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Eric Lopez Schnabel, Esq. (ES5553) Jessica D. Mikhailevich (JM1043) DORSEY & WHITNEY LLP 51 W. 52nd Street New York, New York 10019 Telephone: (212) 415-9200 Facsimile: (212) 953-7201 -andAnnette Jarvis (Utah Bar No. 01649) Peggy Hunt (Utah Bar No. 06060) DORSEY & WHITNEY LLP Kearns Building 136 South Main Street, Suite 1000 Salt Lake City, UT 84101-1655 Telephone: (801) 933-8933 Facsimile: (801) 933-7373 Counsel to Ad Hoc Committee of Retired Partners of LeBoeuf, Lamb, Leiby & MacRae UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF NEW YORK

In re: DEWEY & LEBOEUF LLP, Debtor.

Chapter 11 Case No. 12-12321-mg

MEMORANDUM IN SUPPORT OF THE MOTION OF AD HOC COMMITTEE OF RETIRED PARTNERS OF LEBOEUF, LAMB, LEIBY & MACRAE FOR APPOINTMENT OF A TRUSTEE OR, IN THE ALTERNATIVE, FOR THE APPOINTMENT OF AN EXAMINER PURSUANT TO SECTIONS 1104(a) AND 1104(c) OF THE UNITED STATES BANKRUPTCY CODE

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TABLE OF CONTENTS INTRODUCTION.................................................................................................................. 1 BACKGROUND.................................................................................................................... 3 Pre-Petition Management ......................................................................................... 3 Certain Relevant Post-Merger, Pre-Petition Events .................................................. 4 The Ad Hoc Committee................................................................................. 7 The Bankruptcy Case and Post-Petition Management................................... 7 ARGUMENT ....................................................................................................................... 12 A. CAUSE EXISTS TO APPOINT AN INDEPENDENT THIRD-PARTY TO SERVE AS TRUSTEE PURSUANT TO 1104(a)(1) .................................... 12 1. 2. Gross Mismanagement Continues ................................................... 14 Debtors Current Management is Incapable of Exercising its Fiduciary Duties ......................................................................... 15 a. b. c. Conflicts of Interest of Meyer and Horvath.......................... 16 Taint of Meyer and Horvath Extends to the CRO................. 17 Specific Issues Creating an Appearance of Impropriety ......................................................................... 18 i. ii. iii. B. Admitted Failure to Investigate ................................ 18 The PCP .................................................................. 18 Need for Investigation.............................................. 21

APPOINTMENT OF A TRUSTEE IS BENEFICIAL TO ALL PARTIES IN INTEREST ....................................................................................................... 22 1. 2. 3. 4. The Debtor has Demonstrated That it is not Trustworthy ................ 22 The Debtor Will Not be Reorganized .............................................. 24 Lack of Confidence......................................................................... 24 Benefits Derived by Trustee Appointment Outweigh Additional Costs ............................................................................. 24

C.

APPOINTMENT OF AN EXAMINER IS REQUIRED PURSUANT TO 1104(c) ................................................................................................................ 25 i

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CONCLUSION .................................................................................................................... 25

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TABLE OF AUTHORITIES Page(s) CASES In re Adelphia Commcns Corp., 336 B.R. 610 (Bankr. S.D.N.Y. 2006)............................................................................12, 22 In re Ames Department Stores, Inc., Case No. 01-42217 (Bankr. S.D.N.Y.) ................................................................................ 17 In re Bonded Mailings, 20 B.R. 781 (Bankr. E.D.N.Y. 1982) .................................................................................. 12 In re Coudert Brothers, LLP, Case No. 06-12226 (Bankr. S.D.N.Y.) [Docket No. 3]........................................................ 17 In re Deena Packaging Industries, Inc., 29 B.R. 705 (Bankr. S.D.N.Y. 1983)................................................................................... 13 In re Denrose Diamond, 49 B.R. 754 (Bankr. S.D.N.Y. 1985)................................................................................... 16 In re Enron Creditors Recovery Corp. et al., Case No. 01-16034 (Bankr. S.D.N.Y.) ................................................................................ 17 In re Eurospark Industries, Inc., 424 B.R. 621 (Bankr. E.D.N.Y. 2010)............................................................................15, 24 In re Evans, 48 B.R. 46 (Bankr. W.D. Tex. 1985)................................................................................... 22 In re Fiesta Homes of Ga., Inc., 125 B.R. 321 (S.D. Ga. 1990) ............................................................................................. 24 In re Howrey LLP, Case No. 11-31376 (Bankr. N.D. Ca.) [Docket No. 132]..................................................... 17 In re Ionosphere Clubs, Inc., 113 B.R. 164 (Bankr. S.D.N.Y. 1990)................................................................ 12, 13, 15, 22 In re Iridium Operating LLC, 478 F.3d 452 (2d Cir. 2007)................................................................................................ 18 In re L.S. Good & Co., 8 B.R. 312 (Bankr. W. Va. 1980)........................................................................................ 17 In re Marvel Entertainment Group, Inc., 140 F.3d 463 (3d Cir. 1998)...........................................................................................12, 25

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In re McCorhill Publishing, Inc., 73 B.R. 1013 (Bankr. S.D.N.Y. 1987)............................................................................13, 15 In re Microwave Prods. of Am., Inc., 102 B.R. 666 (Bankr. W.D. Tenn. 1989) ............................................................................. 17 In re Oklahoma Refining Co., 838 F.2d 1133 (10th Cir. 1988)............................................................................................ 12 In re Sharon Steel Corp., 871 F.2d 1217 (3rd Cir. 1989)...................................................................................12, 22, 25 In re TransTexas Gas Corp., 597 F.3d 298 (5th Cir. 2010)............................................................................................... 20 In re U.S. Communications of Westchester, Inc., 123 B.R. 491 (Bankr. S.D.N.Y. 1991)................................................................................. 13 In re V. Savino Oil & Heating Co., Inc., 99 B.R. 518 (Bankr. E.D.N.Y. 1989) .................................................................................. 13 Loop Corp. v. United States Trustee, 379 F.3d 511 (8th Cir. 2004)................................................................................................ 16 Loral Stockholders Protective Comm. v. Loral Space & Communications, Ltd. (In re Loral Space & Communications, Ltd.), No. 04 Civ. 8645RPP, 2004 WL 2979785 (S.D.N.Y. Dec. 23, 2004) .................................. 25 Morgenstern v. Revco D.S., Inc. (In re Revco D.S., Inc.), 898 F.2d 498 (6th Cir. 1990)............................................................................................... 25 Smart World Techs., LLC v. Juno Online Servs., Inc. (In re Smart World Techs., LLC), 423 F.3d 166 (2d Cir. 2005)................................................................................................ 15

STATUTES 11 U.S.C. 102(3).................................................................................................................. 13 11 U.S.C. 521(a).................................................................................................................... 16 11 U.S.C. 544 ........................................................................................................................ 1 11 U.S.C. 547 .......................................................................................................................... 1 11 U.S.C. 548 .......................................................................................................................... 1 11 U.S.C. 548(a)(1)(B)(i)....................................................................................................... 20

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11 U.S.C. 548(a)(1)(B)(ii)(IV)..........................................................................................10, 20 11 U.S.C. 548(b).................................................................................................................... 10 11 U.S.C. 550 .......................................................................................................................... 1 11 U.S.C. 1104(a).............................................................................................................. 1, 25 11 U.S.C. 1104(a)(1) .............................................................................................. 3, 12, 13, 22 11 U.S.C. 1104(a)(2) ....................................................................................................3, 17, 22 11 U.S.C. 1104(c).............................................................................................................. 1, 25 11 U.S.C. 1104(c)(1) ......................................................................................................... 3, 25 11 U.S.C. 1104(c)(2) ......................................................................................................... 3, 25 11 U.S.C. 1106 ...................................................................................................................... 15 11 U.S.C. 1106(a)(1) ........................................................................................................... 21 11 U.S.C. 1106(a)(3)-(4)........................................................................................................ 22 11 U.S.C. 1106(a)(5)-(8)...................................................................................................... 21 11 U.S.C. 1107(a).......................................................................................................15, 21, 22 11 U.S.C. 1112 (b)(4)(A)..................................................................................................16, 24 11 U.S.C. 1125 ...................................................................................................................... 23

OTHER AUTHORITIES 95 Cong. 1st Sess. (1977) ......................................................................................................... 24 Employee Retirement Insurance Security Act of 1974 .............................................................. 12 Fed. R. Bankr. P. 1007.............................................................................................................. 16 Fed. R. Bankr. P. 9019...................................................................................................18, 23, 24 Fed. R. Bankr. P. 9037.............................................................................................................. 16 H.Rep. No. 95-595 ................................................................................................................... 24 U.S. Code Cong. & Admin. News. p. 5787............................................................................... 24

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The Ad Hoc Committee of Retired Partners of LeBoeuf, Lamb, Leiby & MacRae (the Ad Hoc Committee), by and through its undersigned counsel, hereby submits this memorandum (the Memorandum) in support of the Motion of the Ad Hoc Committee of Retired Partners of LeBoeuf, Lamb, Leiby, & McRae for Appointment of a Trustee, or, in the Alternative, for the Appointment of an Examiner Pursuant to Sections 1104(a) and 1104(c) of the United States Bankruptcy Code (the Motion) requesting (a) the appointment of a trustee pursuant to 11 U.S.C. 1104(a) of title 11 of the United States Code (the Bankruptcy Code) on the grounds that: (1) cause exists due to gross mismanagement by the pre-petition management of Dewey & LeBoeuf, LLP (the Debtor or Firm), as well as due to continuing mismanagement by the Debtor post-petition, or (2) cause exists because the appointment of a trustee is beneficial to all parties in interest; or alternatively (b) the appointment of an examiner pursuant to 1104(c) of the Bankruptcy Code to investigate, report on, and pursue or settle avoidance claims under 544, 547, 548 and 550 and any other claims arising out of the conduct of the Debtor, including former Chairman Steven H. Davis (Davis), former Executive Director Stephen DiCarmine (DiCarmine), former Chief Financial Officer, Joel Sanders (Sanders) and other partners of the Debtor who were members of its management committees or otherwise had influence over the affairs of the Debtor (collectively, the Management). INTRODUCTION This Motion is predicated on the unassailable fact that prior to the commencement of this case, the Debtor was managed for the disproportionate benefit of certain insider partners (and non-partner Firm managers such as DiCarmine and Sanders); and after the commencement of the case, the Debtor continues to be managed in a way that benefits many of those same insiders. A trustee, or alternatively an examiner is required, because the Debtor continues to be mismanaged, its assets are eroding, and an independent investigation and pursuit of insider claims is required

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to make certain that the estate is not directed for the protection of insiders and that its assets are maximized for the benefit of creditors. The Debtor and its current management are incapable of conducting an independent investigation. Indeed, current management is steeped in conflicts of interest, both real and apparent, as a result of its involvement or connection with pre-petition Management as well as receipt from the Debtor of pre-petition transfers which makes it impossible for this management group to act as fiduciaries of the Debtors estate. Current management has taken actions that, in light of obvious conflicts, appear to be devoted to protection of themselves and other insiders. Furthermore, the Debtors financial affairs remain shrouded in darkness. The Debtor has not provided the Court with fundamental disclosures required by applicable law. While the assets of the estate continue to erode, the Debtor, without disclosure of critical facts, spent the first two months of this case propounding an uninformed and desperate proposal, 1 defined below as the PCP. The PCP, if approved, would permit certain Firm insiders to obtain the broadest possible release of potential liability without sufficient contribution to creditors. An independent review is necessary because the current management of the estate is rushing to implement the PCP that would impose significant burdens on retirees and other innocent parties and shield the partners who took out huge compensation, including in the months preceding the firms collapse. No creditors in this case are more affected than senior-citizen members of the Ad Hoc Committee, who are without the necessary remaining years to replace the revenue they have depended on and

Lavish Dewey Payouts May Turn Creditors Against $90M Deal, attached hereto as Exhibit G-1 and available at: http://www.law360.com/articles/365659/lavish-dewey-payouts-may-turn-creditors-against-90mdeal (quoting Edwin Reeser, this article states the PCP is a creative move . . . . But the plan is also a somewhat desperate one, as it depends on whether both the partners and the creditors, and their counsel, can be persuaded to make a deal that does not include deep due diligence, when it is quite possible that any such transaction in this type of environment would not survive the kinds of disclosures likely to come out[.]).

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lost and whom the Debtor is strong-arming and intimidating into contributing fresh funds into the PCP without any articulated legal basis for requiring them to do so. While appointing a chapter 11 trustee is an extraordinary remedy, this case presents compelling grounds for granting such relief. As discussed below, cause exists to appoint a trustee under 1104(a)(1) of the Bankruptcy Code because pre-petition and post-petition mismanagement of the Debtor, encumbered by blatant conflicts of interest, make the incumbents incapable of acting as fiduciaries and create a reality and an appearance of impropriety that will illegitimize any consensual resolution of this case. Additionally, 1104(a)(2) requires the appointment of a trustee in the best interests of all parties. Appointing a trustee, untainted by any association with pre-petition Management, who is statutorily required to investigate the affairs of the Debtor and to pursue claims in an impartial way will ensure that the integrity of the bankruptcy process is protected and that Debtors assets are maximized. Such an appointment will prevent favored treatment of certain insiders, will require a proper accounting of their acts and omissions, and will guarantee accurate disclosure of the Debtors affairs for the Court and creditors. In the event that a trustee is not appointed, the Ad Hoc Committee requests the appointment of an examiner, which is mandatory, pursuant to 1104(c)(2). There are also independent grounds for appointing an examiner under 1104(c)(1). BACKGROUND Pre-Petition Management 1. In 2007, Dewey Ballantine LLP merged with LeBoeuf, Lamb, Greene &

MacRae LLP (the Merger).2

See Declaration of Jonathan A. Mitchell Pursuant to Local Bankruptcy Rule 1007-2 and in Support of Chapter 11 Petition and First Day Motions [Docket No. 2] (the Mitchell Declaration) at 17.

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2.

From the time of the Merger until on or about March 27, 2012, Davis acted as

Chairman of the Firm.3 3. Upon information and belief, during this time, the Chairman chaired an

Executive Committee comprised of approximately 30 equity partners, the precise number of which varied from time to time (the Dewey Executive Committee).4 4. During all or most of this period, Janis M. Meyer (Meyer), an equity partner of

the Firm, served as the Firms General Counsel.5 Certain Relevant Post-Merger, Pre-Petition Events 5. Upon information and belief, following the Merger, the Debtor entered into

contracts with select equity partners purporting to guarantee compensation, in many cases without regard to the partners actual performance or pecuniary benefit to the Debtor. Upon information and belief, these guaranteed payments were significantly greater in amount when compared to payments to other partners whose income was not similarly guaranteed, a phenomenon that would naturally occur if overall net income of the firm was less than projected.6 6. The Debtor experienced a steady defection of equity partners, but the pace of

defections accelerated toward the end of 2011 and into early 2012, after the revelation of the number of guarantees that favored partners had obtained. Thereafter, between January 1, 2012 and March 30, 2012 approximately 20% of the Debtors equity partners resigned or left the Firm.7

3 4 5 6 7

Id. at 61. Declaration of Hugh T. McCormick in Support of the Motion attached hereto as Exhibit A (the McCormick Declaration) at 4. See Mitchell Declaration at 12. McCormick Declaration at 5. Mitchell Declaration at 59.

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7.

On or about May 4, 2012, the losses in the partner ranks was such that the Firm

sent a so-called WARN (federal Worker Adjustment Retraining and Notification Act) notice to staff, associates and other employees, including Of Counsel.8 In May 2012, the Firm told the few remaining lawyers that it would cease operations.9 On May 28, 2012, the Firm filed its bankruptcy petition. 10 8. In late 2009 and early 2010, the Firm unilaterally ceased paying retirees (the

1990 LeBoeuf Retirees) under the LeBoeuf, Lamb, Leiby & MacRae Partners Retirement Plan, effective as of November 15, 1990 (the LeBoeuf 1990 Retirement Plan). These actions were contrary to the terms of the plan and were taken apparently with the intention to reduce payments indefinitely, again contrary to the plans express provisions.11 9. The cessation of monthly payments to the 1990 LeBoeuf Retirees continued

through April 30, 2010, when the Firm recommenced full monthly payments to retirees, and began paying arrearages due.12 10. Payments due under the LeBoeuf 1990 Retirement Plan on December 31, 2010

were not paid until January 2011.13 In April 2012, the 1990 LeBoeuf Retirees learned from the Firm, without any significant accompanying information, that pension payments would henceforth cease.14 11. Despite financial infirmities from at least 2010, the Firm made large distributions

8 9 10 11

Id. at 69. McCormick Declaration at 6. See Docket No. 1. Declaration of Davis Robinson in Support of the Motion attached hereto as Exhibit B (the Robinson Declaration) at 4-10. 12 See Id. at 5-10. 13 Robinson Declaration at 11. 14 Robinson Declaration at 3.

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to those with guaranteed compensation packages.15 Thus, it appears that insiders with information about the Firms true financial condition, received distributions in late 2010, while compensation was denied to the 1990 LeBoeuf Retirees at that same time and deferred into early 2011. Later, insiders also took very large payments from the Firm just prior to the Petition Date.16 12. On or about March 27, 2012, , the Firm announced the creation of the Office of

the Chairman, to replace the hitherto sole Chairman Davis.17 According to the Firms announcement, the Office of the Chairman was comprised of Davis, Martin Bienenstock, Rich Shutran, Jeffrey Kessler, Charles Landgraf, and with Stephen J. Horvath, III (Horvath) serving as Executive Partner.18 13. On April 1, 2012, the Firm retained Togut, Segal & Segal LLP as bankruptcy

counsel (the Togut Firm), with Albert Togut (Togut) serving as lead counsel.19 14. On or about April 27, 2012, the Office of the Chairman informed the Firm

partnership that it had learned that the Manhattan District Attorneys Office was investigating allegations of wrongdoing by Davis.20 15. On or about April 29, 2012, Davis was removed from all leadership roles within

15 See generally, Statement of Financial Affairs [Docket No. 294] (SOFA) at pp. 118, 175, 186, 190, 214, 229, 232, 233, 245, 260, 278, 295, 333, 352, and 353. 16 See SOFA at pp. 141, 154, 175, 186, 245, 262, & 316 (detailing numerous payments made to partners ranging from $264,166.67 to $2,000,000 in the months and even the days prior to the Petition Date); see infra 29-38 (discussing the SOFA and pre-petition transfers in greater detail). 17 Mitchell Declaration at 61. 18 See Dewey Law Firm Adds Four Partners To Chairmans Office attached hereto as Exhibit G-2 and available at: http://www.bloomberg.com/news/2012-03-27/dewey-law-firm-adds-four-partners-to-chairman-soffice-1-.html. 19 See Docket No. 98 (Employment Application); Declaration of Albert Togut [Docket No. 98-2] (the Togut Declaration). 20 Mitchell Declaration at 65.

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the Firm,21 but, upon information and belief, continued to be paid by Management. Any amounts paid to Davis after April 29. 2012 have not been disclosed to creditors.22 16. By letter dated May 1, 2012, counsel for the Ad Hoc Committee, requested

certain information from the Firm, including relating to payments intended to be made to partners, and reminded the Firm that payments to creditors, including the 1990 LeBoeuf Retirees (which were not being paid), took priority over payments to partners.23 17. On or about May 11, 2012, the Firm appointed a two-person Committee to

oversee its wind-down comprised of its General Counsel and equity partner Meyer and Executive Partner Horvath (the Wind-Down Committee).24 The Ad Hoc Committee 18. In April 2012, the Ad Hoc Committee was formed to act for and on behalf of

members and to present claims related to the LeBoeuf 1990 Retirement Plan. The Committee currently is comprised of 54 persons who have vested interests in the plan.25 The Bankruptcy Case and Post-Petition Management 19. On May 28, 2012 (the Petition Date), the Debtor filed its petition seeking relief

under chapter 11 of the Bankruptcy Code in this Court. 20. After the Petition Date, the Firm, acting through the Wind-Down Committee of

Meyer and Horvath, employed Jonathan A. Mitchell as the Debtors Chief Restructuring Officer

21 Id. at 66. 22 The SOFA filed by the Debtor does not name the partners receiving distributions, but only identifies them by employee number, so it is impossible to tell what was paid to whom within the final month, and indeed, the year before the bankruptcy filing. 23 Declaration of Annette W. Jarvis in Support of the Motion attached hereto as Exhibit C (the Jarvis Declaration) at 3. 24 See Mitchell Declaration. at 13. 25 McCormick Declaration at 7; see Docket No. 39 (Verified Statement).

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(the CRO), which the Court approved.26 Upon information and belief, the CRO takes direction from, and reports to, the Firms Wind-Down Committee. 21. It was not until July 26, 2012, that the Debtor filed its SOFA. These documents

establish, among other things, three significant issues, each of which is addressed in the Summary of the Debtors Statement of Financial Affairs attached hereto as Exhibit D. 22. Because the SOFA only details payments made to partners in the one-year period

prior to the Petition Date,27 it is impossible to ascertain the exact amount of distributions to partners from May 28, 2010 through the Petition Date (the Two-Year Avoidance Period). In light of the distributions described in Exhibit D, which exceed $250 million, distributions during the Two-Year Avoidance Period must have been substantial. 23. Since the Petition Date, the focus of the Debtor, through the Wind-Down

Committee and the CRO, has been formulating and proposing a settlement for former insider partners of the Firm known as the Partner Contribution Plan(the PCP). The PCP requires contributions from non-insiders, including retiree members of the Ad Hoc Committee, based on monies that the Debtor paid to them commencing in January 2011 (the PCP Start Date) through the Petition Date.28 24. The proposed PCP seeks a return of approximately $90.4 million from more than

700 partners and former partners, including from almost 400 persons who left the Firm before the January 2011 PCP Start Date.29 25. The PCP also proposes, among other things, to release partners and former

26 Docket Nos. 99 & 224. The CROs firm was paid a total of $600,000 prior to the Petition Date. See SOFA at p. 27; Docket No. 99-3 (Rule 2014 Statement). 27 See SOFA at p. 11 (SOFA 3(c) Payments Made Within One Year To Or For The Benefit Of Creditors Who Were Insiders.). 28 McCormick Declaration 10-11.. 29 See id. at 11(a); see also For Dewey: A $90 Million Bill attached hereto as Exhibit G-4 and available at: http://online.wsj.com/article/SB10000872396390444840104577551374135253472.html.

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partners, including most notably Management (other than Davis), from claims of the estate, and to enjoin creditors, including 1990 LeBoeuf Retirees, from pursuing their own claims against these partners (the Proposed PCP Injunction).30 26. The PCP requires a premium contribution from those who served on the

Dewey Executive Committee, but does not otherwise address numerous potential tort claims against partners who formally or informally managed or controlled the Firm.31 27. As noted, Meyer and Horvath were part of the pre-petition Management of the

Debtor and remain in control of the Debtor as its current management. No disclosure has been made as to transfers made to either since the PCP Start Date32 and both may be liable for tort claims.33 Yet, it appears that Meyer and Horvath will pay nothing under the PCP, and will benefit from the Proposed PCP Injunction.34 28. Although the Two-Year Avoidance Period commenced on or about May 28,

2010, payment calculations under the PCP are limited to the 2011 PCP Start Date, and no disclosure has been made of 2010 distributions to partners.35 29. Calculation of the amounts being requested from those asked to participate in the

30 See McCormick Declaration at 11(b). 31 The PCP is a so-called no fault plan, so no attempt is made to distinguish among members of the Executive Committee, some of whom may actively have participated in the mismanagement, alleged breach of fiduciary duty and perhaps worse, and others of whom may not have taken their fiduciary duty of inquiry seriously, may not have known all of the facts or even may have, in good faith, tried to rectify the wrongs being committed within the Firm. 32 From the Petition Date through June 30, 2012, Meyer received $56,000.00 in salary, and Horvath received $190,000.00 in salary and $23,563.33 in expense reimbursements. See Debtors Monthly Operating Report [Docket No. 260] at p. 9. 33 For instance, Meyer was the General Counsel of the Firm during the period in time as to which serious allegations of mismanagement have been made, including that the Firm was not properly organized or run as a limited liability partnership and including the period of time currently under criminal investigation. 34 McCormick Declaration at 11(j). 35 Id. at 11(c). Note that the LeBoeuf 1990 Retirees has their December 2010 payments unilaterally deferred to January of 2011 by the firm. Robinson Declaration at 11. Some partners may have received the same treatment, thus pushing their distributions into 2011, while, upon information and belief, other partners may have received large distributions in late 2010. McCormick Declaration at 11(c).

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PCP is unquestionably slanted toward higher paid partners including Management and those with guaranteed compensation packages. This discrimination in their favor is due to the percentage and cap on return payments and the PCP Start Date, both of which come at the expense of others, including former partners who were not at the Firm during the time in question, such as most of the LeBoeuf 1990 Retirees. Furthermore, partners or former partners who were not among these higher paid partners saw distributions expected in 2010 instead pushed into 2011.36 30. Current management has not disclosed any evaluation or even identification

either of the estates tort claims or of independent claims of creditors that the Proposed PCP Injunction will release or discharge. Nor does the PCP appear to consider the value of such claims, other than additional payment of up to the 20% Dewey Executive Committee premium. In particular, the Debtor admits that in proposing the PCP with its Proposed PCP Injunction, it has not done any analysis of (a) tort claims that may exist against Management, including breach of fiduciary duty, negligence, recklessness, arbitrary and capricious conduct, or malpractice, or (b) fraudulent transfer claims that may exist (including those related to insider employment contracts under 548(a)(1)(B)(ii)(IV)) or partnership distributions under 548(b) during the Two-Year Avoidance Period,37 including but not limited to those partners who had guaranteed compensation packages.38 31. The Debtor does not appear to have considered the effect of the PCP on coverage

under existing insurance policies. There is a risk that releasing members of Management from liability as proposed in the PCP, may jeopardize access to a $50 million D&O insurance

36 See e.g. SOFA at pp. 175, 214, 233, and 278; see also Robinson Declaration at 11 37 Distributions during the one-year period alone were in excess of $250 million. See SOFA at p. 355. 38 McCormick Declaration at 11(c); see supra n. 1.

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policy, as well as to any insurance policy covering the possible legal malpractice claims.39 32. The Debtor has failed to respond to questions of fact and law related to the basis

of the PCP, including with respect to any purported legal basis for the requested return of 2011 and 2012 pension plan payments previously made to retirees.40 33. Management and those who had guaranteed compensation that is, those who will

most benefit from the Proposed PCP Injunction are not distinguished from the lesser paid partners who were not involved, either formally or informally, with the Firms Management. These lesser paid partners, therefore, presumably receive little benefit from the Proposed PCP Injunction due to the lack of third party exposure. Retirees and partners who left the Firm before the PCP Start Date are asked to contribute, but will receive no benefit from the Proposed PCP Injunction inasmuch as they could not be targets of tort or fraudulent transfer claims brought by third-parties.41 Indeed, impecunious spouses of deceased former partners, and terminally ill and superannuated former partners, who served the Firm long and faithfully, are not only being deprived of their pensions, which they depended upon for daily essentials; but they are also being frightened and intimidated into throwing what could be a substantial portion of their remaining retirement savings into the PCP. They are told by Debtors bankruptcy counsel that they must do so or be sued. 34. The United States Department of Labor is investigating Debtors post-petition

management with respect to a previously unannounced administrative fee that post-petition management assessed on participants in the Dewey & LeBoeuf 401(k) Savings Plan (the 401k

39 See In Dewey talks, a surprise $50 mln insurance policy emerges attached hereto as Exhibit G-3 and available at: http://in.reuters.com/article/2012/07/20/dewey-insurance-idINL2E8IKAM720120720; see also McCormick Declaration at 11(f). 40 Id. at 11(g). 41 See id. at 11(c).

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Plan).42 Specifically, during June and July of 2012, without notice to 401k Plan participants and contrary to the terms of the 40lk Plan, participants, including retired and other former partners, were prevented from withdrawing benefits from their accounts.43 In July 2012, while the accounts remained unavailable for distribution, the Debtor imposed a 1% administrative fee, which was deducted from each account.44 35. The Debtor attempted to justify this unnoticed deduction by mailing a letter

dated June 29, 2012, which advised the participants of the deduction of the 1% fee from their 401k Plan accounts, but the participants did not receive the letter until after the imposition of this administrative fee, and until after the freezing of each participants 401k Plan. 45 36. Although the details surrounding the freezing of the 401k Plan accounts and the

Debtors use of the aggregated fees collected remain undisclosed, it is abundantly clear that Debtors management did not inform 401k Plan participants of the fee prior to its imposition, an act which potentially violates the Employee Retirement Insurance Security Act of 1974, as amended (ERISA). ARGUMENT A. CAUSE EXISTS TO APPOINT AN INDEPENDENT THIRD-PARTY TO SERVE AS TRUSTEE PURSUANT TO 1104(a)(1) Although the Bankruptcy Code generally permits chapter 11 debtors to remain in control of their assets and business operations,46 when a debtor in possession is incapable or unwilling to

42 See Declaration of Lawrence G. Acker in Support of the Motion attached hereto as Exhibit E (the Acker Declaration) at 7; Declaration of Andrew J. Fawbush in Support of the Motion attached hereto as Exhibit F (the Fawbush Declaration) at 3. 43 Acker Declaration at 4-5; Fawbush Declaration at 3. 44 Acker Declaration at 5. 45 Fawbush Declaration at 3. 46 See In re Adelphia Commcns Corp., 336 B.R. 610, 655 (Bankr. S.D.N.Y. 2006).

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perform its statutory duties or cause otherwise exists, a chapter 11 trustee must be appointed.47 Under 1104(a)(1), cause to appoint a trustee is a factual determination48 which includes, but is not limited to,49 managements fraud, dishonesty, incompetence, or gross mismanagement of the affairs of the debtor[.]50 Here, the appointment of a trustee is mandated because cause exists within the meaning of 1104(a)(1). Most glaring is the Debtors pre-petition mismanagement, and the fact that members of that Management, particularly Meyer and Horvath, continued to ineffectively manage the Debtor as the Wind-Down Committee, both in the weeks preceding the Petition Date, and in the post-petition period. Furthermore, as is apparent from the PCP, Meyers and Horvaths significant actual conflicts of interest make them incapable of impartially and effectively managing the Debtor and performing their fiduciary duties. Finally, given the serious allegations in this case, including an ongoing criminal investigation, and the cloak of secrecy that existed prior to the bankruptcy filing and which continues to this date, this case cries out for an

47 11 U.S.C. 1104(a)(1); see, e.g., In re Ionosphere Clubs, Inc., 113 B.R. 164, 169 (Bankr. S.D.N.Y. 1990)(appointing a trustee when the debtor grossly mismanaged its estate); In re Oklahoma Refining Co., 838 F.2d 1133, 1136 (10th Cir. 1988) (affirming appointment of a trustee for cause where the company was not in operation); In re Bonded Mailings, 20 B.R. 781, 786 (Bankr. E.D.N.Y. 1982) (appointing a trustee for cause when the management of the debtor had engaged in fraudulent conduct). 48 See, e.g., In re Sharon Steel Corp., 871 F.2d 1217, 1226 (3rd Cir. 1989) (the question of whether to appoint a trustee in a chapter 11 case is decided on a case by case basis). 49 See In re Marvel Entertainment Group, Inc., 140 F.3d 463, 472 (3d Cir. 1998) (stating that the language of 1104(a)(1) does not promulgate an exclusive list of causes for which a trustee must be appointed . . . .); see also 11 U.S.C. 102(3) (rules of construction on word includes) & 1104(a) (cause includes the grounds cited). 50 Id. 1104(a)(1). Courts in the Second Circuit have appointed chapter 11 trustees in situations where: (1) debtors managing employees could not be depended upon to carry out the fiduciary responsibilities of a trustee[,] In re U.S. Communications of Westchester, Inc., 123 B.R. 491, 495 (Bankr. S.D.N.Y. 1991); (2) debtors gross mismanagement was evidenced by inability to formulate a business plan and continuing enormous operating losses, see Ionosphere, 113 B.R. 164; (3) debtors management violated fiduciary duties based on pre-petition conduct and not disclosing material information to creditors and the court, see In re V. Savino Oil & Heating Co., Inc., 99 B.R. 518 (Bankr. E.D.N.Y. 1989); (4) debtors directors had conflicts of interest that may have prejudiced the interests of creditors, see In re McCorhill Publishing, Inc., 73 B.R. 1013 (Bankr. S.D.N.Y. 1987); and (5) debtor engaged in dishonest conduct by failing to appropriately disclose relevant financial information in its schedules, see In re Deena Packaging Industries, Inc., 29 B.R. 705 (Bankr. S.D.N.Y. 1983).

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independent person to conduct a full and impartial investigation and to take control over the disposition of insider claims. Only a Court-appointed trustee can efficiently and effectively undertake such a task under these unprecedented circumstances. The Ad Hoc Committee requests that the Court find that cause exists to appoint a trustee under Section 1104(a)(1). 1. Gross Mismanagement Continues

Given the facts that have come to light, including the ongoing criminal investigation of Davis, the mismanagement of the Debtor prior to the Petition Date is beyond dispute. However, this egregious mismanagement did not end with the removal of Davis. Even after (i) the formation of the Office of the Chairman which divested Davis of his sole Chairmanship, (ii) the engagement of bankruptcy counsel, (iii) the divesting of Davis from all leadership positions, and (iv) the formation of the current Wind-Down Committee, significant transfers continued to be made to partners, including possibly to Davis, DiCarmine, Sanders, partners named to the Office of the Chairman, and Horvath.51 These transfers were occurring despite the fact that approximately 20% of the Debtors equity partners had resigned or left the Firm and more were continuing to resign. And these transfers were made despite the fact that creditors of the Firm, including the 1990 LeBoeuf Retirees, received nothing.52 Furthermore, based upon the facts known to the Ad Hoc Committee at this time, it appears that the Debtors management continues to engage in questionable self-dealing through the PCP (see discussion below).53 This outright mismanagement is further evidenced by the Debtors unannounced withdrawals from the 401k Plan, and action currently under investigation

51 See Exhibit D at 5-6. 52 See supra at 6 & 8-11. 53 See supra at 27-30.

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by the Department of Labor.54 As a result of this latter 401k Plan debacle, retirees who left their 401k plans in the control of the Firm have been denied access to their funds (even if absent 20112012 401k Plan contributions) and have had 1% of their funds taken by the Debtor. This maneuver is apparently for the purpose of paying for the Debtors defense with regard to alleged improprieties in the funding of the 401k Plan in 2011.55 This egregious situation further exacerbates the plight of certain retirees, who now, in addition to not receiving their retiree payments, cannot even access their own 401k Plan funds. Given the pre-petition and post-petition mismanagement of the Debtor, cause exists for the appointment of a trustee. As discussed below, cause is even more apparent when the serious conflicts of interest of Debtors current management are considered.56 2. Debtors Current Management is Incapable of Exercising its Fiduciary Duties

A debtor in possession owes fiduciary duties to the bankruptcy estate,57 including a duty of care to protect the assets, a duty of loyalty and a duty of impartiality.58 Encompassed within these duties is the statutory duty under 1107(a) of the Bankruptcy Code to perform the duties of a chapter 11 trustee under 1106, including the duty of protecting and conserving property of the estate for the benefit of creditors, and from refraining from acting in a manner that potentially damages the estate.59 To fulfill these duties, a debtor in possession must avoid self-dealing,

54 See supra at 34. 55 See supra at 34-36. 56 The Ad Hoc Committee notes that it has received limited information as to the Debtor and its management and, therefore, it reserves all rights to supplement the allegations contained herein as it discovers further information related to the Debtors management. 57 See Smart World Techs., LLC v. Juno Online Servs., Inc. (In re Smart World Techs., LLC), 423 F.3d 166, 175 (2d Cir. 2005) (stating that a debtor-in-possession's duty to wisely manage the estate's legal claims is implicit in the debtor's role as the estates only fiduciary). 58 In re Eurospark Industries, Inc., 424 B.R. 621, 627 (Bankr. E.D.N.Y. 2010) (internal quotations omitted). 59 Ionosphere, 113 B.R. at 169.

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conflicts of interest and the appearance of impropriety.60 Thus, when the principals of a debtor have a financial interest in conflict with the interests of the debtor, a trustee should be appointed in the best interests of creditors and all parties in interest in order to investigate the financial affairs of the debtor.61 For the reasons set forth below, Debtors current management is not capable of fulfilling its statutory and fiduciary duties because of significant, actual conflicts of interest creating, at a minimum, an appearance of impropriety. These conflicts of interest are an independent basis for cause for appointing a trustee. a. Conflicts of Interest of Meyer and Horvath

Since the Petition Date, the business of the Debtor has ended.62 Consequently, the primary function of current management is to maximize the value of the Debtors assets for the benefit of creditors, a significant portion of which are claims based on pre-petition mismanagement and avoidance law. Yet, other than the CRO,63 the Debtors management Meyer and Horvath, who presumably direct the CROeither participated in, or were appointed by, Debtors pre-petition Management and, therefore, are themselves targets of the very claims that require investigation and pursuit for the benefit of creditors. This overwhelming real conflict of interest makes it impossible for Meyer and Horvath to act as fiduciaries of the Debtors estate. Such a situation provides further independent cause for the appointment of a trustee.

60 Id. 61 McCorhill, 73 B.R. at 1017. 62 Indeed, the Debtor has no business to operate and is suffering a continuing loss to or diminution of the estate in satisfaction of the first prong of cause for mandatory conversion under 11 U.S.C. 1112 (b)(4)(A). See Loop Corp. v. United States Trustee, 379 F.3d 511, 515 (8th Cir. 2004) (affirming conversion of debtors case where the ongoing expenses associated with administering the estate and attempting to negotiate a confirmable plan constituted continuing loss to or diminution of the estate and, second, the debtors were liquidating and therefore had no likelihood of rehabilitation.) (internal quotations omitted); In re Denrose Diamond, 49 B.R. 754, 757 (Bankr. S.D.N.Y. 1985) (stating that diminution of the estate sufficient to motivate conversion exists where a secured creditors collateral is depreciating and there are no prospects to produce income). 63 But see infra at Section A(2)(b).

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Meyer was General Counsel prior to the Petition Date and remains in this role. Thus, she is a potential target both under the Debtors mismanagement insurance policy,64 and, given the allegations surrounding partnership irregularities, under its malpractice policy as well. Horvath was also a member of Management pre-petition. Although not entirely known to the Ad Hoc Committee given the Debtors disclosures to date,65 Meyer and Horvath undoubtedly received pre-petition transfers that may be avoidable. Therefore, Meyer and Horvath necessarily have a tainted interest going forward and cannot assess the interests of the estate objectively.66 b. Taint of Meyer and Horvath Extends to the CRO

The taint of pre-petition Management and the resulting conflicts of Meyer and Horvath extend to the CRO because there is no non-conflicted, disinterested person supervising and directing the CRO and its counsel. Without disinterested management, the CRO is not, and cannot be, truly independent. An independent officer of the Court should be appointed to avoid any issue of impropriety and impairment of integrity of the bankruptcy system in this case.67

64 The Debtor recently disclosed a $50 million mismanagement insurance policy. See Exhibit G-3. 65 The Debtors failure to disclose the names of the partners filing in the SOFA (i) does not comply with the disclosure required in the SOFA, 11 U.S.C. 521(a) and Fed. R. Bankr. P. 1007; (ii) does not meet the requirements of Fed. R. Bankr. P. 9037 if the Debtor believes it has a right to redact information, (iii) is inconsistent with the way this information has been treated in other law firm bankruptcies (see In re Coudert Brothers, LLP, Case No. 06-12226 (Bankr. S.D.N.Y.) [Docket No. 3]; In re Howrey LLP, Case No. 11-31376 (Bankr. N.D. Ca.) [Docket No. 132]); and (iv) most importantly, does not allow the Court or parties in interest to assess conflicts of interest (as appear probable to exist with Meyer and Horvath) or evaluate potential causes of action against individual partners, which are important assets of the estate. 66 See e.g., In re Microwave Prods. of Am., Inc., 102 B.R. 666, 676 (Bankr. W.D. Tenn. 1989) (trustee appointed where debtor was not in a strong position to pursue possible claims due to a conflict of interest and fraudulent transfers, and a trustee would likely be able to investigate claims that could result in additional sums of money coming into the estate); In re L.S. Good & Co., 8 B.R. 312, 315 (Bankr. W. Va. 1980) (appointing trustee under 1104(a)(2) where [t]he magnitude of the number of intercompany transactions places current management [of the debtor] in a position of having grave potential conflicts of interest and the presumption arises that the current management of [the debtor] will be unable to make the impartial investigations and decisions demanded in evaluating and pursuing inter-company claims on behalf of [the debtor].) 67 Bankruptcy counsel was hired by pre-petition Management as well, and has significant, well-known connections with Martin Bienenstock, who was a member of the Office of the Chairman as of April 1, 2012.. See In re Enron Creditors Recovery Corp. et al., Case No. 01-16034 (Bankr. S.D.N.Y.) (Togut conflicts counsel); In re Ames Department Stores, Inc., Case No. 01-42217 (Bankr. S.D.N.Y.) (same).

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c.

Specific Issues Creating an Appearance of Impropriety i. Admitted Failure to Investigate

This case was filed under the shadow of an investigation by the Manhattan District Attorneys Office, amid numerous allegations of mismanagement and worse. To the best of the Ad Hoc Committees information and belief, the Debtor has never appointed a disinterested committee or other person to investigate the facts. In this vein, the Debtors current management admits in conjunction with the proposed PCP that it has not conducted any analysis of the causes of action that may be available to the estate against Debtors former management or of the value of such claims.68 ii. The PCP

The PCP, and the admissions of the Debtor related thereto, are evidence that at a minimum post-petition management is not performing its function of maximizing the estate for creditors, all in breach of its statutory and fiduciary duties as a debtor in possession, and at the worst are evidence of possible self-dealing. Based on what has been disclosed to the Ad Hoc Committee to date, post-petition management has neither applied the factors required for approval of settlements under Federal Rule of Bankruptcy Procedure 9019 (Rule 9019)in formulating the PCP nor does the proposed PCP meet those required factors for approval.69 The PCP is based on recovery of monies transferred by the Debtor to partners and nonpartners as of the 2011 PCP Start Date through the Petition Date in 2012.70 Almost 400 of the

68 See McCormick Declaration at 11(c). 69 See In re Iridium Operating LLC, 478 F.3d 452, 462 (2d Cir. 2007) (stating the factors courts assess when evaluating a proposed Rule 9019 settlement). Even if no party in interest objects to a Rule 9019 settlement, the Court has an independent duty to insure that the requirements for approving settlements under Rule 9019 are met. See id. at n. 18. 70 See supra at 23.

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700 persons from whom recovery is sought left the Firm before the PCP Start Date.71 While service on the Dewey Executive Committee requires a higher contribution, the PCP does not address either the differing potential liability of these partners,72 nor the numerous potential tort claims against partners who formally or informally managed or controlled the Firm. Significantly, the PCP contains the Proposed PCP Injunction which, among other things, would provide those agreeing to make contributions (which, other than the Dewey Executive Committee premium, are based solely on a percentage return (not to exceed 30%) of only the distributions received in 2011 and 2012 with a $3.5 million cap) with a broad release from claims of the estate, and an injunction preventing creditors, including the 1990 LeBoeuf Retirees, from pursing their own individual claims against these persons. This is significant in light of the fact that the release would cover pre-petition Management and others who are insiders (other than Davis), as well as members of pre-petition Management who retain post-petition control of the Debtor (and who will make no PCP contribution in exchange for this broad protection).73 In conjunction with the PCP, the Debtor has failed to respond to issues of fact and law as to the basis of the PCP, including the basis for including retirees as persons who are asked to contribute to the PCP.74 In fact, the Debtors have made many admissions making it clear that the PCP is suspect. The following are some examples: The PCP, if wholly accepted, would recover up to $90.4 million for the estate based on transfers made after the January 2011 PCP Start Date. Yet, during the period from May 28, 2011 to the Petition Date alone, the Debtor made transfers of $250 million to its partners.75

71 72 73 74 75

See supra at 24. See supra at n. 31. See supra at 27. See supra at 32. See Exhibit D at 3.

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The Debtor uses the PCP Start Date as a proxy date for insolvency, yet the Debtor admits that it has not done any insolvency analysis that would support such Date.76 Thus, there is no basis for the PCP Start Date set by the Debtor.

The Debtor admits that it has done no analysis of the value of claims that may exist arising before the PCP Start Date which would be released under the Proposed PCP Injunction.77 Thus, large transfers that were purportedly made in 2010 to partners managing or controlling the Firm and those with guaranteed compensation packages are not being disclosed and are excluded from consideration for recovery. This is so despite the fact that these transfers were made within the Two-Year Avoidance Period and may be recoverable pursuant to 548(a)(1)(B)(i) and (ii)(IV) of the Bankruptcy Codedealing with compensation paid to insiders without reasonably equivalent valuewithout regard to insolvency.78

It appears that the Debtors have not attempted to value potential tort claims that creditors, including Ad Hoc Committee members, may have against pre-petition Management or even current managementall of which the Proposed PCP Injunction would release. In fact, the Debtor admits that, except for the premium to be paid by the Dewey Executive Committee, it has not accounted for the value of such potential tort claims.79 Although there is currently no way to know, it does not appear that the Dewey Executive Committee premium adequately compensates the estate for existing claims that may be released.

The Debtor does not appear to have considered the effect of the PCP on coverage under existing insurance policies. As a result, there may be a risk that a release of members of the Debtors pre-petition Management from liability, as proposed in the PCP, will jeopardize

76 77 78 79

See McCormick Declaration at 11(c-d). See supra at 30. 11 U.S.C. 548(a)(1)(B)(ii)(IV); see also In re TransTexas Gas Corp., 597 F.3d 298, 305 (5th Cir. 2010). See supra at 30.

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access to a $50 million D&O insurance policy for mismanagement of the Firm as well as to any insurance policy with respect to the possible legal malpractice against the Firm that current or former partners of the Firm, including General Counsel, may have perpetrated.80 Debtors management continues to state in Debtors Meetings that, subsequent to any approval of the PCP, creditors can pursue estate and personal litigation against alleged wrongdoers, but, when pressed on this issue, it has admitted that, other than Davis, there will be no partners who mismanaged the Firm out of existence left to sue if all alleged wrongdoers participate in the PCP. These examples show that the PCP is not well-grounded in fact or law. The PCP is a hasty and desperate attempt by insiders to protect themselves and other insiders at the expense of creditors, including the 1990 LeBoeuf Retirees.81 The PCP and the Debtors admissions thus show that at a minimum post-petition management is not performing its function of maximizing the estate for creditors consistent with its statutory and fiduciary duties as a debtor in possession. As a result of the pre-petition Managements mismanagement, the taint of current management and the structure of the proposed PCP, including the Proposed PCP Injunction, there is at the very least an appearance of impropriety that calls for the appointment of a trustee. iii. Need for Investigation

As discussed above, debtors in possession have duties that overlap those of a chapter 11 trustee.82 Yet, there are some exceptions, including certain investigative and reporting duties assigned only to trustees.83 If there ever was a case requiring independent investigating and

80 81 82 83

See supra at 14-16. See supra n.1. See 11 U.S.C. 1106(a)(1), (5)-(8) & 1107(a). Specifically, a chapter 11 trustee must: :

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reporting, it is this case. Given the serious alleged misconduct of the pre-petition Management, the pending criminal investigation, and the unwillingness of the Debtors management (which overlaps the pre-petition Management) to investigate, disclose or pursue causes of action available to the estate, it is imperative that a chapter 11 trustee be appointed. B. APPOINTMENT OF A TRUSTEE IS BENEFICIAL TO ALL PARTIES IN INTEREST Even without regard to a courts assessment of cause under 1104(a)(1), a trustee must be appointed under 1104(a)(2) when it is in the best interests of creditors and the estate.84 When considering whether appointment of a trustee is in the best interests of creditors and the estate, courts look to the practical realities of the case and typically consider numerous factors, including the following: the trustworthiness of the debtor; the debtor in possessions past and present performance and prospects for the debtors rehabilitation; the confidence or lack thereof of the business community and of creditors in present management; and the benefits derived by the appointment of a trustee, balanced against the cost of appointment.85

Here, all four factors weigh heavily in favor of appointing a chapter 11 trustee. 1. The Debtor has Demonstrated That it is not Trustworthy

A debtors failure to investigate possible pre-petition avoidable transfers is conclusive evidence of detriment to the estate and of an inability to trust the debtor to protect the interests

(3) except to the extent that the court orders otherwise, investigate the acts, conduct, assets, liabilities, and financial condition of the debtor, the operation of the debtors business . . ., and any other matter relevant to the case or to the formulation of a plan; (4) as soon as practicable: (A) file a statement of any investigation conducted under paragraph (3) of this subsection, including any fact ascertained pertaining to fraud, dishonesty, incompetence, misconduct, mismanagement, or irregularity in the management of the affairs of the debtor, or to a cause of action available to the estate; and (B) transmit a copy or a summary of any such statement to any creditors committee or equity security holders committee, to any indenture trustee, and to such other entity as the court designates[.]. 11 U.S.C. 1106(a)(3)-(4); see id. 1107(a) (stating debtors in possession do not share these duties). 84 See e.g., Ionosphere, 113 B.R. at 168; see also Sharon Steel, 871 F.2d at 1226; Adelphia, 336 B.R. at 658. 85 Ionosphere, 113 B.R. at 168.

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of the estate.86 Here, Debtors management has demonstrated time and time again that it cannot be trusted. There has been no disclosure of material facts, including relevant financial information, no disclosure of payments made to certain partners that could be subject to potential claw back litigation (including payments made in 2010 during the Two-Year Avoidance Period), and no evidence of any identification or evaluation of the causes of action held by the estate which could lead to recoveries inuring to the benefit of all creditors. Indeed, creditors and even partner participants are asked to buy into the PCP based on completely inadequate disclosure. 87 Further, the no fault aspect of the PCP not only leaves significant value on the table that a true identification of potential causes of action and analysis of Rule 9019 factors would uncover, but it in fact favors those at fault at the expense of those without fault who are subject only to statutory clawback claims. The inappropriate treatment of the 401k plans also demonstrates untrustworthiness of the Debtors current management, including fees taken without proper notice and without real justification (thus passing estate costs off to retirees and other 401k participants), and the unilateral freezing of retiree accounts at a time when, because of the Firms breach of the 1990 LeBoeuf Retirement Plan, access to those funds is even more important. There can be no trust of those running the Debtor given their inherent conflicts and (i) known pre-petition mismanagement and their connection thereto, (ii) the historical lack of disclosure that continues to this day, (iii) the additional unknown but suspected mismanagement and lack of investigation, (iv) the treatment of the 401k Plan, and (v) the PCP protection of higher paid and potentially liable partners who controlled the Firm. Indeed, if there is any hope

86 See, e.g., In re Evans, 48 B.R. 46, 48-49 (Bankr. W.D. Tex. 1985). 87 Indeed, given the comprehensiveness of the proposed PCP and the fact that it is admitted by the Debtor that it cannot be implemented except in a plan of reorganization, it is important to note the limited disclosure given is far less than what would be required under 11 U.S.C. 1125.

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of a global settlement, that will only be possible with an independent party in control who ends the Debtors current Managements continuing policy of non-disclosure and who does the work required by Rule 9019 as a predicate for any settlement. 2. The Debtor Will Not be Reorganized

The appointment of a trustee is in the best interests of creditors where no plan of reorganization has been or can be proposed and all that remains is avoidance litigation. 88 Here, the Debtor is not a going-concern, and the primary function of current management is liquidating assets of the estate, including by prosecuting the estates claims. This function requires absolutely no insider knowledge, and since most avoidance actions would be brought against insiders, would most effectively be performed by an independent trustee. 3. Lack of Confidence

As discussed in detail above, the significant, actual conflicts of interest of Debtors management make it impossible for it to perform its statutory and fiduciary duties in this case and create an appearance of impropriety. Given these facts, there can be no confidence in Debtors management and the appointment of a trustee would be in the best interests of creditors. 4. Benefits Derived by Trustee Appointment Outweigh Additional Costs

[T]he court may order appointment only if the protection afforded by a trustee would not be disproportionately higher than the value of the protection afforded.89 Here, as discussed, the Debtor is not acting in a manner that indicates that it is maximizing the assets of the estate. Thus, the protection afforded by a trustee would not be disproportionately higher than the value of the

88 See Eurospark, 424 B.R. at 632 (citing In re Fiesta Homes of Ga., Inc., 125 B.R. 321, 326 (S.D. Ga. 1990) (appointment of a trustee, by way of conversion to chapter 7, appropriate where case was a liquidation case and litigation of the preferences is essentially all that is left to do, [and] there is no need to balance the propriety of the appointment of a trustee with the present management's ability to run the company)). The presence of this factor satisfies the second prong of cause for mandatory conversion found in 11 U.S.C. 1112(b)(4)(A). See supra n. 62. 89 H.Rep. No. 95-595, 95 Cong. 1st Sess. (1977), U.S. Code Cong. & Admin. News. p. 5787.

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protection afforded. Furthermore, given the significant, actual conflicts of interest of Debtors management, there is little trust of Debtors management which likely will result in greater litigation costs. Appointment of a trustee not only will mitigate such costs, but it will serve to protect the integrity of the bankruptcy system. C. APPOINTMENT OF AN EXAMINER IS REQUIRED PURSUANT TO 1104(c) The Debtors list of Top Twenty Unsecured Creditors filed with its petition lists over $90,000,000 in unsecured debts, which significantly exceeds the $5,000,000 minimum threshold for mandatory appointment of an examiner pursuant to 1104(c)(2). The Court of Appeals for the Sixth Circuit has stated that 1104(c)(2) plainly means that the bankruptcy court shall order the appointment of an examiner when the total fixed, liquidated, unsecured debt exceeds $5 million, if [a party in interest] requests one.90 Because the Debtors unsecured debts exceed the $5,000,000 minimum, an examiner must be appointed. Furthermore, the although the express language 1104(c)(2) mandates the appointment of an examiner in this case, it is worth noting that for the same reasons discussed above regarding the appointment of a trustee, the appointment of examiner is appropriate under 1104(c)(1) as being in the best interests of creditors. CONCLUSION WHEREFORE, based on the foregoing, the Ad Hoc Committee respectfully requests that this Court enter an Order granting the Motion and appointing either a trustee or an examiner.

90 Morgenstern v. Revco D.S., Inc. (In re Revco D.S., Inc.), 898 F.2d 498, 500-01 (6th Cir. 1990). See also Marvel Entertainment, 140 F.3d at 472, 474 (appointment of examiner required where conditions of 1104(a) are met); Sharon Steel, 871 F.2d at 1226 (same); Loral Stockholders Protective Comm. v. Loral Space & Communications, Ltd. (In re Loral Space & Communications, Ltd.), No. 04 Civ. 8645RPP, 2004 WL 2979785, at *5 (S.D.N.Y. Dec. 23, 2004) (court has no discretion to deny appointment of an examiner).

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DORSEY & WHITNEY LLP

Dated: August 8, 2012

/s/ Eric Lopez Schnabel ___________________ Eric Lopez Schnabel (ES5553) Jessica D. Mikhailevich (JM1043) 51 W. 52nd Street New York, New York 10019 Telephone: (212) 415-9200 Facsimile: (212) 953-7201 E-mail: schnabel.eric@dorsey.com mikhailevich.jessica@dorsey.com -andAnnette Jarvis (Utah Bar No. 01649) Peggy Hunt (Utah Bar No. 06060) Kearns Building 136 South Main Street, Suite 1000 Salt Lake City, UT 84101-1655 Telephone: (801) 933-8933 Facsimile: (801) 933-7373 E-mail: jarvis.annette@dorsey.com peggy.hunt@dorsey.com Counsel to Ad Hoc Committee of Retired Partners of LeBoeuf, Lamb, Leiby & MacRae

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