By Nick Brown
May 29 An attorney for bankrupt law firm Dewey &
LeBoeuf on Tuesday said the firm was "close" to a deal that
would allow it to recover money from some of its former
Attorney Albert Togut, speaking at the first bankruptcy
hearing since Dewey filing for Chapter 11 on Monday, gave no
details on the scope of a potential deal, other than to say it
would cost ex-partners a "significant" amount of money.
Togut said the firm would like to achieve a quick and
orderly settlement of potential claims against ex-partners who
left the firm this year en masse, possibly costing Dewey money
that it was owed.
Dewey, troubled by a large debt load and a high-cost
compensation structure, filed for bankruptcy after losing the
lion's share of its roughly 300 partners to mass defections. It
may have legal claims against the partners who left and took
clients with them, as well as against the firms where those
lawyers ended up.
"Our goal is to get to a negotiated settlement, and bring in
money without the staggering fees that you see in case after
case in these law firm bankruptcies," Togut said.
It was unclear how far along talks were. Mark Zauderer, a
lawyer representing more than 50 former Dewey partners, said
after the hearing that talks with his group were only
preliminary. During the hearing, Zauderer told the court his
clients had "not heard the basis" for any claims against them
from Dewey, and pointed out that former partners might have
offsetting claims against the firm.
Another lawyer representing ex-partners said Togut's
announcement at the hearing was the first he'd heard about a
Togut after the hearing declined to expound on the status of
The hearing grew contentious when U.S. bankruptcy Judge
Martin Glenn refused to grant Dewey's lenders a lien on the
proceeds of certain future litigation in exchange for the
lenders' allowing Dewey to fund its bankruptcy using their cash
Cash collateral is money that belongs to a bankruptcy debtor
but has been pledged as collateral to lenders.
Dewey owes about $75 million in loan debt to a lender group
led by JPMorgan Chase & Co.
The lenders had said they would allow Dewey to use its cash
collateral to fund it while in bankruptcy, but in exchange
demanded a lien on so-called avoidance actions, or litigation
undertaken by a bankruptcy debtor to claw back payments it may
have made when already insolvent.
The demand underscores an aggressive approach taken by
lenders as Dewey's debt has been bought and sold on the
secondary market. A person close to Dewey earlier this month
told Reuters the firm's debt is mainly in the hands of investors
who acquired it at a discount and are hoping to make a profit
through the bankruptcy process.
Glenn said the demand for the lien was unreasonable, and
ordered the parties to try to negotiate new terms.
The case is In re Dewey & LeBoeuf LLP, U.S. Bankruptcy
Court, Southern District of New York, No. 12-12321.