Dewey & LeBoeuf hires bankruptcy counsel

Speculation abounds as the floundering firm has lost about 70 partners since January

The dark cloud hanging over New York law firm Dewey & LeBoeuf could be developing from cumulonimbus to supercell.

News broke yesterday that the firm, which has been steadily bleeding both money and talent since the start of the year, has hired prominent bankruptcy attorney Albert Togut, according to attorneys at other law firms who have insight in the matter.

One of those sources, Reuters reports, says that Togut, who has represented numerous large companies including General Motors, Chrysler Automotive and Ambac Financial in Chapter 11 bankruptcies, is working with Martin Bienenstock, a bankruptcy attorney  and member of Dewey’s new five-person management team. Both Togut and Dewey declined to comment on the matter, the news service said.

Togut’s hiring doesn’t necessarily mean that law firm is planning to file for bankruptcy. Reuters notes that Dewey could simply be seeking legal help to renegotiate its debt, much of which stems from extending lucrative pay guarantees to top producers. As a result, the firm is said to be deferring tens of millions of dollars in payments to its partners and reducing compensation for others.

One partner who recently defected from Dewey speculated that the firm could be preparing for a “prepackaged bankruptcy” that could involve merging with another law firm. In this scenario, Reuters says Dewey would negotiate with creditors and prepare for a merger prior to a bankruptcy filing, which would enable Dewey to reorganize and quickly emerge from bankruptcy.

Dewey is currently in the process of negotiating with its lenders, and its spokespeople say the majority of the recent personnel departures were part of its plan to trim its partner ranks and increase profitability.

Among other losses, in mid-March, Dewey lost a dozen partners from its insurance transactional team to Willkie Farr & Gallagher. Later in the month, the firm announced its management team changeover, and a week later, it lost more attorneys from its mergers and acquisitions team to DLA Piper.

For more on the suspected bankruptcy, read Reuters.

For more InsideCounsel coverage on Dewey’s recent troubles, read:

12 Dewey & LeBoeuf partners defect to Willkie Farr

Dewey & LeBoeuf overhauls management team amid more defections

Dewey & LeBoeuf loses 4 more lawyers

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