Dewey Seeks Bankruptcy Judge OK to Pay Remaining Workers Up to $450K in ‘Morale’ Bonuses
Posted Jul 5, 2012 2:25 PM CST
By Martha Neil
Dewey & LeBoeuf is seeking bankruptcy court approval to pay up to $450,000 in "morale" bonuses to help retain the 52 workers it needs to wind up its operations over the next few months.
However, five key employees could get another $250,000, for a total bonus pool of $700,000, depending on how much they collect from an estimated $200 million or so in legal fees owed to the dissolving law firm, according to Law 360 (sub. req.) and the Bankruptcy Beat blog of the Wall Street Journal.
“The employees are integral to the efficient and expeditious wind down of the debtor’s affairs,” explains a Tuesday court filing (PDF) by the law firm. “Without the continued commitment of these employees, the debtor’s ability to complete an orderly liquidation and to make a meaningful distribution to creditors would be severely compromised.”
Meanwhile, a lengthy Legal Week (sub. req.) series documents the downfall of the law firm, which owes creditors an estimated $345 million.
It points to two events that put Dewey, which had already been experiencing a partner exodus, into a death spiral:
• The exit of a 12-partner insurance practice group, which left Dewey in mid-March for Willkie Farr & Gallagher, made it difficult for the remaining partners to renegotiate terms on the bank lines of credit that funded the firm's operations.
• The news that actual profits for 2011 were significantly lower than what Dewey had reported to the American Lawyer for the magazine's annual survey of the world's largest law firms.
Adding to the firm's difficulties were pay disparities among partners that outraged those who weren't at the higher end, a lack of communication and a lack of cohesiveness among a collection of partners who had come together through the merger of two separate law firms and the recruitment of a significant number of lateral partners.
As early as October 2011, a significant number of partners began to realize something was amiss, as chairman Steven Davis revealed at a partnership meeting that huge pay guarantees had been made to a select partner group, creating a revenue shortfall, and the pressure to bill and collect began to increase.
"A phone call from Steve made me realize that something was seriously amiss," an unidentified senior lawyer told Legal Week. "Yes, the fact that we hadn't been paid for months was worrying, but now Davis was openly acknowledging that the firm had a serious cash flow problem."