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(Reuters) - The former chairman of Dewey & LeBoeuf has agreed to pay more than half a million dollars in a proposed settlement with Dewey's trustee and insurer to resolve claims that bad management led to the law firm's demise, according to papers filed in federal bankruptcy court.
Former Dewey chairman Steve Davis has agreed to pay $511,145 to settle claims that he mismanaged Dewey & LeBoeuf, which became the largest law firm in U.S. history to file for Chapter 11 bankruptcy last May. XL Specialty Insurance Company, Dewey's management liability insurance policy holder, has agreed to pay $19 million in the proposed settlement, according to court documents.
"The Settlement Agreement is a substantially more favorable result than litigation," said Edward Weisfelner, speaking on behalf of the liquidation trustee Alan Jacobs, in court papers.
Without a settlement, Weisfelner said, Dewey's estate would face large litigation expenses to go after Davis and the insurance company in court, as well as the risk of not collecting a full recovery from the parties.
"Litigation of the Management Claims would require extensive discovery, including millions of pages of documents to review and over 100 depositions," he said.
The settlement agreement still needs a judge's approval. A hearing on the proposed deal is scheduled for May 13.
Reached Tuesday, Kevin Van Wart, a lawyer for Davis, said: "Mr. Davis is pleased with the settlement, which is a practical resolution for all concerned."
A spokeswoman for XL Specialty Insurance Company did not immediately return a request for comment.
The case is: In re: Dewey & LeBoeuf LLP, Debtor, United States Bankruptcy Court for the Southern District of New York, Case No. 12-12321 (MG)
Reporting By Casey Sullivan; Editing by Alden Bentley