April 20 (Bloomberg) -- Dewey & LeBoeuf LLP is weighing options, including a pre-packaged bankruptcy, to avert the New York-based law firm’s collapse after losing dozens of partners over several months, a person familiar with the matter said.
A team led by partners Martin Bienenstock and Bruce Bennett is considering a pre-pack -- a bankruptcy plan approved by creditors -- that could lead to a merger with another U.S. firm, said the person, who asked not to be identified because he isn’t authorized to discuss the plans publicly. The team is also examining what happens if the firm shuts down, the person said.
More than 60 partners have left Dewey during what the firm has called a restructuring process. The largest exiting contingent was a group of 12 insurance and regulatory lawyers who went to Willkie Farr & Gallagher LLP last month.
“We are considering various paths, including continuing to operate as an independent global law firm and a strategic combination with another leading law firm, the latter of which could take many forms,” said Angelo Kakolyris, a spokesman for Dewey. “Nothing, however, at this point, is definitive.”
Bienenstock, who was named a member of the firm’s five-person chairman’s group, declined to comment on his plans for Dewey.
Dewey ranks third among legal advisers to investment banks advising companies on mergers this year, based on the announced dollar value of deals, according to data compiled by Bloomberg. Bienenstock’s restructuring team represented Los Angeles Dodgers LLC in its bankruptcy and sale to a group including Magic Johnson, according to Dewey’s website.
Closing Dewey would make it much more difficult for members of the firm’s limited liability partnership and creditors to get any money back, said the person familiar with the situation. Most large law firms that fail don’t come out of bankruptcy, they liquidate, said Chip Bowles, a bankruptcy lawyer with Bingham Greenebaum Doll LLP in Louisville, Kentucky.
“Unless they get to a stopping point on the bleeding, Dewey will simply collapse,” Bowles said, citing Finley Kumble, which went bankrupt in 1988.
Dewey might have trouble finding a merger partner, since many rivals prefer to select only the partners they want, Bowles said.
“What you are seeing happen to them now is a form of cherry-picking with groups of partners leaving,” he said. “This doesn’t mean the firm won’t survive, but people going to jobs which are perceived as safer is a bad sign.”
While a pre-pack “in theory could work,” Dewey’s challenge will be to keep control of the firm’s assets, which are mainly its partners, Bowles said. “The money is in the books of business of the productive partners.”
New York-based Finley Kumble had almost 200 partners, according to the American Lawyer.
The Wall Street Journal reported Dewey’s possible bankruptcy filing earlier today.
“The firm has not hired a bankruptcy attorney and I think I would know if it had,” said Bennett, who co-chairs Dewey’s business solutions and governance practice in Los Angeles. Reuters reported that Dewey hired Albert Togut, a bankruptcy attorney with Togut Segal & Segal LLP who has represented companies in Chapter 11 bankruptcy cases. Togut didn’t return phone calls and e-mails seeking comment.
Peter Gilhuly, a partner at Latham & Watkins who advised Howrey LLP on its dissolution last year, said earlier this week he “has a role” in Dewey’s struggle for survival. Gilhuly, who also advised San Francisco-based law firm Thelen LLP in its 2008 dissolution, declined to comment further on the role and said he isn’t representing the firm or the banks.
Dewey raised $125 million in a 2010 bond offering to refinance existing bank debt, a rare action by a U.S. law firm.
In Dewey’s international network, the 42-lawyer Moscow outpost is assessing its options after approaches from firms including King & Spalding LLP, said a person familiar with negotiations. The Russian office focuses on energy and corporate law.
This week, Dechert LLP took a five-partner corporate and securities team from Dewey’s Dubai office to open in the city.
Dewey’s Rome office head, Stefano Speroni, said the Italian business isn’t looking to leave the firm.
“I truly deny that we are in negotiations with anyone,” Speroni said in a telephone interview today. “People are calling us, which is inevitable, but there is no substance to the rumors that the Italian offices are going to leave Dewey & LeBoeuf.”
After the spate of departures, the firm last month said it would set up a new chairman’s office with five co-equal members from its most profitable groups, according to a letter to the partners obtained by Bloomberg News.
Current Chairman Steven Davis would be joined in the chairman’s office by Bienenstock, who runs the firm’s restructuring group; Rich Shutran, head of the corporate department; Jeffrey Kessler, head of litigation; and Charles Landgraf, who runs the Washington office and the legislative and public policy group, according to the letter.
The new management team was being set up after “internal requests for more hands-on management,” Shutran said in a phone interview at the time.
“On insurance, we’re confident that the group’s departure has no impact on our firm’s profitability,” Shutran said. “That group was break-even at best.”
Revenue for the first two months of this year rose 28 percent from a year earlier, and so called billable value increased 13 percent, according to the letter. Revenue for the 12 months through Feb. 29 grew 6 percent with an increase in billable value of 9.7 percent, according to the letter.
Florida law firm Ruden McClosky PA won approval in bankruptcy last year to sell itself to Greenspoon Marder PA, raising enough from the sale to pay about $5 million owed to Wells Fargo Bank NA, according to court filings. There were no rival bids.
To contact the reporters on this story: Jeremy Hodges in London at firstname.lastname@example.org; Sophia Pearson in Philadelphia at email@example.com; Linda Sandler in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Anthony Aarons at email@example.com