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.