Dewey Honor Associate Bonuses or Retired Partners' Claims? Not So Much.

As the Dewey bankruptcy case grinds toward an end, former associates find themselves getting shafted on bonuses.

Some of our associate readers were not happy with their latest bonuses. But hey, let’s look on the bright side: at least they got bonuses (assuming they made their hours).

The same can’t be said for former associates of the now-defunct Dewey & LeBoeuf. These associates sought to be treated as Dewey creditors in the firm’s bankruptcy case, but the effort isn’t going so well. And the same could be said of retired partners of D&L, some of whom could be paying money into the bankruptcy estate instead of getting money out of it….

Here’s what we heard last week from an angry ex-associate of Dewey:

[Dewey bankruptcy counsel Al] Togut has deemed that all associate claims for their 2011 bonuses should be rejected under the grounds that the bonuses were “discretionary” (notwithstanding the numerous claims by Dewey management that the bonuses would be paid as late as March of 2012). Keep in mind that Dewey only paid bonuses for people who hit their hours, so people who hit 2000 and made money to keep creditors paid are getting nothing, but associates with low hours who were let go before the implosion have an accepted claim by the estate for the remainder of their severance packages. Makes zero sense, but I guess that should be expected from these jokers.

(As some of you may recall, at least one ex-Dewey associate has a severance-related claim for more than $400,000. That’s one heck of a package.)

We asked this source for additional background, which was duly provided:

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The Seventh Omnibus Objection (document 760 on the Epiq website) was initially filed on 12/21 and sought to exclude the bonus claims. Obviously, that objection was met with a lot of pissed-off calls to Togut, so they adjourned the objection until the February hearing to give themselves more time to consider the associates’ arguments. We just learned that they are standing by their decision to exclude the bonus claims, so now everyone will need to file a response with the court and argue that the bonus claims are valid. From a firm that paid partner draws five days before filing for bankruptcy, would you expect anything less?

Not really. But before you shrug your shoulders and say “Dewey care?”, consider this from our tipster:

This issue actually has broader implications than just with respect to Dewey. If Togut is right, it means that every other Biglaw associate’s bonus is at risk, because the firm can completely go back on its word and refuse to pay them, even after they’ve announced the bonus and you’ve met the criteria. Of course, such a firm would take a massive p.r. hit, so it is a move that a firm would probably only make as it was going down the toilet.

We reached out to Al Togut for comment, but we did not hear back from him.

So former associates, aka the kiddies, are getting screwed. What about the oldies, namely, the retired partners of Dewey & LeBoeuf? (These partners, who retired from the firm well before it went under, are to be distinguished from the former D&L partners who are now mostly at other firms.)

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The bankruptcy process hasn’t been kind to the retirees either. Many of them went into the case hoping to get money out of the estate, as creditors. Instead, they’re being asked to pay into the estate, as reported by Thomson Reuters News & Insight:

A group of Dewey & LeBoeuf retirees who previously claimed the defunct firm owned them $80 million has agreed to return a portion of the retirement payments and compensation they received before Dewey collapsed, according to a settlement proposal filed in New York federal bankruptcy court on Thursday night.

If the proposal is approved, the retirees will each pay the Dewey estate either $5,000 or 25 percent of payments they received from Dewey in 2011 and 2012, whichever amount is smaller, in exchange for a release of claims and years of costly litigation.

Ouch — that’s quite the reversal. As Lena Dunham wrote in the New Yorker, it’s like “opening your cupboard to grab a cookie, but instead of getting a cookie you get dick-slapped.”

Of course, the retired partners don’t have to take the deal; they can continue to fight. But it sounds like a good chunk of them just want to wash their hands of Dewey (not unlike the many former partners who took an earlier Dewey deal):

It is unclear what the total payment to the Dewey estate would be, but the settlement covers 125 Dewey retirees and beneficiaries of retirees, according the application, which was filed by Al Togut, a lawyer for the Dewey estate.

The retirees still need to sign onto the resolution. Joff Mitchell, Dewey’s chief restructuring officer, said more than half have so far agreed to settle.

What led so many of the retired partners, a previously saber-rattling group, to accede to a settlement? Their attorneys — Annette Jarvis of Dorsey & Whitney, and David M. Friedman of Kasowitz Benson — did not comment to Thomson Reuters or the American Lawyer. But it seems some of the retirees felt that further fighting would be pointless, as one of them told Am Law Daily:

David Bicks — a retired Dewey partner who is now in an of counsel capacity at Duane Morris and was among the most vocal dissenters — said in an interview Friday that it was simply time move on.

“The best course was for both sides to lay down arms and avoid the travail and cost of continued litigation,” Bicks says, adding that as the bankruptcy moved forward, “it became clear that the projected recoveries to the estate would provide little or no upside for the retirees or other creditors.” (As The Am Law Daily has previously reported, Dewey’s creditors — who say they are owed $600 million — could receive pennies on the dollar.)

The bankruptcy process will culminate in a February 27 hearing before Judge Martin Glenn. Considering that Dewey filed for bankruptcy on May 28, 2012, a confirmation hearing on February 27 would represent a fairly swift resolution for a case of this size and complexity. By then the case will have lasted for nine months, about the duration of a pregnancy.

One might describe the Dewey bankruptcy case as relatively swift and relatively painless. Whether one could say the same thing about the law firm collapse that preceded it is an entirely different matter.

Dewey retirees agree to return compensation, retirement pay [Thomson Reuters News & Insight]
Dewey Retirees “Lay Down Arms” and End Fight With Firm’s Estate [Am Law Daily]


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