A bankruptcy judge refused last week to dismiss lawsuits against seven former Dewey & LeBoeuf LLP partners seeking nearly $16 million for the defunct law firm’s creditors, ruling that under New York state law, any money the partners were paid while the firm was insolvent can be clawed back, the Wall Street Journal reported on Saturday. The decision comes 2 1/2 years after the firm’s dramatic collapse and after the vast majority of ex-partners have rid themselves of most Dewey-related liability. In the months after Dewey entered bankruptcy protection, 475 of the firm’s former partners agreed to join a $70.4 million settlement that formed the basis of Dewey’s creditor repayment plan. Others have since settled individually. The ruling, released on Wednesday from U.S. Bankruptcy Judge Martin Glenn in New York, is a big win for Dewey’s liquidating trustee. Judge Glenn found that under New York’s debtor and creditor laws, the partners can’t argue that the value of the work they did for Dewey offsets the money they were paid, a defense that can sometimes be used in such clawback suits. If such a defense were available, a partner who, for instance, brought in $2 million in fees and received $1 million in compensation during the same period could argue that he or she owes the bankrupt firm nothing.
