Dewey puts bankruptcy settlement on hold as ex-partners wait on amendments

The deadline for partners to opt in to a settlement deal absolving former Dewey & LeBoeuf partners of their liabilities has been delayed after concerns were raised about its contents.

Chief restructuring officer Joff Mitchell of Zolfo Cooper told ex-partners in an e-mail on Thursday evening New York time that changes will be made to the controversial deal, under which partners can choose to pay back a proportion of their 2011 and 2012 income from the firm in exchange for removal of liability from future lawsuits (11 July 2012).

Mitchell also told recipients that the deadline for taking part had been put back from 24 July to 7 August.

It is currently unclear when the case will convert to a Chapter 7 bankruptcy should the deal not work, as the estate’s funds expire on 31 July, with the original plans seeing the US firm take on a Chapter 7 trustee at the end of this month if $50m (£32m) is not raised.

Partners have not been told formally what the amendments to the deal will be, but are currently expecting to receive an update next Thursday (26 July) detailing the changes.

It comes after a group of ex-London partners including finance lawyer Bruce Johnston and tax specialist Fred Gander held a telephone call on Wednesday (18 July) to discuss the offer, coming to the decision that they would not take part. 17 London ex-partners including Johnston have together instructed a specialist US bankruptcy law firm to advise on their legal position.

A number of senior ex-partners from the UK office are understood to have snubbed the deal too, although capital markets partner Camille Abousleiman, who is now at Dechert, told The Lawyer he was still considering participating.

Dewey wind-down chiefs tried to persuade former London partners to buy into the scheme in a conference call last Friday (13 July) but were met with significant opposition (13 July 2012).

Partners had raised issues with the proposed settlement, with some claiming it was biased towards the highest earners and those who brought in little revenue, but that it was disadvantageous for middle-ranking partners. There have also been concerns about former Dewey executive partner Steve Horvath’s salary of $50,000 (£32,000) per week for his role in the wind-down and the fact that the settlement absolves Horvath and Dewey general counsel Janis Meyer of liability, with neither asked to contribute a cut of their income.