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Category: Interim Fees

Law Firms Seek $10M in Fees in Kwok Chapter 11

February 23, 2024

A recent Law 360 story by Aaron Keller, “Paul Hastings, Others Seek $9.9M in Kwok Ch. 11 Case Fees”, reports that Paul Hastings LLP and six other law firms and professional services organizations have filed applications seeking more than $9.9 million in fees and expenses in the global Chapter 11 saga of Chinese exile Ho Wan Kwok, leaving the cost of the two-year-old case at well more than $30 million.

Leading a recent spate of interim expense requests is one for $6.9 million for services rendered between Sept. 1 and Dec. 31, 2023, by Paul Hastings LLP, where Chapter 11 trustee Luc A. Despins and most of his team of attorneys are partners, of counsel or associates.  Paul Hastings is also seeking $718,000 in expenses in the Kwok case over the same period.

The lead attorneys' fee request, filed in the U.S. Bankruptcy Court for the District of Connecticut, adds to the nearly $21.8 million in combined fees and expenses Paul Hastings has already been paid to litigate the complex case.  "Given the vast network of companies affiliated with the individual debtor, and the fact that these companies or their assets are located around the world, the trustee's investigation was, and continues to be, extensive," the firm noted in its application.

Despins recently told U.S. Bankruptcy Judge Julie A. Manning that Kwok's financial empire and myriad challenges filed by Kwok's associates and relatives have slowed his asset recovery operation and added significantly to the cost of the case.  Local and conflicts counsel at Connecticut law firm Neubert Pepe & Monteith PC filed a recent bid for close to $1 million in fees and nearly $35,000 in expenses, citing more than 2,470 hours of work on the case between Sept. 1 and Dec. 31.

Neubert Pepe attorneys played a key role in Despins' recent blitz of approximately 200 avoidance actions in the Kwok case, and the firm's work on those filings, which hit the docket before a Feb. 15 deadline, is not fully included in its recent application.  Previous asset recovery maneuvers, such as the sale of a luxury yacht connected to Kwok, helped pay for additional investigations that led to the clawback claims, Despins has said.

Its hourly rates in the $500 and $600 range, as indicated in the filings, are a fraction of the rates in the $1,675 to $1,975 per hour for lead attorneys at Paul Hastings, a key reason why Despins said in a recent court hearing that the firm's assistance in the case would result in significant savings for the Kwok estate.

$4M Interim Fee Request ‘Only the Beginning’ in Kwok Chapter 11

October 18, 2023

A recent Law 360 story by Brian Steele, “Paul Hastings Seeks $3.9M in Kwok Ch. 11 Fees and Costs”, reports that attorneys with Paul Hastings LLP have sought additional fees and costs of nearly $3.9 million for overseeing the Chapter 11 bankruptcy of Ho Wan Kwok during July and August, continuing to make good on their promise that a previous $12 million fee request was "only the beginning."

In an interim fee application filed in the U.S. Bankruptcy Court for the District of Connecticut, counsel for Chapter 11 trustee Luc A. Despins – himself a Paul Hastings attorney – asked for $3.76 million in fees and more than $146,000 in reimbursements for the firm.  The application notes that Despins filed or prosecuted several adversary proceedings during the fee period and gained access to tens of millions of dollars in escrow funds.  A "substantial portion of the fees" resulted from obstructive acts by Kwok and his associates, the application argued.

"During the fee period, the trustee and Paul Hastings continued the investigation into the financial affairs of the individual debtor and his corporate 'shell game' to shield companies and assets under his ownership and/or control from his creditors," the application said.  "Given the vast network of companies affiliated with the individual debtor, and the fact that these companies or their assets are located around the world, the trustee's investigation was, and continues to be, extensive."

Kwok filed for Chapter 11 protection in Connecticut in February 2022, claiming less than $100,000 in assets and more than $376 million in liabilities.  He was arrested in March 2023 on allegations that he operated a multifaceted $1 billion scheme of securities fraud, wire fraud and money laundering.  Once among the richest men in China, Kwok fled in 2014 amid corruption charges that he claimed were trumped up. He later gained a social media following as a critic of the Chinese government.

In its first interim fee application filed in May, Paul Hastings sought $12.3 million in attorney fees plus costs, noting that the request was "only the beginning" and adding that "what could initially have been perceived as a $100 to $150 million case has now turned into a case involving assets and claims many multiples of that."  The second application sought more than $8.2 million.  To date, Paul Hastings has collected $18.7 million for its work on the case, according to the application.

The debtors in the case are Kwok and two of his companies, Genever Holdings LLC and Genever Holdings Corp., the latter of which is based in the British Virgin Islands.  All three filed for Chapter 11 protection at different times, and a Connecticut bankruptcy judge is administering the cases jointly.  Paul Hastings represents Despins as trustee and the Genever entities.

During the fee period, the firm said that it recorded a total of 3,031.6 hours by attorneys and paraprofessionals.  The application lists 22 docket numbers linked to the case, including 11 adversary proceedings.  Paul Hastings has worked to minimize costs by delegating work to junior attorneys, paraprofessionals and lower-cost local counsel, according to the application.  The latest requested amount does not include a firm-wide hourly rate increase that went into effect Aug. 1; it also excludes pay for 21 timekeepers who billed less than five hours, and it incorporates a reduction to Despins' hourly rate from $1,975 to $1,860.

Other firms and organizations filed separate requests Monday for fees and costs in the case.  Despins' and Genever's local and conflicts counsel, Neubert Pepe & Monteith PC, is seeking more than $285,000, while British Virgin Islands counsel Harney Westwood & Riegels LP wants about $480,000.  Claims and noticing agent Epiq Corporate Restructuring asked for roughly $99,000 in fees and $7,500 in expenses, and Pullman & Comley LLC, which represents the official committee of unsecured creditors, requested about $88,000.

Kirkland Seeks $13M in Fees in Tossed 3M Bankruptcy

June 26, 2023

A recent Law 360 story by Henrik Nilsson, “Kirkland Seeks $13M Fees in 3M Unit’s Tossed Bankruptcy”, reports that Kirkland & Ellis LLP sought an Indiana federal judge's approval for nearly $13 million in fees and expenses for the firm's representation of 3M subsidiary Aereo Technology's bankruptcy case between February and April, days after the judge tossed the case upon finding the company financially healthy.  Kirkland's request is its third interim fee application and comes on top of more than $30 million in total compensation the court has already approved for the firm's representation of Aearo Technologies LLC, which filed for Chapter 11 to address 230,000 liability claims of its allegedly faulty Combat Arms Earplugs Version 2, or CAEv2.

Kirkland seeks $12,641,180 in fees and $277,065 in expense reimbursement for the period Feb. 1 through April 30, saying the firm has spent significant time and resources responding to dismissal motions, settlement talks and a Seventh Circuit appeal.  "This has required a significant expenditure of time and effort due, in part, to the vast number of Combat Arms claims alleged against the debtors, in parallel with the debtors' intensive preparations for the hearing on the dismissal motions," the firm said.

In total, Kirkland attorneys and paraprofessionals spent more than 11,777 hours during the fee period, according to the request.  The firm said that it spent almost 8,000 hours for a total of $8.1 million on litigation involving adversary proceedings and contested matters between February and April.  Kirkland dedicated 1,454 hours for a total of $1.7 million to develop a disclosure statement and reorganization plan in connection with the Chapter 11 cases, according to the request.

Kirkland charged Aearo a blended hourly rate of $1,073.30 during the fee period.  The firm said the compensation is warranted given the complexity of the case and the time expended.  "During the fee period, [Kirkland] provided extensive and important professional services to the debtors in connection with these Chapter 11 cases," the firm said.  "These services were often performed under severe time constraints and were necessary to address a multitude of critical issues both unique to these Chapter 11 cases and typically faced by large corporate debtors in similar cases of this magnitude and complexity."

$12M in Attorney Fees ‘Only The Beginning’ in Kwok Chapter 11 Case

June 7, 2023

A recent Law 360 story by Craig Clough, “Paul Hastings’ $12M Kwok Chapter 11 Fee Bill ‘Only The Beginning’,” reports that, calling it one of the most "complex and challenging" individual Chapter 11 cases ever filed, Paul Hastings LLP asked a Connecticut bankruptcy judge for $12.3 million in attorney fees covering eight months of work on exiled Chinese billionaire Ho Wan Kwok's case, adding the request is "only the beginning."

An interim fee application covering fees from July 8 through Feb. 28 done on behalf of the bankruptcy trustee in Kwok's case also includes nearly $349,000 in expenses for the firm, which said it took the case on a contingency basis and waited until the trustee recovered enough to pay the amount requested in the application, including two luxury yachts and $33 million held in escrow.  Kwok, also known as Guo Wengui, declared Chapter 11 bankruptcy in February 2022, citing $100 million to $500 million in liabilities, and he was arrested in March on allegations that he operated a multifaceted $1 billion fraud scheme.

"These Chapter 11 cases likely rank among the most complex and challenging Chapter 11 cases ever filed by an individual debtor," Paul Hastings said.  "The lead debtor — Mr. Ho Wan Kwok — is at the center of a vast maze of companies and assets purportedly owned by the individual debtor's family members or close business associates, but who, in reality, have no financial interest in, or control over, the companies and assets they purport to own because, in reality, the individual debtor owns and controls these companies and assets."

Trustee Luc A. Despins of Paul Hastings and the firm have faced a number of challenges in the case outside its complexity, including street protests of the firm orchestrated by Kwok and death threats against Despins, according to the filing.  "While the trustee and Paul Hastings will not be intimidated by these actions, they did require Paul Hastings to incur, among other expenses, hundreds of thousands of dollars in cyber security measures," Paul Hastings said.  "To be clear, Paul Hastings is not seeking reimbursement of these expenses in this application."

Attorneys Seek $13M in Fees in Pork Antitrust Settlement

August 22, 2022

A recent Law 360 story by PJ D'’Annunzio, “Attys Seek $13M Payout For Pork Antitrust Deal With Eateries reports that attorneys representing commercial pork buyers asked for $13.2 million in fees for their role in negotiating a $42 million settlement between a group of restaurants and Smithfield Foods in multidistrict litigation over an alleged meat industry scheme to inflate prices.  In a memorandum, a class of commercial and institutional indirect pork purchasers urged the court to award fees using a "percentage of the funds" calculation, in this case, 31% of the gross settlement proceeds.

"The $42 million settlement before the court is the result of extensive work done by counsel for the CIIPPs on a contingent basis," the memorandum said.  "Counsel has worked for over four years and have invested thousands of hours to pursue the CIIPP claims.  Counsel for the CIIPPs request an interim award of attorneys' fees for the work done to achieve this settlement."  Minnesota U.S. District Judge John R. Tunheim preliminarily approved the $42 million settlement between Smithfield and the pork purchasers in an April order.

In addition to the money, Smithfield agreed to cooperate in prosecuting claims against the remaining defendants, which include big names like Tyson Foods and Hormel Foods Corp., in the large-scale litigation.  The purchasers' memorandum said four years of litigation resulted in roughly 16,800 attorney hours and 2,560 hours for legal assistants and other professionals.

"Given the excellent results achieved, the complexity of the claims and defenses, the real risk of nonrecovery, the formidable defense teams, the delay in receipt of payment, and the substantial experience and skill of counsel, the requested multiplier on the lodestar and the resulting fee is reasonable compensation for the work done by counsel for the CIIPPs," the purchasers said.  Additionally, the purchasers asked for an award of $7,500 to each plaintiff representative.