Headquartered in New York City, it had 26 offices all over the world and at one time employed more than 1000 lawyers at its peak. One of their offices is located in San Francisco, CA. Ironically, the San Francisco location handles bankruptcy, litigation, dispute resolution, insurance, and business restructuring; considering their situation right now, they seem to be in the same position as the clients that they are trying to acquire.
Established in 2007 through the merger of LeBoeuf, Lamb, Greene & MacRae and Dewey Ballantine, the law firm has been known to be one of the biggest firms in the United States. Unfortunately, trouble started when they began losing partners. Approximately 300 partners were lost to other firms because of issues with debt and compensation.
Their financial woes became public when the New York District Attorney’s office began an investigation on the supposedly false statements that were issued by the firm’s Chairman Stephen Davis.
The firm then went into administration as of May 2012. In going into administration, the firm is managed by an interim chief executive who oversees the operation in behalf of the law firm’s creditors. Dewey and Leboeuf was allowed to operate and keep their assets for the meantime while they sort out a way to pay off their debtors and the best way to do that is to find a merger partner who could bring in the cash flow.
Unfortunately, they failed miserably having not found any firm willing to merge with them. On top of that, 160 partners resigned as of May 11 causing more strain to the firm.
Liquidation is now the only way for them to get out of their financial rut. But still hoping to keep the firm intact, Dewey and Leboeuf opted to file a Chapter 11 bankruptcy. In Chapter 11, they have to propose a profitability plan post-bankruptcy petition (like in Chapter 13). This will shield them from their creditors from going after them. They listed their liabilities in the area of $100 to $500 million and just down to 100 employees in New York from the original 533 based on the labor department’s report. Even their Paris and London offices were already placed into administration as of filing date.
May 28, 2012 is listed as the bankruptcy filing date for Dewey and Leboeuf. Currently, the firm’s assets are listed as $255 million accounts receivable, $11 million invested in an insurance consortium, $13 million in cash, artwork, and other potential claims as of filing date. Currently, the Chief Restructuring Officer is still Joff Mitchell of Zolfo Cooper LLC and their bankruptcy petition is being handled by Togut Segal & Segal LLP.
As with Chapter 11 bankruptcies, any decisions or actions by Dewey and Leboeuf like payroll, paid time off and benefits given to employees must first be approved by the court. Currently, the Chief Restructuring Officer is still Joff Mitchell of Zolfo Cooper LLC
Despite all the debts that they are facing, Dewey is assuring their former and current employees and partners should not worry about their 401(k) plans and pensions because it has been placed in a trust that the creditors cannot go after. Although a problem may arise here because they are also being sued by The U.S. Pension Benefit Guaranty Corporation to the tune of $80 million for unpaid pension benefits and is trying to seize control of the law firm’s 3 pension plans.
Dewey’s current situation proves how even big law firms can become vulnerable because of the recession; and as Kent Zimmerman (legal consultant for the Zeughauser Group) puts it, “Dewey’s failure is rocking the industry in the sense that most firms are saying to themselves, if Dewey could go down, could we?”
Even with big name clients like General Motors Corp., Novartis, Ebay, Berkshire Hathaway Reinsurance Division and Ambac, Dewey and Leboeuf still managed to fail miserably. And with the case expected to draw out in court for years, there doesn’t seem to be an easy way out for them. Will they be able to get back on their feet again or will they end up as just another statistic?