Davis excluded from Dewey settlement deal
20 June 2012 | By Joshua Freedman
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Dewey & LeBoeuf’s bankruptcy team has outlined to former partners a settlement deal that would see them pay back an amount of money in return for being absolved of future liability.
The agreement, which requires a “critical mass” of ex-partners to ratify it, would also prevent former partners from suing each other.
The settlement, which was explained to former partners yesterday in an hour-and-a-half conference call scheduled for 2.30pm New York time, would exclude former chairman Steve Davis. It is thought that it would apply to global partners including members of the UK LLP covering the London and Paris offices.
The call was led by former executive partner Stephen Horvath and chief restructuring officer Joff Mitchell of turnaround consultancy Zolfo Cooper, with Dewey general counsel Janis Meyer introducing the call. Davis did not dial in.
The conference was open to all partners globally who had left the firm relatively recently, as well as their counsel. Partners could not call out with questions but were asked to dial into a queue to speak out, with roughly 20 questions being fielded.
It is unclear how much partners will be expected to pay back as part of the deal, but it is expected to be calculated as a percentage of partners’ 2011 and 2012 compensation. The leaders of the call also listed a number of other factors that could determine the amount, including partner performance.
What proportion of former partners are needed to agree on the settlement is also not determined, but those running the call referred to it as a “critical mass”.
The team has been given six weeks from now to approve the plans.
During the call, Horvath was forced to defend the winding-down team against claims that the plans were intended to protect the firm’s former management.
Two partners asked questions that intimated a belief that the removal of former partners’ liability to be sued by other ex-partners was irrelevant for creditors and served only to protect the members of the office of the chairman and the executive committee from lawsuits.
The questions, one of which is understood to have been from a former London partner, prompted Horvath to argue that this was not the bankruptcy team’s intention.
The conference also threw up the issue of partners’ status as insiders, with Horvath telling partners that they all held this status and, under US bankruptcy law, were liable for clawbacks for payments during a period going back a year from the firm’s bankruptcy rather than a shorter three-month period.
At least one partner asked why partners were treated like this on the same level as members of the office of the chairman and the executive committee, but it is understood that Horvath declined to go into any details when responding.
Horvath could not be reached for comment.
Readers' comments (9)
Anonymous | 20-Jun-2012 12:55 pm
So the plan was to have a call to explain the plan to approach banks to approve a plan that has not yet got beyond the planning phase? So what IS the plan? Nice one wind-down team! How much cash did this burn up?
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Anonymous | 20-Jun-2012 3:27 pm
Was Horvath making a deal to benefit the executive committee types (other than throwing Davis under the bus - which looks like it is deserved)? Or did he simply not think this through and the blowback that he would receive?
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Anonymous | 20-Jun-2012 8:18 pm
Horvath is trying to save his mates on the Office of the Chair from lawsuits and liabilities at the expense of all other partners ...while Togut and Zolfo Cooper are trying to safeguard the millions in fees they expect to cream out of the chapter 11
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Anonymous | 20-Jun-2012 8:21 pm
Another way of looking at this is that the wind-down team is making a deal acceptable to partners (by agreeing to a lwer clawback) so that the exec comm types could be isolated from rank and file partner suits. So the estate and creditors get less money so that partners are released from claims brought by other partners.
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Anonymous | 21-Jun-2012 10:03 am
Shouldn't they exclude peter "Captain Schettino" Sharp from the release?
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Anonymous | 21-Jun-2012 10:06 am
They need to give the mutual release to the partners in order to induce the partners with big compensation and guarantees, and the partners in management, to participate. Otherwise, why would they sign up to this?
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Anonymous | 21-Jun-2012 10:13 am
So, the idea is that the rank and file partners pay more money, after losing their capital, to stop other partners suing them. But in reality, which partners are most likely to be sued? Most likely the management partners, who did not tell the other partners what was really going on, or induced laterals to join a sinking ship. Will the general body of partners really buy into the idea of paying yet more money for illusory benefits for themselves, to protect the very partners who got them into this mess in the first place? Nice try.
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Anonymous | 21-Jun-2012 10:37 am
Contribution makes sense as long as it measures partner performance (whether guaranteed or not) in terms of cash brought to the firm, and NOT billable hours stacked onto a system but never billed or collected. Partners who brought the cash to keep the firm afloat should contribute less than those who free loaded (and this includes many of those who did not have guarantees). Lets face it, whether we like it or not, many of the guaranteed partners genuinely delivered in cash terms.
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Anonymous | 21-Jun-2012 1:51 pm
Horvath wants that job at Greenberg Traurig.
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