A U.S. bankruptcy judge approved a $71.5 million settlement between former Dewey & LeBoeuf partners and the bankrupt law firm’s estate on Tuesday.
Under the terms of the deal, roughly 400 of Dewey’s 670 ex-partners will pay between $5,000 and $3.5 million of their compensation in exchange for immunity against future lawsuits connected with the firm’s demise. In his approval of the settlement, U.S. Bankruptcy Judge Martin Glenn said that the agreement “will lead to a quicker wind-down in Chapter 11, and—more importantly—a quicker and more certain distribution to creditors.”
A group of former partners had opposed the deal, arguing that the wind-down team comprised some of Dewey’s former management, who some critics blame for the firm’s collapse, and that it favored more highly-paid partners when crafting the settlement. But Judge Glenn rejected these arguments, ruling that the team negotiated the settlement “at arm’s length.”
Not included in the settlement are several high-ranking firm executives, including Chairman Steven Davis, executive director Stephen DiCarmine and chief financial officer Joel Sanders. The estate will reportedly pursue litigation against the trio for their alleged role in the firm’s demise.
The agreement comes just four months after the law firm filed for Chapter 11 bankruptcy protection on May 28. In the past, it has taken other firms years to reach such clawback settlements. But Dewey isn’t out of the woods yet: In its initial bankruptcy filings, the firm reported that it owed $315 million to creditors, but subsequent reports have put that total as high as $560 million.
Partners who have not yet signed on to the deal can still do so, according to Dewey’s chief restructuring officer Joff Mitchell. The estate will file a final plan for the firm’s reorganization in November.
And for more InsideCounsel stories about the Dewey saga, see: