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Category: Bankruptcy Fees / Expenses

$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.

Big Monthly Legal Fees in Takata Bankruptcy

August 22, 2017

A recent American Lawyer story by Brian Baxter, “Takata Parent’s Bankruptcy Reveals Big Monthly Litigation Fees,” reports that Japanese auto parts giant Takata Corp., which followed its U.S. unit into a Delaware bankruptcy court, revealed in court documents that it is paying nearly $1 million per month to an Am Law 100 firm advising it in product liability litigation over faulty air bags.

A court filing in Takata’s Chapter 15 case by Covington & Burling partner Shankar Duraiswamy in Washington, D.C., revealed that between January and June of this year, Takata has paid roughly $877,000 each month in legal fees and costs to his firm for work in air bag-related litigation.  That would put the amount that Covington has earned this year from Takata’s Japanese parent at nearly $4.4 million.

In a separate court filing by Covington on July 7 in the Chapter 11 case of TK Holdings Inc.—Takata’s North American subsidiary—Covington stated that it had received nearly $6.6 million from the debtor in the 90 days prior to its bankruptcy filing on June 25 in Wilmington.  That document, filed by Covington product liability litigation partner Keith Teel in Washington, D.C., disclosed that the firm was also holding a $1.9 million retainer for its services to TK Holdings.

A Covington spokesman declined to discuss the firm’s work on behalf of Takata or clarify whether the filings in the two separate bankruptcy cases tallied up different sets of fees.  In 2015, Takata tapped the firm to serve as co-lead counsel with Dechert in the growing air bag litigation.  In January, Takata reached a $1 billion criminal plea deal in Detroit with the U.S. Department of Justice related to its sale of defective air bags.  Court filings show that Dechert worked with Covington on that matter for Takata.

The July filing by Covington seeking to advise TK Holdings in its Chapter 11 case states that in the spring of 2016 the firm took over from Dechert as “lead counsel in all litigation matters arising from the air bag litigation.”  An attached declaration by Teel states that Covington partners, of counsel, senior counsel and special counsel are billing TK Holdings between $725 and $1,575 per hour for their services, associates between $455 and $700 an hour and staff attorneys at hourly rates ranging from $215 to $365.

Covington’s Teel has taken the lead for the company in multidistrict civil litigation that it faces in Miami—and is now trying to stay with its dual bankruptcy filings.  The Chapter 15 filing Tuesday by Tokyo-based Takata and its affiliates Takata Kyushu Corp. and Takata Service Corp. lists Delaware’s Young Conaway Stargatt & Taylor and leading Japanese firm Nagashima Ohno & Tsunematsu as outside legal advisers.  Neither firm has yet filed billing statements with the bankruptcy court in Wilmington.

Weil, Gotshal & Manges, Delaware’s Richards, Layton & Finger and Nagashima Ohno have taken the lead for Auburn Hills, Michigan-based TK Holdings in its bankruptcy case, according to our previous reports, which noted that Weil had received payments totaling $19.1 million from Takata since August 2015.  Other firms that have since filed papers seeking to advise the debtor include Delaware’s Ashby & Geddes and Washington, D.C.’s Frankel & Wyron.  Dechert has not filed an appearance in the Chapter 11 case of TK Holdings or Takata’s Chapter 15 case.

Milbank, Tweed, Hadley & McCloy, national bankruptcy boutique Pachulski Stang Ziehl & Jones, Delaware’s Whiteford, Taylor & Preston, insurance law firm Gilbert and the Sakura Kyodo Law Offices in Tokyo are representing an official committee of unsecured creditors in the Chapter 11 case of TK Holdings.

Attorneys Net $8.75M in Barclays Foreign Exchange Misuse Settlement

July 28, 2017

A recent Law 360 story by Melissa Daniels, “Barclays Forex Rigging Settlement Nets $8.75M in Atty Fees,” reports that counsel for Axiom Investment Advisors LLC will receive $8.75 million from a $50 million settlement with Barclays Bank LLC in a New York federal court action filed over purported misuse of a foreign exchange trading system to boost bank profits.  The fee award equals 17.5 percent of the settlement, which will be divvied up among four firms: Scott + Scott LLP and Korein Tillery LLC, who are class counsel, as well as Hausfeld LLP and Nussbaum Law Group PC.

“Class counsel shall allocate the attorneys’ fees awarded among plaintiff’s counsel in a matter that they, in good faith, believe reflects the contributions of such counsel to the institution, prosecution and settlement of the action,” U.S. District Judge Lorna G. Schofield said in a five-page order.  The plaintiffs' attorneys will also receive more than $339,000 in reimbursements, the order said.

The settlement, announced in February 2016, ended Axiom Investment Advisors LLC’s class action allegations that Barclays used its Last Look system, which monitors foreign exchange trades, to put a slight hold on clients' foreign exchange orders so it could determine whether the price a customer sought to pay was profitable for the bank.  It would then enter a different price or cancel trades with little or no explanation, Axiom said.

The firms who worked on the case said in their request for fees they put in more than 5,100 hours on the case.  They also said the requested fee amount was actually below the typical amounts awarded in comparable cases in the Second Circuit's courts.  Axiom will receive a service award of $10,000 from the settlement fund, according to Judge Schofield’s order.

Axiom filed its suit in late November 2015, less than two weeks after Barclays was hit with a $150 million fine by the New York Department of Financial Services for misconduct using the Last Look system, forcing it to fire its global head of electronic fixed income, currencies and commodities automated flow trading.

The settlement class includes anyone who was affected by these practices between June 1, 2008, and the date the settlement is preliminarily approved, as long as they lived in the U.S. or placed an order using BARX, the bank’s electronic trading platform.  Judge Schofield’s order said notices have been mailed to 1,373 potential settlement class members about the proposed 17.5 percent fee award.

The case is Axiom Investment Advisors LLC v. Barclays Bank PLC, et al., case number 1:15-cv-09323, in the U.S. District Court for the Southern District of New York.