Dewey & LeBoeuf law firm seeks Chapter 11 protection during wind-down

By Jim Witters

Wilmington, Del., May 29 - The international law firm Dewey & LeBoeuf LLP filed for Chapter 11 bankruptcy protections on May 28 "in an effort to preserve assets and wind down its business in the most orderly and efficient way possible," according to a company press release.

The case was filed with the U.S. Bankruptcy Court for the Southern District of New York.

"Unlike most other Chapter 11 cases, this filing does not anticipate a return to business but rather a managed wind-down of affairs, followed by liquidation. Dewey & LeBoeuf expects the most significant portion of the process to be completed in the next few months. In the interim, the firm will be operating on a budget and according to a timetable to be determined by the court," the release states.

The firm plans to continue to serve clients through the use of partners who have already left the firm. Dewey is seeking bankruptcy court approval to continue to pay salaries and benefits to 90 current employees during the wind-down period.

Until recently, the firm operated 26 offices around the world with about 5,000 clients, according to court documents.

Financial problems

During the first quarter of 2012, Dewey & LeBoeuf encountered "liquidity constraints that led to the precipitous resignation of over 160 of the firm's partners by May 11," according to the declaration of chief restructuring officer Jonathan A. Mitchell, which was filed with the court on May 28.

Dewey & LeBoeuf unsuccessfully attempted to structure a transaction with other law firms to "maintain the core value of the firm," and continuing credit defaults and the company's inability to secure alternative financing led to the decision to wind down the business, Mitchell states.

The firm faced the potential acceleration of about $225 million in prepetition secured obligations, according to Mitchell's statement.

Consolidated operations

Dewey & LeBoeuf has consolidated its operations and intends to sharply reduce the size of the office space it occupies at its headquarters, 1301 Avenue of the Americas, New York, according to the press release.

Other domestic and foreign offices have been or are in the process of being closed. The firm plans to work with its landlords to help lessors of telecommunications, computer equipment and furniture to recover and remove their property in a timely manner, the release states.

The firm's London and Paris offices are operated through a separately incorporated U.K. entity, which was placed into administration on May 28.

Administration is a British legal process under court supervision, similar to Chapter 11.

The U.K. partnership is following an approach similar to that of Dewey & LeBoeuf in the United States, the press release states.

The firm's wind-down committee, the finance director and Mitchell continue to negotiate a plan in conjunction with the secured lenders that would include consensual use of cash collateral, liquidation of the firm's assets - including $255 million in face amount of accounts receivable and work in progress - disposition of client files, closing of the debtor's officers, evaluation of the estate and investigation of potential estate claims and causes of action, according to court documents.

Dewey & LeBoeuf said that the 401(k) plans and qualified pension plans of its current and former employees and partners are held in trust and cannot be accessed by the firm's creditors.

Restructuring officers

Dewey & LeBoeuf has retained Jonathan Mitchell of Zolfo Cooper LLC as chief restructuring officer and Albert Togut of Togut Segal & Segal LLP as bankruptcy counsel in the U.S. case.

Mark Shaw and Shay Bannon, business restructuring partners of BDO LLP, were appointed joint administrators of the U.K. Entity.

Debt details

Dewey & LeBoeuf listed assets of $100 million to $500 million and liabilities of $100 million to $500 million, according to court documents.

The firm's largest unsecured creditors are:

• Pension Benefit Guaranty Corp., back in Washington, DC, with an $80 million pension claim;

• 1301 Properties Owner LP, based in New York, with a $3.78 million rent and property tax claim;

• Thompson Reuters, based in Eagan, Minn., with a $2.36 million library services and research claim;

• Bank of America, based in San Francisco, with a $2.14 million credit card claim;

• HireCounsel, based in New York, with a $1.56 million claim for outsource staffing;

• Lexis-Nexis, based in New York, with a $1.4 million library services and research claim; and

• Carrao Miller Wiesenthal Legal Search Consultants, Inc., based in New York, with a $1.32 million outsource staffing claim.

Dewey & LeBoeuf LLP is an international law firm based in New York. The Chapter 11 case number is 12-12321.

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