A federal agency tasked with protecting the nation’s pensions has succeeded in taking over three retirement plans run by bankrupt Dewey & LeBoeuf that are underfunded by an estimated $80 million.
The Pension Benefit Guaranty Corporation sued Dewey exactly one month ago, seeking to terminate the planswhich cover a total of 1,800 employees from legacy firms LeBoeuf, Lamb, Greene & MacRae and Dewey Ballantine, as well as from the combined entity produced by the 2007 merger of those two firmsas of May 11 and to place them under PBGC control. The agency guarantees benefits of $56,000 a year for retirees once they turn 65.
On June 8 the Dewey estate, represented by Proskauer Rose, filed an opposition to PBGC’s summary judgment motion. In its filing, the firm agreed the agency should take over the plans, but took issue with the May 11 termination date.
A PBGC official told The Am Law Daily Thursday that the agency “didn’t really understand” why Dewey objected to the May 11 date, but that the two sides had mutually agreed to resolve the case Wednesday. That resolution came when U.S. District Court Judge Jesse Furman signed off on an order appointing PBGC as the trustee of the three funds.
Proskauer partner Myron Rumeld declined to comment on the case when reached Thursday. In a court filing, Dewey argued that “the determination of the termination date can have a direct impact on the size of PBGC’s recovery in bankruptcy and its relative standing to obtain such recovery.”
The PBGC, which is listed in court filings as Dewey’s largest unsecured creditor in the firm’s Chapter 11 case, still plans to pursue its claim in the bankruptcy, according to the agency official. Dewey filed for bankruptcy May 28 after months of partner losses and amid mounting questions about the firm’s financial condition.
Because the PBGC is an unsecured creditor, its claim is subordinate to the roughly $225 million in secured claims due to JPMorgan Chase and a group of hedge funds that bought portions of Dewey’s debt in the weeks leading up to its Chapter 11 filing.
On Wednesday, U.S. Bankruptcy Court Judge Martin Glenn in Manhattan signed off on a budget to fund the bankruptcy proceedings through the end of July. By August, the estate will have to turn its attention to trying to reach a global settlement with Dewey’s former partners to bring in more money to pay off the firm’s creditors.
At the same time, at least one former partner contends he is owed money in the wake of the firm’s collapse. On Wednesday, former Dewey partner Henry Bunsow sued former firm leaders to recover what he says is more than $5 million in unpaid compensation he is due for the 16 months he worked at the firm.
The U.S. trustee’s office has also appointed a committee composed of former LeBoeuf Lamb partners who are seeking unpaid retirement benefits from the premerger firm. Unlike the defined benefit pension plans secured by the PBGC, the pensions of interest to that group are entirely unfunded, meaning they come from the firm’s revenues. The American Lawyer examined the burden unfunded pensions are putting on large law firms in this March cover story.
