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Former Dewey & LeBoeuf partners including those in London will be asked to pay up to $3m (£1.9m) each as a settlement to grant them relief from being sued, it was revealed today.
The optional deal will see partners pay between 10 per cent and 30 per cent of the total cash they received from the firm for 2011 and 2012, with a cap set at $3m.
The amount due to absolve partners from future liability varies depending on partners’ positions in the defunct firm’s remuneration ladder, with those towards the bottom paying 10 per cent and those towards the top 30 per cent, while those in the middle will pay a figure in between. The minimum amount partners who opt in will have to pay is $25,000 (£16,000).
Details of the deal were communicated in a conference call to ex-partners scheduled for 10am New York time today led by Togut Segal & Segal managing partner Albert Togut, the collapsed firm’s bankruptcy counsel.
Partners will find out tomorrow (12 July) how much they are expected to contribute, with the firm set to send each partner an individual email detailing the amount due.
Former Dewey chairman Steve Davis is excluded from the deal, with Togut telling partners on the call that the estate reserves the right to sue the collapsed firm’s erstwhile chief.
The settlement is open to global partners including former partners of the London and Paris offices, who were members of the UK LLP.
Partners have until 24 July to opt in to the settlement, but are still able to participate after the cut-off date if they pay an extra 25 per cent premium.
The total figure brought into the estate from the settlement has to hit a threshold of $50m (£32.1m) in order for it to gain court approval. However, the estate is aiming to raise a total of $103m (£66.2m) from the contributions.
If the deal is not approved by a 31 July deadline, the case will convert to a Chapter 7 bankruptcy as the estate will have run out of funds.
The look-back period does not go further back in time than 2011, with the amount due calculated as a percentage of total cash received rather than purely compensation. This means partners will have to pay a proportion of compensation deferred from previous years and any other payments they received, but they will not be required to pay a proportion of compensation that was deferred if they did not receive it.
Furthermore, the amount is calculated based on when the cash was received rather than the year in which the partner earned the remuneration.
A former partner told The Lawyer that the deal was favourable to those low on the remuneration ladder who did not bring in much revenue and to those on the top who earned significantly more than the cap of $3m they will have to pay. However, the partner said it was unfavourable towards those in the middle who were profitable members of the firm.
The partner said: “Those who are really getting screwed the most are those in the middle who were productive.”
The details of the deal were originally put to former partners in a conference call last month in which those present were able to respond with questions (20 June 2012). However, today’s call was a one-way announcement.