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Fee Examiner Says Too Many Attorneys at Puerto Rico Hearing

March 2, 2018 | Posted in : Bankruptcy Fees / Expenses, Fee Expert / Member

A recent Law 360 story by Alex Wolf, “Fee Examiner Says Too Many Attys at Puerto Rico Hearings,” reports that the firms representing Puerto Rico’s public debtors and creditor committees in the territory’s restructuring cases are sending too many professionals to court hearings and mediation sessions and are seeking excessive coverage for travel expenses, according to a fee examiner report filed Thursday.

For their work over the first five months of what amounts to the largest municipal bankruptcy in history, the legal and financial professionals hired to represent Puerto Rico’s government, public corporations, pensioners and committee of unsecured creditors have requested $77 million in fees and expenses. Of that amount, nearly $50 million should be approved by the federal judge overseeing the territory’s restructuring cases while another $26 million is under further review, an appointed fee examiner said in his first initial report, identifying several problematic practices and areas of concern.

While expressing an understanding that there are bound to be areas of confusion and disagreement in a massive and complex reorganization, examiner Brady Williamson said he encountered “problematic billing practices” that ought to be addressed, like professionals charging disparate rates or failing to provide discounts for their services where others have.

Notably, the average attorney hourly rate for applying firms based in Puerto Rico is about $245, while the average rate for firms based in New York or in other major U.S. cities is just under $775, with one reported rate at $1,425 an hour, Williamson said. His report shows that all of the BigLaw firms filing requests for payment – O'Melveny & Myers LLP, Greenberg Traurig LLP Willkie Farr & Gallagher LLP, Paul Hastings LLP, Jenner & Block LLP and Proskauer Rose LLP - have voluntarily discounted their service fees.

The entities billing the commonwealth have also employed multiple firms and professionals to conduct seemingly duplicate types of work and have been sending too many people to attend mediation sessions and court hearings, Williamson said.

“The remarkable number of professionals in attendance, both in the aggregate and from individual firms, cannot be ignored and may lead to formal objection,” he said. “It is unreasonable, whether the clients or the professionals make the staffing decisions, to expect compensation for 12 attorneys from a single firm to attend an omnibus hearing at which only one or two were expected to speak.”

Williamson also said some professionals charged for unnecessary electronic research and travel while others “routinely fail to observe applicable caps and prohibitions” on expenses, citing bills for first-class airfare and charges for hotel laundry service. He identified more than $680,000 in “apparently excessive or undocumented expenses” out of just over $2 million being sought.

Despite these findings, “almost every firm that was asked to do so adjusted their requested fees and expenses,” according to Williamson’s report.

The fees and expenses recommended for approval Thursday encompass the work done by the majority of professionals employed by the debtors and committees, but do exclude compensation requested by counsel for the federal board appointed to oversee the island’s debt overhaul and some of its hired professionals. Williamson said that consideration for payments requested by Proskauer Rose and McKinsey & Co. Inc., among a few others, is being deferred until April.

Puerto Rico began its court-monitored restructuring process last May with about $74 billion in public debt and an additional $49 billion in pension liabilities. Officials are using the bankruptcy-like process created under Title III of the Puerto Rico Oversight, Management and Economic Stability Act to address a flurry of competing claims for payment while attempting to keep the struggling territory afloat.

The bankruptcy case is In re: Commonwealth of Puerto Rico, case number 3:17-bk-03283, in the U.S. District Court for the District of Puerto Rico.