After news of the proposed settlement of $104 million that Dewey is seeking from former partners hit the market reactions have hardly been favorable. The former partners of Dewey are in a fix, as they have few encouraging options.
In Wednesday’s meeting, Joff Mitchell, the chief restructuring officer for Dewey told the former partners in no uncertain terms that if the deadline of July 24 made by the firm’s bankruptcy officers is not met then the proceedings could be converted to Chapter 7 instead of Chapter 11. This would lead to the appointment of a trustee empowered to seek clawbacks aggressively from former partners as part of the liquidation. Also, those former partners who fail to settle by July 24 may have to pay a 25 percent penalty. On the other hand, not settling would mean long years of litigation.
Mark Zauderer, a lawyer who represents 57 Dewey partners told Reuters, “From what I’ve seen, the numbers are not generating enthusiasm.” According to the clawback plan, 709 former partners have been asked to give back a portion of the $455 million the firm distributed to them since 2011. Former partners are receiving emails with individual demands ranging from $25,000 to $3 million from Wednesday night.
A former partner reported that the demand made on him was at least $50,000 more than what he thought he owed, and it would delay his retirement by at least four years. He said, “My view is there’s nothing less desirable than having this drag out for years … I’m willing to pay a lot of money to have this go away.” He’s ready to pay up, because he wants to move on, even though he knows he’s paying extra.
However, the case is not the same with many others. At least one former partner said “I have all the records, and I can prove what I got … It’s not so much the money. It’s the ridiculous nature that they can’t get it right.” This partner believes he is being charged at least $500,000 more than what he owed the firm.
Some, of course, see foul play even while Dewey is in the last throes. Zauderer said that the estate is yet avoiding the pursuit of about $18 million in payments made to only certain partners before applying a formula to everyone. This was done as a special distribution in 2012.
According to its bankruptcy advisors, the firm has to collect at least $50 million by July 24 in order to proceed with the settlement with former partners.