Jacobs ex rel. Dewey & LeBoeuf Liquidation Trust v. Terpitz (In re Dewey & LeBoeuf LLP)

522 B.R. 464, 2014 Bankr. LEXIS 5113, 60 Bankr. Ct. Dec. (CRR) 122
CourtUnited States Bankruptcy Court, S.D. New York
DecidedDecember 22, 2014
DocketCase No. 12-12321 (MG); Adv. Proc. No. 14-01991 (MG)
StatusPublished
Cited by3 cases

This text of 522 B.R. 464 (Jacobs ex rel. Dewey & LeBoeuf Liquidation Trust v. Terpitz (In re Dewey & LeBoeuf LLP)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Jacobs ex rel. Dewey & LeBoeuf Liquidation Trust v. Terpitz (In re Dewey & LeBoeuf LLP), 522 B.R. 464, 2014 Bankr. LEXIS 5113, 60 Bankr. Ct. Dec. (CRR) 122 (N.Y. 2014).

Opinion

Chapter 11

MEMORANDUM OPINION AND ORDER DENYING DEFENDANT’S MOTION TO DISMISS

MARTIN GLENN, UNITED STATES BANKRUPTCY JUDGE

Before the Court is Jochen Terpitz’s (“Terpitz”) motion to dismiss (the “Mo[467]*467tion,” ECF Doc. # 13-2)1 the Complaint (the “Complaint,” ECF Doc. # 1) filed by Alan M. Jacobs, as the Liquidating Trustee for the Dewey & LeBoeuf Liquidation Trust (the “Trustee”).2 Terpitz argues that the Complaint must be dismissed for lack of personal jurisdiction and, alternatively, based on forum non conveniens asserting Germany as the adequate alternative forum. The Trustee filed an opposition to the Motion (the “Opposition,” ECF Doc. # 15),3 and Ter-pitz filed a reply (the “Reply,” ECF Doc. # 17). The Court heard argument on December 11, 2014.

Terpitz was a partner in Dewey & Le-Boeuf LLP (the “Debtor” or “Dewey”), a limited liability partnership (“LLP”) registered under the laws of the state of New. York. From the time he became a partner in 2011 until he left the firm in 2012, he was a resident of Germany and worked solely in Dewey’s Frankfurt, Germany office only for European clients. The Trustee filed this adversary proceeding against Terpitz to claw back distributions Dewey made to Terpitz and tax payments made on his behalf pursuant to the firm’s partnership agreement, both on account of Terpitz’s status as an equity partner in the firm. The challenged transfers allegedly originated in New York and were made when Dewey was insolvent prior to filing for bankruptcy.

As explained below, the Court concludes that it has specific jurisdiction over Terpitz and this Court is the more appropriate forum to adjudicate this case. The Motion is therefore DENIED in its entirety.

I. BACKGROUND

A. The Debtor: Dewey & LeBoeuf LLP

Before its bankruptcy filing on May 29, 2012 (the “Petition Date”), Dewey was a prestigious New York City-based law firm that traced its roots to the 2007 merger of Dewey Ballantine LLP and LeBoeuf, Lamb, Green & MacCrae LLP. (Compl. ¶¶ 10, 18-14.) Dewey was a registered LLP under the New York Partnership Law and was governed by the Dewey & LeBoeuf LLP Partnership Agreement (the “DLPA”), effective as of October 1, 2007, and amended twice. (Id. ¶¶ 11-12.) At its peak, more than 1,300 lawyers worked at the firm in numerous domestic and foreign offices. Hundreds of these lawyers — partners and associates alike — fled shortly before the firm collapsed.

On February 27, 2013, the Court confirmed the Debtor’s second amended chapter 11 plan of liquidation (the “Confirmed Plan”). (See Chapter 11 Case No. 12-12321, ECF Doc. # 1144.) Pursuant to the Confirmed Plan, Alan M. Jacobs was appointed as the Trustee. Since his appointment, he has brought adversary proceedings against former partners and employees of the Debtor in an effort to claw back transfers made by Dewey while it was insolvent prior to the bankruptcy filing. This is one of those actions.

B. Partnership Compensation

Pursuant to the DLPA, Dewey’s Compensation Committee allocated shares of the firm’s net profits among the firm’s [468]*468equity partners. (Id. ¶ 15.) The firm used participation targets to project a partner’s profits if Dewey achieved its projected net income, or to allocate profits to the partner if the firm failed to meet projections. (Id. ¶¶ 15-17.) The Complaint alleges that in early 2008, Dewey adopted participation targets that would require the Debtor to “immediately perform at a higher level from a fiscal standpoint.” (Id. ¶¶ 18-19.) The Complaint further submits that Dewey hired new lateral partners who were given high participation targets that “did not reflect the firm’s economic reality....” (Id. ¶ 20.) As a result of Dewey’s consistent failure to meet its projected income, the equity partners did not reach their participation targets from 2008 through the Petition Date. (Id. ¶ 21.)

In 2008, the firm missed its projections by approximately $140 million. (Id. ¶ 26.) Given this failure, in early 2009, Dewey proposed participation targets for 2009 that included bonuses based on the 2008 shortfall. (Id. ¶27.) After the firm fell short of projections in 2009 and 2010, Dewey proposed make-up bonuses in 2010 and 2011 as well. (Id. ¶ 28.) Despite its intentions, Dewey was never able to make up for its previous compensation shortfalls, even with the bonuses. (Id. ¶ 29.)

C. Terpitz’s Relationship with Dewey

The Complaint alleges that Terpitz was and held himself out to be a partner and equity interest holder of Dewey from at least February 16, 2011. (Id. ¶¶ 9, 38-39.) The Complaint further alleges that under the DLPA, Terpitz was required to make certain capital contributions to Dewey as a partner. (Id. ¶ 40.) The Complaint also alleges that:

Upon information and belief, Defendant is a resident of Germany. Defendant is an individual who may be served with process by any manner of service authorized by Rule 7004 of the Federal Rules of Bankruptcy Procedure.

(Id. ¶ 9.)

By way of declaration, the Trustee provides evidence establishing that: (1) Ter-pitz was hired by Dewey, a New York LLP, as a partner in the firm’s Frankfurt, Germany office, via Dewey’s Chairman, Steven Davis, who was based in New York (Valentine Decl. Ex. A); (2) Terpitz’s compensation was set by individuals in Dewey’s New York office (id.); (3) Terpitz corresponded with David Rodriguez of the New York office regarding tax and capital contribution obligations Terpitz owed to Dewey on account of his partnership interest in the firm (id. Exs. B-C); (4) Terpitz worked and corresponded with partners in the New York office in relation to Dewey’s energy practice (id. Exs. D-E.); and (5) Terpitz corresponded and worked with partners in the New York office to manage Dewey’s “Global Renewables” practice, including by suggesting and setting billing rates for the practice and seeking to hire new associates (id. Exs. F-H).

In his declaration, Terpitz alleges that on February 10, 2011, Philipp von Ilberg, a representative of Dewey’s Frankfurt branch, gave him a letter signed by Davis, inviting him to join the Frankfurt office (the “Offer Letter”). (Terpitz Decl. ¶ 3 (citing Ex. A).)4 Terpitz executed and returned the letter to Mr. von Ilberg in Frankfurt and began working in Dewey’s Frankfurt office on or about May 13, 2011. (Id.) Terpitz alleges that he severed his involvement with Dewey on May 15, 2012 [469]*469and at all relevant times, his principal place of work was Dewey’s Frankfurt office and none of the cases and projects in which he participated were for any of the Debtor’s United States (“U.S.”) based clients. (Id. ¶¶ 9-10.) Terpitz further alleges that he does not solicit business in the U.S., does not have any bank accounts in the U.S., and does not lease or own any real property in the U.S. (Id.

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522 B.R. 464, 2014 Bankr. LEXIS 5113, 60 Bankr. Ct. Dec. (CRR) 122, Counsel Stack Legal Research, https://law.counselstack.com/opinion/jacobs-ex-rel-dewey-leboeuf-liquidation-trust-v-terpitz-in-re-dewey-nysb-2014.