On Thursday, attorney David Friedman, who is representing a group of former Dewey & LeBoeuf partners, opposed the $71.5 million settlement between former partners and the estate of the now defunct law firm. In a long hearing before the U.S. Bankruptcy Judge Martin Glenn, Friedman grilled Joff Mitchell over his impartiality in structuring the settlement. Joff Mitchell is leading the liquidation of the Dewey estate.
It appears that some former partners who have objected to the settlement have asked the court to appoint an independent trustee to investigate the fairness of the settlement.
Friedman drew attention to the fact that Dewey’s wind-down team included some of the former leaders of the firm and could possibly be lenient towards their past cronies. Since all of Joff Mitchell’s decisions need to be approved by the wind-down team, the constitution of that group would influence Mitchell’s decisions.
During the three-hour hearing on Thursday, Friedman also questioned a member of Dewey’s unsecured creditors committee over his decision to support the settlement that excluded three top executives of the firm including the former chairman Steven Davis. The member of the unsecured creditors committee, Paul Gendler, whose company is owed $43 million, said that his decision was based on information provided by the wind-down team of the firm, which had apparently said, “the folks that were really responsible for setting the tent on fire are the three folks who are excluded.”
Apparently, it was forwarded by the Dewey wind-down committee that the top executives were excluded from the settlement, as claims regarding them should remain open to separate proceedings. However, such a strategy also leaves further proceedings against those “responsible for setting the tent on fire” undecided and in question, while those not responsible are forced to reach a settlement. Of course, this also leaves the chance of those three executives later claiming benefits of the same settlement on the basis of equity. And, as Friedman’s submissions indicate, if they had been included in the present settlement, then the cards may have fallen differently.
Currently, more than 450 of the former 672 former partners of Dewey have assented to the settlement. If the settlement were approved by the court, then those who are included within its ambit would need to pay between $5000 to $3.5 million to prevent future clawback proceedings by the estate.