Bankrupt US firm Dewey & LeBoeuf’s settlement with former partners has won approval from a New York court, ending months of attempts to green-light the deal since the firm collapsed in May.
The partner contribution plan (PCP), which asks ex-partners for a contribution to the estate in return for being absolved of future liability, was given the go-ahead yesterday (9 October) in a ruling by US bankruptcy judge Martin Glenn.
Glenn dismissed motions brought by two groups of retired partners of Dewey legacy firm LeBoeuf Lamb Greene & MacRae opposing the PCP and calling for an examiner to be appointed over the case.
The ruling states that the settlement has raised more than $70m (£43.7m) for the estate, while granting participating partners a “broad release” from liability. This excludes claims made under the so-called unfinished business doctrine, which allows the estate to claim back fees earned by a partner at a new firm if the business was generated at the old firm.
The settlement also does not protect participating partners against claims made by ‘third parties’ or by non-participating partners against either partners who have signed up or the firm’s insurance policies.
The deal explicitly excludes Dewey’s ex-chairman Steve Davis, executive partner Steve DiCarmine and CFO Joel Sanders, but the ruling states: “The court has no basis to conclude – and does not conclude – that there are any viable claims that can be pursued against Davis, DiCarmine and Sanders, or what defences they may be able to assert.”
The process of approving the plan and making it appealing to former partners has lasted almost since the firm went under (29 May 2012). The firm’s bankruptcy advisers took the deal to the US bankruptcy court for the Southern District of New York for approval after the total contributions hit the $70m barrier (30 August 2012).
The speed at which the settlement has been approved far exceeds other major law firm bankruptcy cases, such as those of Coudert Brothers or Thelen, in which litigation lasted for years. It comes despite multiple changes to the terms following significant opposition from former Dewey partners to the deal, including from London partners (13 July 2012). A number of UK partners eventually signed up (1 October 2012).