Dewey & LeBoeuf LLP sought Chapter 11 protection yesterday, listing debt of $245 million and assets of $193 million in a filing U.S. Bankruptcy Court in Manhattan.
The New York-based firm, which had more than 1,300 attorneys in 12 countries after the 2007 merger of Dewey Ballantine LLP and LeBoeuf, Lamb, Greene & McRae LLP, now has 150 employees in the U.S. to wind it down, Jonathan A. Mitchell, the firm’s restructuring officer, said in the filing. Dewey will be liquidated, he said.
Dewey hired Togut Segal & Segal LLP as bankruptcy counsel. It is closing offices in Hong Kong, Beijing, Sao Paulo, London, Paris, Madrid, Frankfurt and Johannesburg. All U.S. offices have been closed or are closing. The firm is recovering equipment and artwork and securing client’s records, according to the filing.
Dewey has accounts receivable and work-in-progress in the U.S. valued at $255 million, according to the filing. The firm has historically collected about 95 percent of its accounts receivable and converted 84 percent of work-in-progress to accounts receivable, it said, although it is unlikely to attain those rates in bankruptcy.
Dewey owes secured lenders $225 million, with an additional $50 million owed to secured property lessors and $40 million in accounts payable, pension and deferred compensation claims and claims by employees for accrued paid time off, it said.
The law firm said it consolidated its bank debt on April 16, issuing $150 million of notes. Between Jan. 1 and March 30 about 20 percent of the firm’s equity partners resigned or left, it said. As of last week at least 250 of Dewey’s 304 partners had found new jobs.
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Judge Holds Ten Firms Liable to Coudert for Unfinished Business
Akin Gump Strauss Hauer & Feld LLP, Jones Day and Dechert LLP are among 10 law firms that must account for profits they made from Coudert Brothers LLP’s unfinished business, a federal judge in New York ruled.
Coudert filed for Chapter 11 bankruptcy in September 2006. The plan administrator sued the firms in 2008 in bankruptcy court claiming they were liable for any profits derived from completing client matters that former Coudert partners brought to their new homes. The firms argued that the doctrine didn’t apply as the matters were billed hourly and not taken on contingency. U.S. District Judge Colleen McMahon disagreed and denied the firms’ motion to dismiss.
“Although the New York Court of Appeals has not addressed this precise issue, I believe that it would conclude that the method by which the client matters were billed does not alter the nature of Coudert’s property interest in them,” McMahon said in a 54-page ruling on May 24.
Coudert, founded in 1853, had more than 600 lawyers in 15 countries when it filed for bankruptcy to avoid posting bonds related to two legal malpractice suits it lost. The law firm began winding down in 2005.
Last week’s ruling could affect similar claims in the case of Dewey & LeBoeuf LLP, which has retained a restructuring company to lead its wind-down efforts. Dewey’s equity partners, a group that numbered about 190, could be subject to such claims, lawyers said.
McMahon referred to Dewey in without naming it specifically. She held that the provisions of partnership law “may appear dated, or even quaint to observers of the kind of sophisticated corporate law practice that was once carried on at Coudert.”
“In the context of the ‘mega-firm’ model -- divisions among classes of partners, client hoarding, and mercenary lateral hiring -- one could argue that the law’s presumption that partners are mutual owners of all of a law firm’s business, and that all contribute to its success and so are entitled to share in the profits, no longer reflects the reality of practice,” she wrote. “Many partners at such firms no longer view their ’book of business’ as an asset of the firm, but as a jealously guarded piece of personal property.”
She added that law firms are free to modify partnership agreements to reflect current law firm practice. But without such a modification, she held, “the Couderts of this world are bound by the ‘quaint’ practices of yore.”
McMahon ruled that former Coudert partners are obligated to account for any profits they earned while winding down the client matters at the firms.
Beth Huffman, a spokeswoman for Dechert, declined to comment on the ruling. Dave Petrou, a spokesman for Jones Day, didn’t immediately return a phone call seeking comment. Ben Harris, a spokesman for Akin Gump, had no immediate comment.
David Adler, a partner in the New York office of McCarter & English LLP, represented Development Specialists Inc., the plan administrator for Coudert. Partner Susheel Kirpalani and of counsel Eric Kay of the New York office of Quinn Emanuel Urquhart & Sullivan LLP represented the law firms in the action, which, in addition to Akin Gump, Dechert and Jones Day, include Arent Fox LLP, DLA Piper LLP, Duane Morris LLP, Dorsey & Whitney LLP, K&L Gates LLP, Morrison & Foerster LLP and Sheppard Mullin Richter & Hampton LLP.
The case is In Re Coudert Brothers LLP 11-cv-05994, U.S. District Court, Southern District of New York (Manhattan).
Ex-SEC Attorney Barred for 1 Year Over Stanford Ethics Lapse
The U.S. Securities and Exchange Commission barred one of its former enforcement officials from practicing before the agency for one year over claims he violated federal conflict-of- interest rules.
Spencer Barasch, who participated in the SEC’s investigation of R. Allen Stanford’s $7 billion Ponzi scheme, performed private legal work for Stanford Group Co. about a year after leaving the agency even though the agency’s ethics office had told him he was prohibited from doing so, the SEC said in a statement last week. Barasch consented to the bar without admitting or denying the allegations.
Stanford was convicted March 6 of 13 criminal counts stemming from an investment fraud built on bogus certificates of deposit at his Antigua-based Stanford International Bank sold through his U.S. brokerage. The investigation became a black eye for the SEC after an inspector general report found the agency had been aware of a possible fraud for more than a decade.
“This action shows that the commission takes seriously ethical lapses by attorneys who appear and practice before it, and that such violations will result in serious disciplinary action,” Richard Humes, SEC associate general counsel, said in a statement.
“In order to avoid the expense and uncertainty of protracted litigation, Spence and the government have entered into a settlement that fully and finally resolves this matter,” Paul Coggins, an attorney for Barasch at Locke Lord LLP, said in a statement.
Barasch, who now practices law at Andrews Kurth LLP in Houston, agreed earlier this year to pay a $50,000 civil fine to the Justice Department for violating ethics rules.
Jenner & Block, Mitchell Silberberg Sue Dish for Networks
News Corp. (NWSA:US)’s Fox Broadcasting Co., Comcast Corp. (CMCSA:US)’s NBCUniversal and CBS Corp. (CBS:US) sued Dish Network Corp. (DISH:US), alleging that their copyrights are infringed by Dish’s PrimeTime Anytime video-on-demand service that allows viewers to watch network programs commercial-free.
Dish created a “bootleg video-on-demand service,” which, if not stopped, “will ultimately destroy the advertising- supported ecosystem that provides consumers with the choice to enjoy free over-the-air, varied, high-quality primetime broadcast programming,” Fox said May 24 in a complaint in federal court in Los Angeles.
Fox is represented by partners Richard Stone, Andrew Thomas, David Singer and Amy Gallegos, all in the Los Angeles office of Jenner & Block LLP.
CBS and NBC sued Dish separately in the same court. The networks accused Dish of copyright infringement and asked for unspecified damages as well as court orders preventing its unauthorized distribution of their programs. Fox also sued Dish for breach of contract. Robert Rotstein, Patricia Benson and Jean Pierre Nogues from Mitchell Silberberg & Knupp LLP are representing both CBS and NBC.
Dish, based in Englewood, Colorado, filed a separate complaint May 24 in federal court in New York against Fox, CBS, NBC and Walt Disney Co. (DIS:US)’s ABC. Dish seeks a court ruling that it isn’t infringing copyrights.
“Consumers should be able to fairly choose for themselves what they do and do not want to watch,” David Shull, Dish senior vice president of programming, said in a statement. “Viewers have been skipping commercials since the advent of the remote control; we are giving them a feature they want and that gives them more control.”
Dish is represented by Orrick Herrington & Sutcliffe LLP. Listed on the complaint from Orrick are Peter A. Bicks, E. Joshua Rosenkranz and Elyse D. Echtman, all partners in the New York office.
In March, Dish introduced its Hopper set-top box, which contains, in addition to a subscriber-controlled digital video recorder, a Dish-controlled section of the hard drive that records the entire primetime broadcast schedule of the four major networks every night, according to the Fox complaint.
Dish operates the PrimeTime Anytime service so that the copied shows can be watched commercial-free with its Auto Hop feature, Fox said.
“We were given no choice but to file suit against one of our largest distributors, Dish Network, because of their surprising move to market a product with the clear goal of violating copyrights and destroying the fundamental underpinnings of the broadcast television ecosystem,” Scott Grogin, a Fox spokesman, said in a statement.
Grogin declined to comment on Dish’s lawsuit in New York, where News Corp. is based.
The Los Angeles cases are Fox Broadcasting v. Dish Network LLC, 12-4529; NBC Studios LLC v. Dish Network Corp., 12-4536; and CBS Broadcasting Inc. v. Dish Network Corp., 12-4551, U.S. District Court, Central District of California (Los Angeles). The New York case is Dish Network LLC v. American Broadcasting Cos., 12-04155, U.S. District Court, Southern District of New York (Manhattan).
In the Courts
American Airlines Doesn’t Need Merger, Lawyer for AMR Says
AMR Corp.’s American Airlines can be strong as a standalone company and doesn’t need a merger with US Airways Group Inc. (LCC:US) to survive, a lawyer for American said in court.
American needs a competitive cost structure, and union support for a merger shouldn’t factor into a judge’s consideration of American’s request to reject union contracts, attorney Jack Gallagher said in U.S. Bankruptcy Court in Manhattan.
“The suggestion that there is a transaction likely with US Airways is wholly speculative, wishful thinking,” Gallagher, senior counsel at Paul Hastings LLP, said.
American and unions representing pilots, flight attendants and mechanics were in court May 25 for closing arguments over AMR’s request to void labor contracts.
The case is In re AMR Corp. (AAMRQ:US), 11-15463, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
Weil Gotshal, Simpson Thacher, Kaye Scholer on Archstone Deal
Lehman Brothers Holdings Inc. reached a deal to buy the rest of apartment owner Archstone for almost $1.6 billion from Bank of America Corp. (BAC:US) and Barclays Plc (BARC), ending a dispute with the banks over the price.
Weil Gotshal & Manges LLP represents Lehman. On the deal from Weil are New York partners David Herman, Michael Bond, Raymond Gietz and Scott Sontag as well as partner Kyle Krpata in Silicon Valley.
Kaye Scholer LLP represented Bank of America. The Kaye Scholer partners involved were New York partners Mark Kingsley, Edmond Gabbay, Aaron Rubinstein, Louis Tuchman and Frankfurt Partner Sebastian Jungermann.
Simpson Thacher & Bartlett LLP represented Barclays. The partners from Simpson are Patrick Naughton, Peter Pantaleo, Gregory Ressa, Peter Kazanoff and Nancy Mehlman, all in New York.
The defunct investment bank also agreed that Sam Zell’s Equity Residential (EQR:US), which had an option to buy the remaining half of the banks’ stake, will get $150 million, including an $80 million breakup fee from the banks and $70 million from Lehman, according to a statement by Lehman.
Hogan Lovells LLP and Morrison & Foerster LLP represented Equity Residential. From Hogan & Lovells were partners Bruce Gilchrist, Warren Gorrell, Prentiss Feagles and Cristina Arumi in Washington and Ira Greene in New York. From Morrison & Foerster was partner David Slotkin in Washington.
Lehman, which is starting to pay creditors after officially exiting bankruptcy court protection, had tried to stop the banks from concluding the option deal with Zell, saying he had bid up the price -- Lehman paid just $1.3 billion for the first half of the banks’ stake -- and the banks would be unjustly enriched. A judge earlier this year told Lehman, which had more than $20 billion of cash at the time, it could afford to pay more for the remaining 26.5 percent of Archstone.
Lehman previously owned 47 percent of Archstone, before agreeing to pay $1.3 billion for the first half of the banks’ stake.
The bankruptcy case is In re Lehman Brothers Holdings Inc., 08-13555, and the Archstone case is Archstone LB Syndication Partner LLC v. Banc of America Strategic Venture Inc. (In re Lehman Brothers Holdings Inc.), 11-02928, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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