Law Firms

Trustee Balks at Dewey Plan to Pay $450K in 'Morale' Bonuses to Remaining Workers

The U.S. bankruptcy trustee isn’t going along with a plan by Dewey & LeBoeuf to pay up to $450,000 in “morale” bonuses to retain 52 workers who are winding down its operations.

U.S. Trustee Tracy Hope Davis noted her objections in a court filing (PDF) on Wednesday. Dewey had claimed the bonuses would help prevent employee attrition and improve morale, thereby maximizing the collection of receivables. The employees are being assisted by a collection agent working on a contingent basis.

Under Dewey’s incentive plan, most of the $450,000 in morale bonuses would be based on additional weeks of service, although some money would be paid on a discretionary basis. According to a footnote in Dewey’s motion, Dewey also planned to pay “ordinary course” bonuses of up to $230,000.

But Davis said in a court filing there isn’t enough information to determine whether the plan is justified. One question, Davis wrote, is whether it would be more economical to hire a collection agent to take over all of the collection work, including the tasks done by the employees. Another question, she said, is whether May and June accounts receivables will justify the costs of the employees.

“To be clear, the United States Trustee has no intention of penalizing the employees, but the estate should not be forced to shoulder unnecessary costs if such costs provide no benefit to the estate,” Davis wrote.

Davis also objected to the “ordinary course” bonuses. She said it’s unclear to what extent the law firm is operating in the ordinary course, given its liquidation. Nor is there enough information available about whether the bonuses would be allowed under the bankruptcy code. “Given the dearth of information provided by the debtor, it is possible that the ordinary course bonuses are designed for insiders and/or senior management,” Davis wrote.

Reuters and Bloomberg News have stories on the court filing.

Updated at 11:45 a.m. to add a PDF of the court filing.

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