Dewey avoids Chapter 7 bankruptcy after agreeing $50m settlement

Dewey & LeBoeuf’s settlement plan to raise funds for the defunct firm’s estate and absolve former partners of future liability has passed the $50m (£32m) threshold required to keep the case out of Chapter 7 bankruptcy.

Chief restructuring officer Joff Mitchell of Zolfo Cooper emailed ex-partners yesterday (16 August) to inform them that the required commitments had been received as of 2.45pm New York time, with the confirmation ending weeks of negotiations and amendments to the controversial plan (15 August 2012).

The e-mail said the wind-down team could now take the plan to the bankruptcy court and creditors.

It is understood that the $60m (£38.2m) mark has since been reached, although the amount is still significantly off the $90.4m (£57.6m) the bankruptcy team is aiming for.

Former partners can still opt in to the settlement even if they missed yesterday’s deadline but will be forced to pay a 25 per cent premium on top of the amount they have already been asked to pay in.

UK ex-partners have been split over the deal after 17 of them took legal advice from a US bankruptcy specialist.

It is understood that Camille Abousleiman and Louise Roman Bernstein, who are both now at Dechert, have committed to participate, but finance partner Bruce Johnston of Morgan Lewis & Bockius, Fred Gander of KPMG and Willkie Farr & Gallagher’s Joseph Ferraro are thought to have snubbed the deal.

Abousleiman previously told The Lawyer that he was considering participating (20 July 2012).

Abousleiman today declined to comment. Bernstein, Ferraro, Gander and Johnston were not immediately available for comment.

Former partners in Dubai and Italy have also participated following negotiations after initially taking a stance against the deal. The firm’s former Polish office has opted in, although many German ex-partners are understood to have refused.

A document leaked to US legal website Above the Law indicates that New York corporate partner Berge Setrakian was asked to pay in $3.5m (£2.2m), the upper limit, the only partner to hit the cap set by bankruptcy chiefs. His total income in 2011 and 2012 was $12,823,670.00, according to the document, but this can include deferred payments from previous years and other amounts aside from compensation.

Ralph Ferrara was the only other partner asked for more than $3m (£1.9m), with his 2011 and 2012 income coming to $12,350,606, resulting in a bill for $3,366,480 (£2.14m).

Separately, filings made yesterday at Companies House by the administrators of the firm’s UK LLP, Mark Shaw and Shay Bannon of BDO, indicate that no creditors’ committee has been formed after none decided to call a creditors’ meeting. The document states the automatic end of the administration of the separate London and Paris unit as 27 May 2013, a year after it filed (29 May 2012).