Today at 5 p.m. is the deadline for former partners of the bankrupt Dewey & LeBoeuf law firm to sign up for the “Partner Contribution Plan.” Under the terms of the Plan, which in its latest iteration seeks $90.4 million in “clawbacks” from ex-partners, participating partners would contribute specified amounts to the Dewey bankruptcy estate in exchange for releases from future liability (to the Dewey estate, to other participating partners, and to Dewey lenders, thanks to recent revisions to the PCP).
When talk of the Plan first surfaced, I opined that “[s]uch a deal sounds reasonable in principle.” I later observed that even if the PCP might not be perfect, “[i]f you’re a productive partner, happily ensconced at a new and stable firm, and just want to forget the D&L debacle and return to serving your clients, this deal may Dewey the trick.”
But now, after numerous revisions to the Plan, seemingly endless extensions of the deadline to join, and a still-insufficient amount of participation, I’m beginning to think that maybe it just won’t fly — and Dewey should just be allowed to die, i.e., slip into a straight-up liquidation. Perhaps Dewey’s bankruptcy advisers should stop trying to flog a product that nobody seems interested in buying.
UPDATE (4:35 PM): It looks like the Dewey estate’s perseverance has paid off. The $50 million participation threshold has been reached.
Here’s one good thing about the Partner Contribution Plan: thanks to the PCP, we now have detailed information about how much each of Dewey’s partners received from the firm in 2011 and 2012. And yes, we’re willing to share the data for the top earners with you, in spreadsheet form.
Some people are big believers in the virtues of black-box compensation. But here at Above the Law, we’re all about transparency….
Before we get to the spreadsheet data, let’s talk a bit more about the Partner Contribution Plan. When the latest extension of the participation deadline was announced on Tuesday, ex-partners being invited to participate received this email:
Subject: Deadline Extended – August 16, 2012 at 5 pm NY time
In a few hours, we will post the revised PCP agreement for your review and signature. The reason for the delay in posting this is simple: lawyers for partners, the lenders and the Official Committee of Unsecured Creditors participated in drafting changes that we deemed important and there were a lot of people involved in this process which made it time-consuming. Just as one example, this final version of the PCP contains a provision for PCP participants to receive releases from the lenders which was not in any of the prior versions.
We are now done and this is the final agreement. We will not make any further revisions.
Finally, some backbone — but is it too little, too late? To quote a commenter on the WSJ Law Blog:
These constant extensions make the estate look weak, embolden former partners, and make them less likely to accept.
Good work Dewey estate. It’s street smarts like these that are why you’re broke. That and the fact that you live off a dying financial system like a tapeworm in a 6 ft tall Mexican transvestite.
(See, Above the Law isn’t the only website with irreverent anonymous commenters; they’re all over the internet.)
The plan needs contributions of at least $50 million in order to be viable. It’s not clear how many partners are already on board, but things are not looking so hot. Here’s a report from Am Law Daily:
With just a day left for former Dewey & LeBoeuf partners to sign on to a proposed $90.4 million settlement deal aimed at helping repay Dewey creditors, the bankrupt firm’s advisers said Wednesday that only about one in four of the affected attorneys had agreed to participate….
[Bankruptcy lawyer Al] Togut and [chief restructuring officer Joff] Mitchell both stressed that while the estate has only lined up agreements with about 160 former partners [out of 672 being asked to participate], conversations with other former partners and their counsel indicate that the threshold figure of $50 million that the estate hopes to achieve is within reach. Both acknowledged, however, that they won’t be certain of anything until Thursday.
So we’ll find out later today if enough partners are on board. Although some partners seem amenable — two partners, a top earner and a midlevel, told Thomson Reuters that they’ll probably sign — other partners seem willing to take their chances in a pure liquidation.
UPDATE (4:35 PM): As noted above, the $50 million participation threshold has been reached. Congrats to the Dewey estate.
We heard from one former partner who is not a fan of the PCP — which he refers to derisively as “the LSD plan.”
“They are trying to bully the little guys into participating because of threatened legal costs,” he said. “There’s not a f**king snowball’s chance in hell I’m participating.”
Does it make sense for partners to participate in the Plan? Let’s take a look at some concrete numbers. We’ll show you what more than 100 former partners received from the firm in total compensation for 2011 and 2012, and how much each is being asked to contribute pursuant to the Partner Contribution Plan.
Sure, comp-related blind items can be tasty — but knowing how much everyone makes is far more delicious….