Liability issues emerge as key in high-stakes conference call; six-week deadline imposed by bankruptcy advisers
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.