LOS ANGELES, CA (Catholic Online) - Previously one of the largest law firms in the U.S., Dewey has lost more than two-thirds of its roughly 300 partners to other firms amid concerns about compensation and a heavy debt load.

Employees had been warned earlier this month of mass layoffs and of the possibility that the firm may shut down altogether. An anonymous source familiar with the matter told Reuters that the firm was considering a bankruptcy filing.

Dewey says it will ask about 90 employees to remain on staff to assist in the liquidation, which it expects to be completed in the next few months.

The economic downturn, along with the firm's partnership compensation arrangements has created a situation where its cash flow was insufficient to cover capital expenses, Dewey said in a court filing.

"During the first quarter of 2012, the firm was confronted with liquidity constraints that led to the precipitous resignation of over 160 of the firm's 300 partners by May 11," Dewey said.

The New-York based firm listed liabilities in the range of $100 million to $500 million, according to the filing. Dewey's assets consist of about $13 million in cash, accounts receivable of about $255 million, various pieces of artwork, and about $11 million invested in an insurance consortium, among other potential claims.

Dewey said the firm in the interim will be operating on a budget and according to a timetable to be determined by the court. The firm has also petitioned the court for permission to continue to pay salaries, benefits and paid time-off for current employees.

Dewey claims that the 401(k) plans and qualified pension plans of its current and former employees and partners are held in trust and cannot be accessed by the firm's creditors.

Dewey has retained Joff Mitchell of Zolfo Cooper LLC as Chief Restructuring Officer and Albert Togut of Togut Segal & Segal LLP as bankruptcy counsel.

The London and Paris offices of the firm are operated through a separately incorporated U.K. entity, which was placed into administration this week.

Administration is a U.K. legal process under court supervision, broadly similar to chapter 11.

The firm had two dozen offices worldwide, including in Washington, Los Angeles and London. Some of the firm's clients included General Motors Corp, eBay, Novartis, Ambac and Berskshire Hathaway Reinsurance Division.

Dewey is one of a handful of major law firms to declare bankruptcy since the recession that began in 2007.

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