Law firms that have recruited partners from Dewey & LeBoeuf may have to account for certain profits the recent hires make from unfinished business at the now defunct law firm, according to a recent New York Federal Court ruling not connected to Dewey’s bankruptcy case.
PE Manager has been tracking where private equity-focused lawyers from Dewey have found new work, including pickups made by Goodwin Procter, O’Melveny & Myers and DLA Piper, to name a few.
Under the separate federal court ruling, a number of law firms were sued in bankruptcy court by dissolved law firm Coudert Brothers’ plan administrator, who claimed the firms must account for any profits derived from unfinished client work that the former Coudert partners had taken on with them to their new employers. The firms argued that because the client work was billed hourly, they were wholly entitled to the profits. The court disagreed, ruling that “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”.
The cause of Dewey’s own bankruptcy is said to in part stem from paying lavish salaries to high profile lawyers who the firm believed would win them enough business to survive the high debt load, according to court papers filed this Monday. The firm has accrued roughly $300 million in debt, against some $225 million in assets, the court filing revealed.
Dewey will not reemerge from bankruptcy, and will instead liquidate its assets, the firm said in a statement
“The needs of all of the firm’s law clients continue to be served, mainly by former Dewey & LeBoeuf law partners who have moved on to other firms in recent months,” the statement said.