Greenberg Traurig has ended talks on a possible deal to rescue law firm Dewey & LeBoeuf as it faces a possible bankruptcy filing this coming week and an investigation by the New York district attorney’s office.
International law firm Greenberg Traurig was seen as the best chance of saving Dewey from a bankruptcy filing or even the dissolution of the firm, while it races to negotiate an extension with lenders, including Citigroup, HSBC, Bank of America and JPMorgan Chase, on a $100 million line of credit.
“Dewey is a firm we hold in high regard, with many fine lawyers, though we never considered a merger,” Richard Rosenbaum, Greenberg Traurig’s CEO, said in a statement.
Dewey has lost dozens of its 300 law partners this year, as the firm struggled with declining earnings and internal strife over its compensation policies that guaranteed money to certain law partners and left other partners accusing the firm of providing misleading numbers.
Stuart Saft, chairman of Dewey’s real estate division, denied that his department was affected by any of the internal issues in a memo obtained March 19 by The Real Deal. Most of the prior defections included lawyers in the insurance and regulatory units.
But sources familiar with the firm’s current state of affairs told The Real Deal that Saft has complained for months about delinquent payments from his real estate clients, many of whom were impacted directly by the 2008 financial collapse.
Legal sources say that lawyers throughout Dewey were actively preparing for an exit last week and that some members of the real estate practice, including Saft, have been actively interviewing with other firms.
Saft was chairman of the real estate practice at Wolf Haldenstein Adler Freeman & Herz before joining Dewey as partner in 2007. He was named chairman of Dewey’s real estate practice in January 2010.
Saft has represented some of the highest-profile real estate projects in New York, including the condo conversions of the Apthorp, on 390 West End Avenue on the Upper West Side, Manhattan House at 200 East 63rd Street in the Upper East Side, Rector Square at 225 Rector Place in Battery Park City and the Sheffield at 322 West 57th Street near Columbus Circle.
A group of law partners handed over documents to Manhattan D.A. Cyrus Vance earlier this month alleging that Dewey’s former chairman, Stephen Davis, made misleading statements about the compensation for senior partners.
Sources say that Dewey, created in 2007 with the merger of Dewey Ballantine and Leboeuf, Lamb, Greene & MacRae, signed certain high-profile partners to guaranteed multimillion dollar compensation deals, while other partners have been forced to take lower payouts based on reduced revenues coming into the firm. The American Lawyer earlier this month revised numbers for Dewey in its annual law firm ranking, lowering the firm’s 2011 gross revenues to $782 million from $935 million.
Earlier this month Dewey also hired commercial brokerage Newmark Grubb Knight Frank to put one-third of its 470,000-square-foot space at 1301 Sixth Avenue, at 53rd Street, up for sublet.
Today, Dewey ousted Davis from its executive committee, according to Reuters.
Saft did not return repeated calls seeking comment. A spokesperson for Dewey and a spokesperson for Vance declined to comment.