Fee Dispute Hotline
(312) 907-7275

Assisting with High-Stakes Attorney Fee Disputes

The NALFA

News Blog

Hourly Rate Increases Under Scrutiny in Caesars Bankruptcy

May 11, 2016 | Posted in : Bankruptcy Fees / Expenses, Fee Expert / Member, Fee Request, Hourly Rates, NALFA News

A recent Law 360 story, “Law Firm Fee Hikes Under Scrutiny in Caesars Bankruptcy,” reports that the committee scrutinizing the professional fees being charged in the Caesars Entertainment Operating Co. bankruptcy has urged an Illinois judge to take a closer look at rate hikes at Kirkland & Ellis LLP, Proskauer Rose LLP and other firms involved in the massive Chapter 11 case.
 
University of Nevada, Las Vegas law professor and NALFA member Nancy Rapoport, a court-appointed member of the committee reviewing fee applications in the CEOC bankruptcy, indicated in a report that firms involved in the bankruptcy should provide more information on whether increases in the rates being charged are reasonable.

Billing rate increases of between 3 percent and 4 percent generally have been viewed by the committee as being reasonable, but firms may need to provide additional justification for increases above that range, the report said.  Rapoport said she would provide an opinion on the fee increases in a later report, saying the key question is whether other clients, both in and out of bankruptcy, are actually paying the rates listed in the fee applications.

The report examines all fees being charged to the debtor’s estate, but in a chart specifically identifies Kirkland & Ellis, Proskauer Rose, Winston & Strawn LLP, FTI Consulting, Alvarez & Marsal, and Zolfo Cooper LLC.

Excluding rate increases less than 4 percent and increases resulting from a promotion, the result of fee increases by those firms is $298,826 through January, according to the filing.  Of that amount, Kirkland & Ellis accounts for $142,893, Proskauer Rose accounts for $75,000 and Winston & Strawn accounts for $60,808.

“Before the fee committee can provide this court with a determination of whether the rate increases are reasonable or have benefitted the estate, then, each professional that has raised its rates must provide to the fee committee the following: an indication that the client has consented to any specific rate increases; an indication that the professional's bankruptcy and non-bankruptcy clients are generally paying those increased rates, without a discount; and an explanation as to the reasonableness of those increases,” Rapoport said.

Kirkland & Ellis, which is serving as CEOC’s primary counsel in the Chapter 11, has told the committee that it charges the same rates for all of its restructuring clients and confirmed that many of its restructuring and nonrestructuring clients have paid the 2016 rates, Rapoport said.

“Kirkland has also provided data indicating that its 2016 rates are within the range of rates charged by other national, full-service law firms with top-tier debtor restructuring practices,” the filing said.

Winston & Strawn has also confirmed that its clients are paying the increased rates, the report said.  Rapoport said the committee will “wait to opine” on the Proskauer Rose rate increases until the firm has had a chance to present arguments defending the increases to the committee.  Proskauer Rose represents the official committee of unsecured creditors.

The firms submitted third interim fee requests last month for work performed in the CEOC Chapter 11 between Oct. 1 and Jan. 31. Kirkland, which is representing CEOC, is seeking more than $12.6 million in compensation for the period and Winston & Strawn is seeking $14.2 million for work assisting Chapter 11 examiner Richard J. Davis.

The time period covers several months leading up to the release of a major report prepared by Davis that looked into whether CEOC creditors have claims against parent company Caesars Entertainment and owners Apollo Management LLC and TPG Capital.  Davis determined the value of those claims was between $3.6 billion and $5.1 billion.

CEOC filed for bankruptcy in January 2015, carrying $18.05 billion in debt.  The debt was made up of $11.7 billion in first-lien bank debt, $5.25 billion in second-lien note debt and two groups of unsecured notes worth a combined $1.1 billion.

The case is In re: Caesars Entertainment Operating Co. Inc. et al., case number 1:15-bk-01145, in the U.S. Bankruptcy Court for the Northern District of Illinois.