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TOGUT, SEGAL & SEGAL LLP One Penn Plaza Suite 3335 New York, New York 10119 (212) 594-5000 Albert Togut Scott E. Ratner Lara R. Sheikh Proposed Counsel to the Debtor and Debtor in Possession UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ---------------------------------------------------------------X : In re: : : DEWEY & LEBOEUF LLP, : : Debtor. : : ---------------------------------------------------------------X

Chapter 11 Case No. 12-12321 (MG)

DEBTORS OMNIBUS REPLY TO OBJECTIONS TO APPLICATION FOR ORDER APPROVING, AND AUTHORIZING IMPLEMENTATION OF, PROCEDURES FOR DISPOSITION OF CLIENT FILES TO THE HONORABLE MARTIN GLENN, UNITED STATES BANKRUPTCY JUDGE: Dewey & LeBoeuf LLP, as debtor and debtor in possession (DL or the Debtor) in the above-captioned case (the Chapter 11 Case), by its proposed counsel, Togut, Segal & Segal LLP, respectfully submits this omnibus reply (Reply) to the objections (each, an Objection and, together, the Objections) to the Debtors Application for Order Approving, and Authorizing Implementation of Procedures for Disposition of Client Files (the Application) [Docket No. 121]. Objections have been filed by: (1) Lloyds America, Inc. and Corporation of Lloyds [Docket No. 152]; (2)

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CitiStorage, LLC, (CitiStorage) [Docket No. 161]; (3) Iron Mountain Information Management, Inc. (Iron Mountain) [Docket No. 162]; (4) Steven J. Stanwyck (Mr. Stanwyck) [Docket No. 174];1 and (5) Dewey & LeBoeuf [UK] LLP (registered in England and Wales with number OC355432) (in administration) (the UK LLP), acting by its joint administrators Messrs. Mark Shaw and James (a/k/a Shay) Bannon of BDO LLP (together, the Joint Administrators) [Docket No. 175]. PRELIMINARY STATEMENT The Application seeks to formalize a process for the disposition of former client files that remain in the Debtors possession or in the possession of third-party storage facilities. It is a process that began before the Chapter 11 Case was filed when substantially all of DLs active client matters were transitioned to other law firms, as the responsible attorneys transferred client files with them to their new firms. Despite these efforts, the Debtor estimates that over 400,000 boxes of files are presently in storage with third parties. The expense associated with storing these files is substantial approximately $110,000 per month. The files are clearly a burden to the estate. The expense to destroy the files will likely also be substantial. Although it can not be estimated with any accuracy until former clients and partners can be deemed to have abandoned the files after receiving notice and an opportunity to retrieve them pursuant

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1

Mr. Stanwycks Objection entitled Introduction & Notice of Bankruptcy Cases makes numerous allegations unrelated to the Application and includes a Notice of Appearance and Demand for Service of Papers and Request to Be Added to the Master Service List. The Debtors claims and noticing agent has been apprised of the request and Mr. Stanwyck has been added to the Master Service List.

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to the Client File Disposition Procedures2, the Debtor has received file destruction estimates ranging from $5.67 to $7.50 per box. With this overview and based on the Supplemental Declaration of Jonathan A. Mitchell filed contemporaneously herewith, the Debtors reply to the Objections is as follows: REPLY A. The Debtor Has Paid Post-Petition Rent to Storage Providers But Cannot Pay Other Costs That Provide No Benefit to the Estate 1. Citistorage and Iron Mountain (together, the Storage Providers)

seek assurance that they will receive post-petition rent for storage of client files. The budget annexed to the Final Order Authorizing Use of Cash Collateral Order [Docket No. 91] provides for payment of storage costs. As of the date of this Reply, post-petition rent has been paid to the Storage Providers and all other storage facilities that have provided an invoice to the Debtor. 2. The Storage Providers assertion of a right to payment for file de-

struction costs, other fees and indemnification for any damages that may arise relating to the files ignores the Debtors obligation to limit the incurrence of administrative expenses to those expenses that provide some benefit to the estate. See 11 U.S.C. 503(b)(1)(A). The costs associated with retrieval of former client records provide no benefit to the Debtors estate and are not properly assessed to the estate as an administrative expense.

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2

Terms used but not defined in this Reply shall have the meaning ascribed by the Application.

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3.

For the avoidance of doubt, the Client File Disposition Procedures

do not require clients to satisfy the Debtors pre-petition arrearages to third party vendors. However, if storage providers assess fees and charges for the retrieval of files, such costs will be charged to the party requesting the files. As noted, such costs provide no benefit to the estate and are not properly assessed to the Debtor as an administrative expense. B. The Client File Disposition Procedures Contemplate that Disputes May Be Brought to the Court on 14 Days Notice 4. Disputes relating to the actual implementation of the Client File

Disposition Procedures, including disputes that may arise between a third-party storage facility and former client relating to the release of files, should be brought to the Debtors attention in the first instance. If a dispute cannot be resolved consensually, the procedures contemplate that the Bankruptcy Court may intervene. C. The Client File Disposition Procedures Do Not Contemplate Abandonment or Destruction of Electronic Files 5. For the avoidance of doubt, the Client File Disposition Procedures

address the disposition of hard copy files only and do not address electronic files. D. The Debtor Should Not Be Required to Publish the Notice of Intent to Dispose of Client Files in Additional U.K. Publications 6. The Joint Administrators request that all partners and former part-

ners of the UK LLP receive a copy of the Notice of Intent to Dispose of Client Files and that such Notice be published in The Times and the London Gazette, in addition to The Wall Street Journal. 7. The Application proposes to serve the Notice of Intent to Dispose

of Client Files on approximately 700 former partners representing all of the former partners of the Debtor dating back to its merger in 2007. Additionally, the Debtor will

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provide notice to any present and former partners of the UK LLP, as requested by the Joint Administrators. 8. The Debtor has no objection to the Joint Administrators publishing

the Notice of Intent to Dispose of Client Files in publications additional to the Debtors proposed publication in the Global Edition of The Wall Street Journal. However, the added expense of providing notice to clients that may be located in the UK is not properly charged to the Debtors estate in this Chapter 11 Case, especially considering that actual notice will be provided to approximately 700 former partners and approximately 4,500 former clients for matters dating back to at least July 1, 2008. E. The Bankruptcy Code Authorizes the Abandonment of Property that is Burdensome Even if Not Consistent With State Laws and Regulations 9. The Bankruptcy Code authorizes a debtor in possession to abandon

property that is burdensome to the estate. Section 554 authorizes a debtor in possession, after notice and a hearing, to abandon any property of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate. 11 U.S.C. 554(a). Section 541 defines property of the estate broadly to include all legal or equitable interests of the debtor in property as of the commencement of the case. 11 U.S.C. 541(a)(1). 10. There is only one recognized exception to the abandonment power

the public health exception. See Midlantic Natl Bank v. New Jersey Dept of Envtl. Prot., 474 U.S. 494 (1986). A trustee or debtor in possession may not abandon property in contravention of state statute or regulation that is reasonably designed to protect the public health or safety from environmental hazards. Id. at 762. This exception to section 554 is narrow in that the abandonment power is not to be fettered by laws or regulations not

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reasonably calculated to protect the public health or safety from imminent and identifiable harm. Id. at 507 n.9. 11. Even where there is a violation of state environmental laws, but no

imminent harm or danger to the public, courts are reluctant to deny a debtors abandonment request, particularly where denial of the request would result in burdening the debtors estate with administrative expense claims. See In re Smith-Douglass, Inc., 856 F.2d 12 (4th Cir. 1988); In re Unidigital, Inc., 262 B.R. 283 (Bankr. D. Del. 2001) (since the Midlantic decision, most courts have only disallowed abandonment where there is an imminent and identifiable harm to the public health or safety); In re Mahoney-Troast Constr. Corp., 189 B.R. 57 (Bankr. D.N.J. 1995) (allowing abandonment and denying reimbursement for removal of underground storage tanks even though landlord claimed removal was necessary to comply with state law). 12. There is no risk of imminent harm to the public health or safety as-

sociated with the proposed disposition of former client files. Accordingly, the narrow exception is inapplicable and the Debtor should be permitted to dispose of abandoned client files that are a clear burden and of no value to the estate. 13. Mr. Stanwyck makes note of the Applications assertion that DL is

not subject to the Ethical Rules. As noted, a Debtors abandonment power under section 554 provides authority for the Court to excuse a debtor from compliance with the Ethical Rules. Notwithstanding this authority, the Client File Disposition Procedures strike a balance between the Debtors abandonment power and the Ethical Rules. 14. Over 4,500 former clients and approximately 700 former partners

will have been provided with ample notice of their opportunity to retrieve files and notice that their files will be deemed abandoned if they fail to do so. As set forth in the Supplemental Mitchell Declaration, substantial efforts have already been undertaken to
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transfer Client Files. Over 850 client files have been transitioned since March 2012. Most of the remaining Client Files are inactive - approximately 85% of the Client Files have not been accessed in the past 2 years. CONCLUSION WHEREFORE the Debtor respectfully request that the Court overrule the Objections and grant the relief requested in the Application, and grant such other and further relief as it deems just and proper. Dated: New York, New York July 6, 2012 DEWEY & LEBOEUF LLP By its Proposed Counsel TOGUT, SEGAL & SEGAL LLP By: /s/Scott E. Ratner ALBERT TOGUT SCOTT E. RATNER LARA R. SHEIKH One Penn Plaza, Suite 3335 New York, New York 10119 (212) 594-5000