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Category: Bankruptcy Fees / Expenses

NALFA Analysis: Partner Bankruptcy Rates

October 27, 2017

NALFA conducted a survey of partner hourly rates in bankruptcy cases.  NALFA examined dozens of court filings in bankruptcy cases over the past couple years.  The following results of our survey are the average of partner hourly rate ranges in major legal markets:

2017: $1005-$878
2016: $921-$807
2015: $886-$783

Key findings:  Not only have partner rates increased every year, but the variance (i.e. the range of rates) has increased as well.

Law Firm Resolves Fee Dispute in Sungevity Chapter 11 Bankruptcy

October 9, 2017

A recent Law 360 story by Matt Chiappardi, “MoFo Resolves Fee Dispute in Sungevity Ch. 11” reports that Morrison & Foerster LLP resolved its fee dispute with bankrupt rooftop solar firm Sungevity Inc.’s buyer and post-petition lender, agreeing to reduce its bid by $25,000 and clearing the way for its total request of about $2.5 million for the roughly six-month-long case.

During a hearing in Wilmington, U.S. Bankruptcy Judge Kevin Gross agreed to approve the fee requests from both Morrison & Foerster and restructuring adviser AlixPartners LLP, both of which worked on Sungevity’s case, after hearing that a dispute with Solar Spectrum Holdings LLC was resolved after giving the parties some time to hammer out a deal.

“There are no longer any objections to the fee applications,” Sungevity attorney M. Blake Cleary of Young Conaway Stargatt & Taylor LLP told Judge Gross after returning from a recess called so the sides could negotiate.

Under the deal both Morrison & Foerster and AlixPartners would reduce their fee bids by $25,000 apiece and neither would bill for having to defend their applications.

The parties are expected on Tuesday to file their final proposed orders for fees, which Judge Gross agreed to sign.

The fees became a disputed issue in the case last week, when Solar Spectrum asked the court to cut about $304,000 from a $1.6 million Morrison & Foerster bill and nearly $183,000 from a $1.1 million AlixPartners bill, arguing that the money was for duplicative and unnecessary work.

The law firm and restructuring adviser fired back days later, contending that Solar Spectrum was dressing up an objection to boost its own recovery and offset closing costs from the debtor’s asset sale.

Sungevity had aimed to auction its assets with a joint venture of prepetition creditor Hercules Capital Inc. and Minnesota private equity firm Northern Pacific Group, called Solar Spectrum, putting up a $50 million stalking horse bid. But the auction was canceled when no topping bidder came forward and the stalking horse was declared the winner.

Sungevity had filed for Chapter 11 protection in March, about three months after a planned acquisition by Boston private equity firm Easterly Capital LLC — a deal with an initial, $350 million price tag — fell through and pushed the rooftop solar company into a liquidity crisis.

That deal had been set to allow Sungevity to go public and give it access to up to $200 million in capital that could be funneled back into its growth plans.

The company listed nearly $170 million in debt.

In August, Judge Gross allowed the case to wind up in a so-called structured dismissal, a controversial case endpoint in which a debtor is allowed to exit Chapter 11 with an agreement with creditors but not a plan.

The move was opposed by the U.S. Trustee’s Office, which Judge Gross overruled on grounds that it complied with the priority payment provisions of The Bankruptcy Code, and that conversion to a Chapter 7 liquidation would add an additional layer of administrative expenses that would eat up creditor recoveries.

The case is In re: Sunco Liquidation Inc. et al., case number 1:17-bk-10561, in the U.S. Bankruptcy Court for the District of Delaware.

$925M in Fees in Madoff-Related Matter

September 10, 2017

A recent American Lawyer story by Roy Strom, “Madoff-Related Fees Grow to $925M for Baker & Hostetler,” reports that last month, a federal judge approved a nearly $36 million payment for four months of work by the firm, bringing Baker & Hostetler’s total fees for the matter to just shy of $925 million.

This week, Picard also reached the largest settlement related to the dissolution of Bernard L. Madoff Investment Securities LLC (BLMIS) since 2011—a $687 million payout from an Irish investment firm that will bring the total recovery for Madoff victims to about $12.7 billion, or about 72 percent of the $17.5 billion that Picard states that Madoff’s investors lost.

The settlement this week with Thema International Fund PLC amounts to 100 percent of the money the Dublin-based fund received from BLMIS for six years prior to the New York fraudster’s collapse, Picard said in a court filing.  It will raise the fund for victims by 5.7 percent.

Meanwhile, the Madoff matter has managed to bolster Baker & Hostetler’s finances for years.  The firm’s gross revenue has grown 15 percent since fiscal 2008, the year before the start of its Madoff work.  Profits per partner at the Cleveland-based Am Law 100 firm rose to $965,000 last year, up 42 percent from 2008.  And revenue per lawyer, at $700,000 last year, is up 22 percent since 2008.

Compared to its Am Law 100 peers, Baker & Hostetler has risen to No. 78 from No. 98 in revenue per lawyer for fiscal 2008.  The firm’s profits per partner ranking last year was No. 76, up from No. 96 almost a decade ago.  Baker & Hostetler’s partner profit numbers are somewhat difficult to compare over that timeframe, however.

Last year the firm restructured its partnership to provide some equity to all partners, which resulted in a slight uptick in the profits per partner metric by lowering the number of “equity partners” under The American Lawyer’s definition.  An equity partner is someone who receives 100 percent of compensation from shares in a law firm.

The latest payment to Baker & Hostetler in the BLMIS matter is for 68,341.3 hours worked by its lawyers, including 24,539.7 by partners and of counsel and 43,801.6 by associates.  The team bills at a blended rate of $515.81, with the highest hourly rates being the $998 earned by Picard and partners David Sheehan and David Rivkin.  Those rates, along with all others, are then discounted 10 percent.

Picard and Baker & Hostetler are not paid from the Madoff victims’ fund, but rather from the Securities Investor Protection Corp. In June, Picard’s team reached two other settlements totaling about $370 million, bringing the total recovery for victims in the past four months to over $1 billion.

“The Thema International settlement is the latest in a series of highly successful negotiations and mediations,” said a statement by Baker & Hostetler partner Oren Warshavsky, who along with Sheehan joined the firm’s New York office in 2008 from Troutman Sanders.

Sheehan’s hire, as previously noted by The American Lawyer, proved to be a critical factor in Baker & Hostetler getting the call for its Madoff work.  Sheehan had previously worked with Picard at another firm, and when Picard was appointed liquidation trustee for BLMIS in late 2008, he called on Sheehan to advise.  Baker & Hostetler hired Picard from New Jersey’s Gibbons shortly thereafter.

$32M More in Fees in Madoff Bankruptcy

September 4, 2017

A recent Law 360 story by Ryan Boysen, “Baker Hostetler Gets $32M More in Fees in Madoff Bankruptcy,” reports that BakerHostetler will receive $32 million for four months of work managing the liquidation of Bernie Madoff’s defunct investment firm after a New York bankruptcy court approved the fee request, bringing the firm’s total payout for its work on the Madoff case past the $900 million mark.  The latest fee request covers nearly 82,000 hours of work performed between the beginning of December and the end of March and was approved by U.S. Bankruptcy Judge Stuart M. Bernstein.

BakerHostetler partner Irving H. Picard serves as the liquidating trustee for Bernard L. Madoff Investment Securities LLC and his firm has received about $908 million all told since the case began in 2008, while recovering roughly $12 billion for victims of the $65 billion Ponzi scheme.

The legal costs in the case are paid by the Securities Investor Protection Corp., a member-funded organization that keeps a warchest stocked with roughly $2.5 billion at any given time to shell out for instances like the Madoff fraud.  SIPC covers investor losses directly in many types of financial frauds, and also works with law firms to recover funds for victims in bigger, more complex cases.

In addition to bearing the costs and fees to Picard, the organization has also paid about $555 million in legal expenses to special counsel, consultants and administrators that have worked on the case, according to the trustee.  The latest $32 million payout for BakerHostetler amounts to roughly 90 percent of the $35.7 million the firm was technically awarded for its work.  BakerHostetler and SIPC agreed to the discount early on in the case, and the firm typically receives about $435 an hour for its work, according to court documents.

"The reasonable value of the services for which the trustee and BH seek an allowance has been reduced significantly, based on consultation and review by SIPC, from the standard rates the trustee and BH charge," SIPC's general counsel wrote in a brief recommending the court approve the fee request.

The case is Securities Investor Protection Corp. v. Bernard L. Madoff Investment Securities LLC et al., case number 1:08-ap-01789, in the U.S. Bankruptcy Court for the Southern District of New York.

Creditor Questions Fees in La Paloma Bankruptcy

August 30, 2017

A recent Law 360 story by Rick Archer, “O’Melveny Blasted for $2.6M Fee Bid in La Paloma Chapter 11,reports that the senior creditor of California-based power producer La Paloma Generating Co. LLC objected to the legal fees submitted by the producer’s former counsel O'Melveny & Myers LLP, calling the $2.6 million request “exorbitant.”   LNV Corp. called for O'Melveny’s request for fees for its seven months of work on the case to be cut by more than a third, saying it was “bewildered” by how much O'Melveny was asking for compared to the progress made on the case during its tenure.

“This amount is exorbitant in light of the fact that (i) this is not a complicated case, (ii) there were virtually no contested hearings held while O’Melveny was debtors’ counsel, and (iii) the debtors made no progress towards exiting these cases during O’Melveny’s tenure,” it said.

The four-unit power plant sought Chapter 11 protection on Dec. 6, saying it had been driven into the red by price competition from alternative energy sources and difficulty in meeting California's demands for payments on carbon emissions under the state's cap-and-trade program to combat climate change.  In late July, the company said it had settled a control dispute with LNV and that a confirmation hearing on its $524 million Chapter 11 plan was scheduled for Oct. 12.

O’Melveny had asked for approximately $2.6 million for fees and expenses incurred between Dec. 6 and June 30, when it was replaced as counsel by Debevoise & Plimpton LLP and Richards Layton & Finger LLP.

LNV asked that the fee be reduced by at least $793,000, saying the firm submitted more than 1,300 excessive or unjustified hours.  It said this included 470 hours in fee applications, well exceeding the standard of 5 percent of all time billed for applications.

“Work related to the plan and disclosure statement was entirely wasteful, as O’Melveny never filed a plan and disclosure statement or even shared a draft with LNV,” it said.  “And the time spent on the use of cash collateral is indefensible given that there was never a contested hearing on the use of cash collateral or any related dispute that wasn’t swiftly resolved.”

LNV counsel Thomas E. Lauria said in a phone interview that while he usually considers fee disputes a “sideshow” in bankruptcy cases, in this case the large fee and the lack of benefits for La Paloma required a response.  “It’s unfortunate we find ourselves in the extraordinary situation that there are issues here we cannot ignore,” he said.

The case is In re: La Paloma Generating Co. LLC et al., case number 1:16-bk-12700, in the U.S. Bankruptcy Court for the District of Delaware.