instead of owing the estate anything, the estate actually owes him nearly $4 million. William Marcoux backs up his claim for $3.4 million in what he says is delinquent restitution and $592,000 in capital. Marcoux and any other former partners targeted by Jacobs are potentially liable for much more now than they would have been if they had participated in the settlement.

The suit against Marcoux offers one of the first official accounts of the happenstance that ultimately resulted in the largest law firm bankruptcy in U.S. history. Allan Diamond, Jacobs’ attorney from Texas, declined to comment. When contacted on Monday Alan Jacobs also rejected commentary.

To ensure that no creditors receive preferential treatment and to also make sure that the money collected will eventually go into the collective being paid to unsecured creditors, the Dewey estate is also continuing its efforts to collect money the firm paid out in the 90 days prior to seeking Chapter 11 protection, known as preference actions. A non-partisan organization focused on issues affecting Russia, Woodrow Wilson International Center’s Kennan Institute, is the latest preference action, filed Thursday. The Dewey estate has presently filed almost $10 million in preference actions.

Image Credit: Iisonline.org