A recent American Lawyer story by Samantha Stokes, “Associate Hourly Billing Rates Surge Past $1K as Firms Snap Up Bankruptcy Work” reports that the coronavirus pandemic quickly upended the economy and sent already struggling companies into free-fall, with retailers such as J.Crew, Neiman Marcus and J.C. Penney among those filing for Chapter 11 protection in recent weeks. Recent court filings highlight the avalanche of fees these new cases are already generating for Big Law restructuring practices.
Take J.Crew, which was the first major retailer to succumb during the pandemic. In the 90 days leading up to the company’s Chapter 11 petition May 4, it paid or advanced its lawyers at Weil, Gotshal & Manges close to $12 million, according to court papers filed this week seeking formally to hire the firm as debtor’s counsel. The Weil team is led by New York partner and restructuring practice co-chair Ray Schrock.
The fees were bolstered by the firm having just recently increased its hourly rate for lawyers and paraprofessionals alike. Signaling a new era, some Weil associates are now billing more than $1,000 per hour—a milestone that was surpassed only about a decade ago at the level of Big Law partners—making it one of the first firms to break that pricey barrier.
Weil said in the J.Crew filing that it had increased its standard billing rates in October 2019. Members and counsel are now billing from $1,100 to $1,695 at the firm; associates are billing $595 to $1,050; and paraprofessionals are billing between $250 and $435 per hour. Previously, the firm’s rates topped out at $1,600 for partners and $995 for associates, according to the filing.
While the partner and associate rates stand out, the paraprofessional fees can add up too. Last November, when the firm billed $10 million for one month of work on the Sears bankruptcy, a single paralegal’s billings added up to 431 hours at $405 per hour—more than 14 hours for every day of the month.
Weil isn’t the first firm whose associate rates have topped $1,000 per hour, and its rates aren’t even the highest. When Kirkland & Ellis signed on to represent Barney’s New York—one of last pre-pandemic retail bankruptcies—it said in a filing that associates’ rates reached $1,125 per hour. At Skadden, Arps, Slate, Meagher & Flom, at least two associates working on the McClatchy newspaper company bankruptcy have also billed over $1,000 per hour.
Efforts to reign in ballooning law firm fees have received little traction in recent years, though creditors, shareholders and employees occasionally raise alarms. A group of small Sears creditors awaiting payment filed an objection to Weil’s fees in that company’s Chapter 11 late last year. Weil, which did not respond to a request for comment, is just one of a growing gaggle of fee-earning firms in the new retail bankruptcies filed so far in May. Neiman Marcus and J.C. Penney both turned to Kirkland & Ellis in those cases, though the firm has yet to disclose pre-petition fees.