If the judge overseeing the Dewey & LeBoeuf bankruptcy approves a proposed settlement under which former partners would return a total of $71.5 million to the defunct firm’s estate, the lawyers who have agreed to participate in the deal know it will be virtually impossible for them to later claim Dewey owes them any money.
If, on the other hand, the settlement proposal fails to win the judge’s consent, court filings show that those partners are ready to join the rest of the firm’s unsecured creditors in pressing the Dewey estate to pay them what they believe they are owed.
A review of more than 2,000 proofs of claim submitted in the Dewey bankruptcy shows that scores of former partners — many of whom have signed on to the so-called partner contribution plan — say the estate owes them sums ranging from roughly $11,000 to more than $67 million.
The low-end figure belongs to former firm chairman Steven Davis, who was not allowed to participate in the settlement deal. Davis filed a claim for $11,725 against the estate Aug. 2. At the other end of the spectrum, M&A heavyweight Morton Pierce, who is now at White & Case, submitted a claim for $67,334,183 on Sept. 6.
The two former firm leaders are among the more prominent names on the long list of one-time partners, vendors, former staffers, landlords and various other creditors that have notified the court about their Dewey-incurred debts. Court filings show that at least 76 former partners have filed claims against the estate while also agreeing to take part in the proposed settlement, which would would give them waivers from Dewey-related liability in exchange for their contributions. (The deadline for submitting proofs of claim was Sept. 7; former partners who agreed to participate in the settlement had to do so by Aug. 16 to avoid being hit with a late fee.)
Dean Hansell, who left for Hogan Lovells in Los Angeles three weeks ahead of Dewey’s May 28 Chapter 11 filing, is one of those whose name appears on both lists. Hansell says he filed a proof of claim for $917,000 because there is “no guarantee the court will approve the settlement.”
Hansell — who has agreed to pay the estate $127,736 of the money he earned in 2011 and 2012 as part of the settlement — says he believes that even if the deal is approved, certain priority claims will still have merit, such as those related to money earned as a result of work done at the firm in May of this year.
In addition to Pierce, at least four other former Dewey partners submitted claims topping the $10 million mark: John Altorelli, who is now at DLA Piper, says he is owed $12,941,586; John Cobb, who is now at Weil, Gotshal & Manges, filed a claim for $12,366,725; Michael Fitzgerald, who is now at Paul Hastings, says the firm owes him $38 million; and Ira White, a partner at Jones Day, claims he is out $14 million. Altorelli and Fitzgerald chose not to sign on to the partner contribution plan, according to court filings, while Pierce has agreed to pay the estate $1.02 million; Cobb’s share is $706,328; and White has agreed to return $166,633. (Pierce had no comment; the other four could not be reached for comment Wednesday).
Other former partners with sizable claims include Bruce Bennett, Alan Salpeter and James Woods. Bennett, one of the lead lawyers on the Dodgers bankruptcy case while he was at Dewey who has since moved to Jones Day, says he is owed owed $8,883,505. Salpeter, now counsel in the Chicago office of Kaye Scholer, filed a claim for $6,900,420. Woods — a partner at Mayer Brown who is one of five defendants in a fraud lawsuit brought by former Dewey partner Henry Bunsow — submitted one for $7,250,000.
Salpeter says the amount he is claiming reflects a salary guarantee written into the contract he signed May 25, 2007, upon joining Dewey. He says he signed a new contract Jan. 3, 2011, at the urging of Dewey management. Both went unfulfilled, he says. Salpeter chose not to sign on to the settlement plan, saying “I didn’t think I had any liability to the firm or the creditors.” (Of the others filing large claims, Bennett has not signed on to the partner contribution plan and Woods has agreed to pay $811,964).
Of the 11 former Dewey partners who have committed to pay at least $1 million to the partner contribution plan, nine did not file proofs of claim in the bankruptcy: Alexander Dye, Michael Groll and John Schwolsky, now at Willkie Farr & Gallagher; Ralph Ferrara, now at Proskauer Rose; Lejb Fogelman, now at Greenberg Traurig; Bruno Gattai, now at Grimaldi Studio Legale; Lawrence Hill, now at Shearman & Sterling; Jeffrey Kessler, who joined Winston & Strawn; and Berge Setrakian, who moved to DLA Piper. Other former Dewey leaders who are paying less than a million to the settlement plan, including Martin Bienenstock, now at Proskauer Rose, and Richard Shutran at O’Melveny & Myers, also did not file claims.
Details supporting the former partners’ claims were not immediately available in public filings posted on the Dewey bankruptcy website. Three claims, however, recently emerged in filings made in San Francisco federal court in connection with Bunsow’s suit.
Davis, former Dewey executive director Stephen DiCarmine and former chief financial officer Joel Sanders have pushed to have Bunsow’s suit — in which he claims to have been fraudulently induced into joining Dewey from the collapsing Howrey by Davis, DiCarmine, Sanders, Woods and former partner Jeffrey Kessler in January 2011 — moved to New York bankruptcy court, where the Dewey case is unfolding. Bunsow, meanwhile, insists the case should remain in California state court.
In a Friday filing made as part of that effort, the three men included copies of their proofs of claim in the bankruptcy case to bolster their argument that they should be indemnified for their actions as Dewey’s leaders.
Davis’ proof of claim explains why he believes he should be protected against allegations arising from his tenure as Dewey’s leader and have his defense costs covered. He also says he is owed $8,000 for moving expenses incurred after Dewey leaders told him he would be relocating to London as part of a management shakeup that came amid the firm’s death spiral.
DiCarmine, meanwhile, has filed two claims against the Dewey estate, one for $11,725 and another for $375,000. He says he is owed money based on terms of his employment agreement with Dewey, including one that triggered payment if a “change of control” occurred at the firm. He also says in his proof of claim filing that the claims are based in part on the fact that he was “the victim of and subjected to a pervasive hostile work environment, including vicious written (emails) and oral communications that personally vilified and attacked him and others in grossly impermissible ways.”
Sanders, who is now the CFO at Florida law firm Greenspoon Marder, has also filed claims for $11,725 and $375,000, largely based on an employment agreement similar to DiCarmine’s.
Beyond the claims submitted by former partners in the Dewey bankruptcy, hundreds of others come from secured and unsecured creditors around the world. Some verge on the ridiculous, such as a $10 claim submitted by Maurice A. Deane School of Law at Hoftstra University and a $15 claim filed by the Los Angeles Law Library.
Others shed a bit of light on the inner workings of a firm that prided itself on lateral hires, such as the $317,500 claim filed by recruiting and consulting firm McMorrow Savarese, a sum it says represents the last of eight monthly installments due for placing Bennett, Bunsow and Robert Finkel (now at Wilmer Cutler Pickering Hale and Dorr) at Dewey.
Several food and beverage vendors populate the list, including Brooklyn Wines & Liquor (a $1,610 claim), Costco ($61,146) and food ordering service Seamless Web ($128,386). The cost of books purchased from the University of California is reflected ($1,729), as is money spent at such venues as Jazz at Lincoln Center ($25,000) and Metrotennis Community Tennis Association ($2,000). A number of media outlets are also on the list, including Recorder parent company American Lawyer Media, which says in four separate claim filings that it is owed a total of $11,477.
In an unrelated development, the Dewey estate reported a bit of good financial news to the court Wednesday: It earned $17,500 from the sale of 47 computer servers.
Dewey’s lawyers are due in court Thursday afternoon before U.S. Bankruptcy Judge Martin Glenn.
Sara Randazzo is a reporter with The Am Law Daily, a Recorder affiliate.
