Dewey Docket: Bonuses for Wind-Down Team Get Green Light

Share This Article!

Written By admin at Monday, July 30th, 2012


A federal bankruptcy judge gave the green light Monday morning to most of a $ 700,000 bonus plan for the team collecting bills and shutting down operations at failed New York law firm Dewey & LeBoeuf LLP.

The Justice Department’s watchdog in the case had objected to the bonuses, calling the Dewey estate’s proposal to reward both the employees that have stayed on after the firm closed up and outside collections consultants “premature” and unjustified.

But Judge Martin Glenn disagreed, saying in his order that the plans were appropriate given the circumstances, with the exception of a proposal to use up $ 100,000 as discretionary funds. Otherwise, Judge Glenn said:

…. the cost of the Retention Plan is reasonable in light of the possible consequences the Debtor would face if it were unable to stop more Employees from leaving. Currently, Employees are engaged in a very wide range of tasks such as the collection of receivables, disposing of boxes of former client files, sorting through the Debtor’s fixtures, furniture, and equipment located throughout the country and in various other countries throughout the world, mining financial data about the Debtor, complying with statutory reporting requirements, administering the Debtor’s claims process, and identifying causes of action and claims that the estate may have against third parties.

Dewey’s wind-down team did not immediately respond to a request for comment.

The judge also called incentives for three “key” Dewey employees working to collect an estimated $ 217 million in unpaid client bills and works in progress “plainly reasonable in the context of the Debtor’s assets, liabilities, and earning potential.”

Still unclear: who will pay for the next phase of the bankruptcy.

On Friday, Dewey’s estate asked Judge Glenn to keep the Dewey train chugging along in Chapter 11 mode by approving the continued use of lenders’ cash collateral through August 15.

That would buy time to gauge whether a second “clawback proposal” to former partners will succeed, according to a declaration filed Friday by the firm’s chief restructuring officer, Joff Mitchell. The former partners now have until Aug. 7 to decide whether they want to give back up to $ 90.4 million they were paid in 2011 and 2012 in exchange for a release from future liability.

Dewey’s secured lenders—J.P. Morgan Chase & Co., and bondholders who own $ 150 million in private placements the firm floated in 2010—have agreed to let the estate use the money for now, Mr. Mitchell said.

But a $ 6 million proposed budget for Aug. 1 to Aug. 15 has not yet been approved by the various creditor committees in the bankruptcy case, which also include a group of unsecured creditors and a committee of former partners.

Law Blog