NEW YORK (Reuters) - Former Dewey & LeBoeuf partners, stung by demands that they repay as much as $103.6 million to compensate the bankrupt firm’s creditors, said Thursday they are considering whether to pay the hefty sums.
“From what I’ve seen, the numbers are not generating enthusiasm,” said Mark Zauderer, a lawyer for 57 former Dewey partners.
The terms of the clawback plan were laid out during a meeting in New York on Wednesday. They called for 709 former partners to give back a portion of the $455 million the firm distributed to partners since 2011.
Emails from Dewey’s general counsel listing amounts ranging from $25,000 to $3 million began arriving in former partners’ in-boxes starting Wednesday night.
At least five of the former partners said that the compensation figures listed in the emails conflicted with what they believed they were actually paid in those years. Two former partners said the changes could materially affect their decisions to pay up and settle.
“I have all the records, and I can prove what I got,” said one former partner, who claimed the change in numbers could cost him $500,000 more than he thought he owed. “It’s not so much the money. It’s the ridiculous nature that they can’t get it right.”
Another former partner said he was being asked to pay $50,000 more than he thought he owed and expects to delay his retirement by at least four years because of Dewey’s collapse. He said he would pay the additional money because he wants to move on.
“My view is there’s nothing less desirable than having this drag out for years,” he said. “I’m willing to pay a lot of money to have this go away.”
At Wednesday’s meeting, Joff Mitchell, the chief restructuring officer for Dewey, said the plan was fair and ensured that those who earned the least paid the least. He declined to comment further through a spokeswoman at Zolfo Cooper, where he is a managing director.
But not everyone agreed with Mitchell’s assessment. Zauderer, for example, said the estate should go after about $18 million in payments made to certain partners as a special distribution in 2012 before applying a formula to everyone.
Once one of the largest law firms in the United States, Dewey & LeBoeuf collapsed in May amid a raft of partner defections and a high debt load. A firm that began the year with 1,040 lawyers in 26 offices ended with hundreds of employees laid off.
Dewey owes creditors more than $315 million, and the firm’s bankruptcy advisors want to amass at least $50 million in the clawback fund by July 24 in order to go forward with the proposed settlement.
If that deadline isn’t met, Mitchell warned partners at the Wednesday meeting that the bankruptcy could be converted to Chapter 7 instead of Chapter 11. Such a move would involve the appointment of a trustee who would be empowered to aggressively seek clawbacks from the former partners as part of a liquidation.
What’s more, former partners who don’t settle by July 24 could pay a 25 percent penalty. Not settling at all could mean years of litigation.
Personal financial pressures could also factor into whether former partners agree to the deal. Several partners owe significant sums to Citigroup Inc (C.N) and Barclays Plc for money borrowed to finance capital they invested in Dewey, according to two people familiar with the loans.
Eamon O’Kelly, a former Dewey partner, said he thought it was too early to tell if partners will agree to Dewey’s terms.
“I think everyone has to digest the information they got and make a rational decision on how they are going to respond to it,” he said.
Nate Raymond and Casey Sullivan; Editing by Richard Chang