What a choice: pay the Dewey & LeBoeuf estate up to $3m (£1.9m) each or risk years of litigation as creditors seek payment.
That’s the dilemma that was presented to former partners of the extinct US firm in a mass conference call yesterday – with partners told they will be asked to pay between 10 and 30 per cent of their 2011 and 2012 income from the firm if they opt into a settlement deal that will absolve them of future liability. Partners low down on the pay scale will pay 10 per cent, while those towards the top are set to return 30 per cent, with $25,000 (£16,000) the minumum amount and $3m the upper limit. Partners in the middle of the ladder will pay a proportion in between.
Dewey has given its former partners something of an exploding offer: after receiving a personalised email today detailing their required contribution, they will have until 24 July to say yay or nay to the settlement. If a partner procrastinates until after that date but still wants to take part, the estate will charge him or her a 25 per cent premium. A law firm bankruptcy model based on budget airline billing practices if ever there was one.
There are two losers in all of this. The first is the unfortunate middle-ranking partner who brought in a fair amount of revenue but will have to pay something in between 10 and 30 per cent of their 2011 and 2012 income. They’re the types who will be looking jealously at the $20m-or-so earners who, by virtue of the $3m cap, will have to pay far less than 30 per cent .
The other loser in the fiasco is former chairman Steve Davis, who is excluded from the deal. Dewey’s bankruptcy counsel apparently told partners on the call that the estate reserves the right to sue Davis. His lawyer’s decision to hire a disgraced former New York Governor’s PR is starting make yet more sense.
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