Time will tell how badly Dewey & LeBoeuf’s ex-partners who jumped ship really want to leave their former firm behind. The largest law firm to declare bankruptcy in U.S. history is offering its former partners a deal: It will drop any and all potential claims against them, if they cough up $103.6 million.
Each of the partners who headed for the hills as the firm slowly sank underwater are expected, under this agreement, to pay amounts depending on their compensation. "I think the plan is fair," Joff Mitchell, the bankruptcy’s chief restructuring officer told Thomson Reuters. "Those that made the least will contribute the least. The plan does not favor those who are on the top." Partners may pay anywhere from $25,000 to $3 million.
Dewey’s creditors are surely salivating at the very idea. The defunct firm owes $315 million, and this deal could put a significant dent in that.
The partners’ earnings are subject to clawbacks, the recouping of which will be a big challenge for the firm’s estate. If they reject this deal, according to Mitchell, the bankruptcy may escalate from a Chapter 11 to a Chapter 7. Were that to happen, a trustee would be put in charge of seeking the clawbacks as part of a liquidation, and things could get aggressive.
Read more InsideCounsel coverage of the Dewey saga: