A recent The American Lawyer story by Dan Roe, “Kirkland and Weil’s Fees in Chapter 11 Work Highlight Big Law Allure to Bankruptcy,” reports that even as the number of commercial Chapter 11 bankruptcies has dropped in recent months, large bankruptcies have continued to churn out big fee packages for some law firms—one reason why firms are continuing to invest and hire in their bankruptcy practices. For instance, a glance at law firm fees in two cases—the Chapter 11 bankruptcy of Sears, filed October 2018, and the May 2020 J.C. Penney bankruptcy—reveal the cases have totaled more than $150 million for law firms since they began. Most of the money has gone to Am Law 200 firms, with some partners billing for more than $1,500 per hour.
Representing Sears Holdings Corp., Weil, Gotshal & Manges emerged as the biggest fee-earner in the Southern District of New York bankruptcy case, with more than $80 million in fees and expenses paid through the end of February 2021. Its partners billed between $1,695 and $1,200 per hour, while associates charged $1,100 to $595. Akin Gump Strauss Hauer & Feld also made out big on the Sears bankruptcy. Representing the bankruptcy’s unsecured creditors, the law firm received $48 million in total compensation through the end of February 2021 with a blended rate of $853 per hour.
Paul, Weiss, Rifkind, Wharton & Garrison, representing Sears, received almost $20 million, although most of it was completed before last year. Its attorneys averaged $790 per hour, with partners topping out at $1,650. And Wachtell, Lipton, Rosen & Katz did $873,000 worth of work representing Sears, with a blended rate of $1,287 and partners billing up to $1,500. Meanwhile, the J.C. Penney bankruptcy has generated more than $28 million in fee revenue for law firms. Representing J.C. Penney, Kirkland & Ellis took most of the spoils with two massive fee applications totaling $20.9 million, with a blended attorney rate of approximately $1,000.
Cooley and Cole Schotz represented the creditor committee, with the former firm taking home $4.2 million in fee revenue with a blended rate of $970 average billing rate. Cole Schotz earned $2.1 million for work it performed in the second half of the year, maintaining a $643 average hourly rate per attorney. Katten Muchin Rosenman put in 1,318 professional hours to earn $1.1 million in fee revenue while representing J.C. Penney, averaging $960 per attorney per hour, while Quinn Emanuel Urquhart & Sullivan, representing the store’s subsidiaries, cleared $827,000 for its work in the second half of 2020, averaging just over $1,000 for its hourly rate.
The J.C. Penney restructuring also benefitted smaller-sized firms such as the New York law firm Herrick Feinstein, whose attorneys billed around $500 per hour for $1.5 million in fees. The opportunity for large fee awards in Chapter 11 work continues to drive a flurry of bankruptcy partner hires. In the last week, Willkie Farr & Gallagher added a three-partner bankruptcy group from Morrison & Foerster who represent creditor committees in high-profile cases and Sidley Austin hired Tom Califano, previously global co-chair and U.S. chair of DLA Piper’s restructuring group. Last month, Kirkland brought on Christine Okike from Skadden, Arps, Slate, Meagher & Flom.
"Our analysis, from our most recent litigation hourly rate survey, shows that all these Chapter 11 bankruptcy rates are well above the approximate national averages," said Terry Jesse, Executive Director of NALFA. "In fact, hourly rates in large Chapter 11 bankruptcies, may be one of the highest rate-charging practice areas, " Jesse wondered.
For more on NALFA's national averages, visit NALFA Releases 2020 Average Hourly Rates in Litigation.