A judge on Friday, Jan. 25, approved a plan by bankrupt law firm Dewey & LeBoeuf to foot some of the cost of destroying old client files, a bill that could ultimately reach almost $1.4 million.In a written order in U.S. Bankruptcy Court in Manhattan, Judge Martin Glenn green-lighted Dewey’s plan to chip in about $4 per box to help destroy an estimated 345,000 boxes of old records, some dating back to the 1930s.
The fate of Dewey’s old files has become an intriguing sub-plot in the unwinding of a once-proud firm that employed 1,000 lawyers in 26 worldwide offices at its height.
Dewey, now liquidating, filed the largest-ever bankruptcy by a U.S. law firm in May. In October it reached a $71.5 million settlement with former partners to help pay back about $260 million owed to secured creditors.
The question of how to destroy files that go unclaimed by former clients has framed a difficult legal issue, pitting Dewey’s fiduciary responsibility to creditors against its ethical duty to clients.
Bankrupt entities have an obligation to creditors to save as much money as possible to maximize payouts. But law firms also owe it to clients to preserve the privacy of their information.
Dewey and several storage companies that hold its files, including Iron Mountain Inc and Citystorage LLC, had been haggling for months over the cost of shredding. Earlier this month, the defunct law firm announced a plan to chip in about $4 per box, a figure that would come to $1.38 million if all roughly 345,000 boxes are ultimately destroyed.
There is no law governing the destruction of client files for liquidating firms, which has made the issue controversial in many law firm bankruptcies. The deal hammered out in Dewey’s case appears consistent with others in the past, including the $5-per-box price that law firm Dreier agreed to pay warehouses after its 2008 bankruptcy.
The case is In re Dewey & LeBoeuf, U.S. Bankruptcy Court, Southern District of New York, No. 12-12321.
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