NEW YORK Bankrupt law firm Dewey & LeBoeuf revised its settlement offer to former partners on Thursday, dropping its potential recovery to $90.4 million from $103.6 million.
The estate is seeking the money from the former partners in exchange for releasing the lawyers from potential clawback claims.
The offer shrinks the burden for some while increasing it for others in the hopes of spurring greater participation by former partners. It also attempts to address criticism by some of those partners that the settlement placed too heavy a burden on the firm's lower-paid members rather than top earners and management.
Under the revised offer, detailed to partners during an afternoon meeting at the New York Hilton & Towers, the minimum amount was reduced to $5,000 from $25,000, according to a document reviewed by Reuters. The maximum contribution was increased to $3.5 million from $3 million, the document said.
At the same time, the new plan calls for onetime members of Dewey's executive committee to pay a 20 percent premium on top of what they otherwise might contribute, the document said.
The premium appears to be a concession to some former partners who complained that the initial settlement plan protected the committee's members from lawsuits brought by its non-members.
Joff Mitchell, Dewey's chief restructuring officer, said that, although the total possible settlement is smaller, the net amount the estate could recover could be greater, mostly because the lower-paid partners are each off the hook for $25,000.
"I don't think they were ever going to really write that check, whereas at $5,000, maybe they will," he said.
The estate wants commitments of at least $50 million from former partners by August 7 in order to present the settlement for approval by a U.S. bankruptcy judge in Manhattan.
The proposed deal is part of the continuing efforts to wind up the affairs of Dewey & LeBoeuf. Once one of the largest law firms in the United States, it filed for Chapter 11 bankruptcy on May 28 following partner defections and concerns about hefty guaranteed compensation packages that a third of its 300 partners had prior to the collapse.
If the former partners agree to the offer, they will help make a significant dent in the approximately $315 million Dewey has said it owes creditors. The firm's wind-down team had hoped initially to get a settlement by Tuesday, but last week pushed the deadline to August 7 to respond to "widely held partner concerns," according to an email from Mitchell.
The choice between settling or being sued is not ideal, Mitchell acknowledged, but it is the reality.
"It's not a happy outcome," he said. "What partners are being asked to do is make a choice between two outcomes, neither of which they particularly like, and hopefully the settlement is better than the alternative."