Dewey Have Plans To File for Bankruptcy? Sources Say Yes
Dewey have plans to file for bankruptcy? Apparently so, sources say.
The ailing law firm of Dewey & LeBoeuf is not long for this world. The only real question that remains is how Dewey’s death will take place. Will Dewey be pushed off the cliff, or will it jump?
We mentioned on Thursday that Dewey might be forced into bankruptcy by creditors, perhaps former partners concerned about their pensions. But now it seems that Dewey might do the deed itself.
Let’s hear the most recent reports — and look at the latest indicators that Dewey is done, including new signage outside 1301 Avenue of the Americas….
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The news of a possible bankruptcy filing by Dewey was reported last night by the Wall Street Journal and then by Reuters. From the WSJ Law Blog:
New York law firm Dewey & LeBoeuf LLP is readying a possible bankruptcy-protection filing for sometime in the next several weeks, said people familiar with the matter, a move that would initiate official liquidation of the beleaguered institution.
Dewey within the last week brought aboard an operational turnaround and restructuring firm to help the law firm collect receivables and attempt to return money to lenders and other creditors, according to the people familiar with the matter.
Dewey’s remaining lawyers and outside advisers are working to be ready to file for bankruptcy protection by the end of next week, though the actual filing could come well after, these people said.
They might want to file sooner rather than later, before they get pushed into an involuntary bankruptcy. As we previously mentioned, bankruptcy litigatrix Annette Jarvis of Dorsey & Whitney is sharpening her scythe, readying herself for the role of Grim Reaper.
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If Dewey files for bankruptcy on a voluntary basis, who will handle it?
Dewey tapped restructuring firm Zolfo Cooper in the past week for additional help winding down the law firm’s operations. Joff Mitchell, a senior managing director at Zolfo, is now serving as Dewey’s chief restructuring officer, said people familiar with the matter. Albert Togut, a bankruptcy lawyer at Togut, Segal & Segal LLP, would handle the bankruptcy filing, one of the people said.
Zolfo Cooper, meanwhile, usually helps companies restructure their operations, sometimes offering advisers to take interim management roles. The firm also enlists advisers to oversee defunct operations and develop plans for returning money to creditors. Stephen Cooper, one of the firm’s namesakes, has alongside teams at the firm overseen Enron Corp. as it liquidated and film studio Metro-Goldwyn-Mayer Studios Inc. before and during “prepackaged” bankruptcy proceedings. Mr. Cooper is no longer with the firm and isn’t working on the Dewey situation.
That’s fine company for a Biglaw firm to find itself in: Enron, and the studio that brought us Showgirls.
Why might Dewey finally file for bankruptcy, despite the repeated insistence by many — including Martin Bienenstock, a former member of the Office of the Chairman — that it would not? Because creditors are increasingly open to it, according to Reuters:
Buyers of distressed debt who have acquired Dewey’s debt at a discount on the secondary market are more open to seeing the firm wound down in bankruptcy court rather than out of it, said [a Reuters source].
With the emergence of new creditors, Dewey on Tuesday replaced restructuring adviser Development Specialists Inc. (DSI) with competitor Zolfo Cooper. Joff Mitchell, a senior managing director at Zolfo, is now Dewey’s chief restructuring officer….
Bill Brandt, chief executive of DSI, confirmed that his firm’s involvement in the matter was coming to an end. “Our firm is transitioning out,” Brandt said. “We’ve been replaced by Zolfo at the insistence of the debt holders. It now becomes a creditor-driven case.”
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Things have been “creditor-driven” at Dewey for quite some time now. As one Dewey employee quipped to Above the Law a few weeks ago, “We work for the banks now.”
In addition to the WSJ and Reuters reports, an ATL source confirmed the bankruptcy planning to us. This tipster, a member of the “skeleton crew” involved in winding down matters at Dewey, attended a meeting on Thursday where management mentioned “that bankruptcy was imminent.” Precise timing was not specified. “No end date was given,” said our source.
(There was also some discussion at this meeting of the status of 401(k) plans. Although I’m not an ERISA lawyer, my guess is that these funds should be safe, since the money has already been set aside and placed under each employee’s name. There should be no need for a PBGC rescue with respect to these 401(k) plans.)
Let’s take a look at two more indicators that Dewey is at death’s door, including that new sign we mentioned….
