Judge Seeks More Details on Dewey Law Firm’s Bonuses

By | July 26, 2012

A judge on Wednesday demanded more detail on a plan by Dewey & LeBoeuf to pay out as much as $450,000 in performance-based bonuses to employees helping to wind down the bankrupt law firm’s operations.

Judge Martin Glenn said he wanted a list of the employees’ salaries and the amount of bonus money to which they would be entitled under the plan.

“I need something to put it in context for me,” Glenn said, calling bonuses for bankrupt companies a “hot-button” issue. He said he was inclined to approve most of the plan pending the salary list.

U.S. Trustee Tracy Hope Davis had objected to the plan, which would cover human resources, finance and IT personnel and billing and collection staff that agreed to stay and help wind down Dewey. Davis, whose job is to oversee bankruptcies to ensure compliance with bankruptcy laws, said Dewey had not shown that it could afford the plan.

In court papers, Dewey called the employees “integral” to collecting accounts receivable and getting the firm’s books and records in order.

The law firm, once one of the largest in the United States, is liquidating after filing for bankruptcy in May.

The plan initially covered 52 employees, not including Stephen Horvath or Janice Meyer, the former Dewey partners now serving as senior management to the firm as it winds down. But at least four of those people have left since Dewey presented the plan earlier this month, an attorney for Dewey said on Wednesday.

“There’s no future in working for Dewey & LeBoeuf — none,” Dewey lawyer Al Togut said. “There’s every reason for these people to leave. The only reason for them to stay is this application.”

Dewey’s plan would provide financial incentives to employees who stay with the firm past certain dates or meet certain thresholds in the collection of accounts receivable.

Davis’ objection also took issue with Dewey’s plan to pay $230,000 in additional, discretionary bonuses, but that issue was not up for debate at the hearing. Dewey argued that the bonuses, to be allocated to three people, fell under the so-called “ordinary course” of business and did not need court approval. Davis argued that Dewey no longer has ordinary-course business because it is liquidating.

The parties planned to discuss that issue out of court, though it could wind up before Judge Glenn if the sides cannot agree on whether the bonuses are appropriate.


Separately, Togut said Dewey has identified an ethics expert to issue a report on whether Dewey has an ethical obligation to pay the cost of shredding its old client files.

Togut did not name the expert, but said he was circulating the person’s credentials among Dewey’s creditor constituencies.

Judge Glenn earlier this month ordered Dewey to find an expert to weigh in on a dispute over document shredding. Dewey has hundreds of thousands of boxes of old client files around the globe, many housed in storage facilities.

Dewey last month asked court permission to destroy the files, which are costly to maintain, but did not address the cost of shredding. The storage facilities feel Dewey should foot that bill.

Togut said many clients have requested the return of their files in the wake of the dispute, and the firm expects to ship more than 100,000 boxes of files.

The case is In Re Dewey & LeBoeuf LLP, U.S. Bankruptcy Court, Southern District of New York, No. 12-12321.

Topics USA Legislation

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