As reported by Thomson Reuters and other news outlets, Dewey & LeBoeuf has filed court papers for approval of liquidation, one more hurdle for the former law firm giant to jump since dismantling their offices and filing for bankruptcy protection.
The firm filed for chapter 11 bankruptcy six months ago. The liquidation plan was filed in Manhattan's U.S. Bankruptcy Court on November 21.
Blamed for the bankruptcy was the mass exodus of several firm partners, mounting debts and arguments among staff about salaries and compensation.
U.S. Bankruptcy Judge Martin Glenn approved a settlement between Dewey's estate and 400 of its former partners this past October. The agreement included the former partners giving back $71.5 million in compensation and then they could be freed from any other claims.
However, the $71.5 million is a drop in the bucket; the company owes its creditors approximately $500 million.
JPMorgan Chase & Co., one of Dewey's secured lenders, will be allowed $261.9 million in claims if the liquidation plan is approved. They may also add another $100 million in claims that would be treated as unsecured under the plan.
The secured lenders are to be the first to receive any funds – recoverable from Dewey accounts or from the foreign offices that are winding down.
Dewey's operating costs are listed at $218.6 million in their accounts receivable. However, of that figure, 79 percent is over 3 months old.
Of the $71.5 million being returned by former Dewey partners, 80 percent of the first $67.5 made available will be given to the secured lenders.
According to the disclosure statement, secured creditors, that are due money related to either equipment leases or personal property, have filed $44.5 million in claims. Another $284.9 million in claims have been listed for unsecured creditors.
According to the liquidation plan, any further settlements with partners, or with other law firms, are to be split exactly in half for payment to both secured and unsecured creditors.
There are 230 more partners that have yet to agree to go along with the settlement. They have each been asked to give back amounts between $5,000 and $3.5 million.
Unfinished business claims, which could account for nearly $60 million in more funds for the firm's estate, can also be added to the settlement – if the money is recovered. These claims account for the profits that former partners made on the clients they took with them to other firms.
The liquidation plan is due to be heard in court on January 3. Following that would be a confirmation hearing Dewey is hoping will take place on February 27.
Al Togut, who is with the law firm Togut Segal & Segal, is representing Dewey. The reconstructing firm that is advising Dewey is Zolfo Cooper. A spokeswoman from Zolfo Cooper denied comment.
If you are considering a business or personal bankruptcy, contact a bankruptcy attorney to help you with your filing. The sooner you file, the sooner you an begin to see a light at the end of the tunnel.