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News: Dewey Files for Bankruptcy

Dewey & LeBoeuf has filed for bankruptcy in federal bankruptcy court in Manhattan on Memorial Day. (Dewey & LeBoeuf LLP, Case No. 12-12321, U.S. Bankruptcy Court, Southern District of New York, Manhattan).

In the documents that the law firm submitted with its Chapter 11 petition, the firm acknowledges that the economic crisis of the past years was only part of the reasons why it failed and also blamed the lucrative compensation guarantees it had accorded to high-profile lateral hires for its demise. These guaranteed pay packages had been approved for a large number of partners in the past years, despite the deepening debt of the firm and mounting questions over its financial stability.

The firm has been in wind-down mode for several weeks and has closed most offices, sold off some overseas branches, and has dismissed hundreds of paralegals and associate attorneys.

While the firm is in bankruptcy, the earnings of some partners could be subject to clawbacks from creditors and lawsuits could also pile up between Dewey partners, as divisions have formed between the partners who had the special pay packages and those who didn't.

Dewey is one of a handful of major law firms to declare bankruptcy since the recession began in 2007. Other firms in this group include Coudert Brothers, Heller Ehrman, and Howrey.