Sunday, January 6, 2013

Dewey Advisers' Tab: $14.1 million


The Am Law Daily

Correction, 1/4/2013, 11:05 a.m. EST: The original version of this article included an incorrect figure for the total fees sought by professionals working on the Dewey & LeBoeuf bankruptcy. The correct figure is $14.1 million. The headline and first paragraph of the article have been revised to reflect the correction information. We regret the error. 

Advisers working for the Dewey & LeBoeuf estate have a dual mission this month: to win court approval for a plan outlining how the bankrupt law firm's creditors will be paid a portion of some $600 million in debt they are collectively owed and to convince the same court that they themselves should be paid $14.1 million for their work advising Dewey during the bankruptcy's first five months.

As of Wednesday, a dozen law firms, financial and restructuring outfits, and other advisers had filed fee and expense requests in bankruptcy court covering the period from May 28—when Dewey filed for Chapter 11 protection—through the end of October.

At $4.7 million, the fee request submitted by lead Dewey bankruptcy counsel Togut, Segal & Segal is the largest of the lot. In second place: the $3.6 million bill submitted by chief restructuring officer Joff Mitchell's firm, Zolfo Cooper.

The filings show Togut, Segal & Segal name partner Al Togut billing 943 hours at a rate of $935 an hour for his Dewey-related work, and his partner Scott Ratner billing 1,218 hours at a rate of $800 per hour. The firm spent most of its time on litigation ($1.4 million) and partner settlement talks ($674,083), while its priciest expenses were $21,843 in photocopies (other bills included late-night meals and car service rides home from the office).

Brown Rudnick, which is serving as counsel to an official committee of unsecured creditors, is asking for $2 million, a quarter of which it chalks up to meetings and communications with creditors as well as to claims analysis.

Kasowitz, Benson, Torres & Friedman, which is acting as counsel to the somewhat embattled official committee of former partners, seeks $1.3 million. Kasowitz's role in the case has been challenged by the Dewey estate, which pushed late last year to disband the former partner group because of what the advisers called its drain on the estate's funds and lack of "productive" contributions to the case.

The committee—which is composed of retired partners from Dewey's two legacy firms, Dewey Ballantine and LeBoeuf, Lamb, Greene & MacRae—has been vocal in its criticism of the $70 million settlement plan struck by the estate and former Dewey partners that frees the 400 participants from future claims brought by the estate in exchange for payments ranging from $5,000 to $3.37 million. In late November, U.S. Bankruptcy Judge Martin Glenn, whose approval of that settlement is currently on appeal, rejected Dewey's request that he dissolve that committee.

Financial consultants at Goldin Associates, who were instrumental in creating the partner contribution plan that is the linchpin of Dewey's Chapter 11 plan, filed a fee request seeking $1.2 million.

Crisis communications firm Sitrick and Company and restructuring shop Development Specialists Inc. are seeking modest sums—$248,860 and $57,258, respectively—for work that wound down fairly quickly once Dewey made its bankruptcy official following several months of partner losses and mounting questions about its fiscal condition.

In June, Glenn questioned why the cash-strapped estate need a public relations adviser, and the Sitrick firm quickly agreed to abandon its Dewey-related work. As The Am Law Daily reported at the time, Dewey had hired Sitrick to advise the firm in mid-March as it grappled with the defections and financial problems that ultimately led to its demise.

Development Specialists, meanwhile, saw its role in the case shrink after Zolfo Cooper's arrival in May at the request of hedge funds that had purchased a portion of Dewey's bank debt, according to our past reports.

Rounding out the list of advisers hoping to be paid (and the amounts they are seeking) are: tax counsel Ernst & Young ($60,235); pension legal adviser Keightley & Ashner ($158,591); bankruptcy administrator Epiq Bankruptcy Solutions ($69,531); and Deloitte Financial Advisory Services, which serves as financial adviser to the unsecured creditors ($653,415). (German restructuring firm Thierhoff Muller & Partner is requesting €249,910, or roughly $330,000, payable from the firm's secondary insolvency overseas).

Glenn is scheduled to weigh in on the fee requests, many of which have already been partially paid out, on January 24. In the meantime, he is scheduled to review the estate's disclosure statement and Chapter 11 plan at a hearing set for 2 p.m. Thursday in lower Manhattan. If approved, Togut and Zolfo Cooper's respective roles in the case will come to an end.

Dewey's advisers stress the importance of confirming the plan in court filings, saying that “any alternative . . . could result in extensive delays and increased administrative expenses, thereby resulting in smaller distributions on account of claims and interest in the Debtor.”

Various groups have objected to the plan, primarily by arguing that it does not give enough specifics as to who will be shielded from future claims and how creditors will be paid. The dissenters include U.S. Trustee Tracy Hope Davis, an ad hoc committee of retirees, former executive director Stephen DiCarmine and former chief financial officer Joel Sanders, and Dewey's former New York landlord, 1301 Property Owners, which has argued that Dewey's former partners may be personally liable for the firm's abandoned lease.

Dewey responded to all the objections in a December 31 filing, pledging to revise the plan's language to address some of the concerns and arguing that the court should reject others. The estate's advisers also strongly contest the landlord's assertion that former partners may be individually responsible for the lease, calling it a scare tactic meant to derail the Chapter 11 plan.

In pushing for the plan's approval, Dewey's advisers argue: "the Debtor is on the cusp of successfully resolving the largest and most complex law firm bankruptcy in history."

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