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Category: USTP

NRA Agrees To Pay Creditors’ Chapter 11 Fees

May 15, 2021

A recent Law 360 story by Vince Sullivan, “NRA Reaches Deal To Pay Creditors’ Ch. 11 Fees” reports that days after the National Rifle Association's Chapter 11 case was dismissed, the organization told a Texas bankruptcy judge that it had reached an agreement with the official committee of unsecured creditors to handle payments of professional fees.  During a status conference requested by the committee, its attorney Louis Strubeck Jr. of Norton Rose Fulbright said the committee had pending fee applications in the case and would likely have at least a further request for payment of professional fees, which are typically paid for by the debtor in a Chapter 11 case.

Since the case was dismissed via an order from U.S. Bankruptcy Judge Harlin D. Hale, Strubeck said he wanted to present the situation to the court to be sure it was being handled properly.  "We wanted to make sure there was full transparency around this," Strubeck said.  "We didn't want to agree to anything that wasn't going to be discussed with the court to make sure we weren't doing something differently."  After the dismissal order came down, Strubeck said he engaged in discussions with Patrick J. Neligan Jr. of Nelligan LLP, the NRA's bankruptcy counsel, to figure out how to move forward.

At the hearing, Nelligan said he was of the legal opinion that once the Chapter 11 dismissal order was issued, the bankruptcy court relinquished its jurisdiction over the parties and restored them to their prebankruptcy circumstances.  That means, he said, that the NRA would treat any invoices from the committee's professionals incurred before the dismissal as it would treat any other unsecured obligation.

"The impact of a dismissal ... is that as we put the entities into their prebankruptcy positions, we need to go forward with payment of the unsecured creditors on their prep claims," Nelligan said.  "The NRA is preparing to make those payments.  Out of an abundance of caution we have not gone forward with those payments until this status conference."  Any disputes among the parties about any invoices will be resolved as they normally would as if the bankruptcy had never occurred, Nelligan said.

The dismissal also restores the parties to their prebankruptcy standing with regard to the litigation in which the NRA is involved, Nelligan said.  As he understands it, the case brought by the New York attorney general seeking to dissolve the organization will continue uninterrupted in New York state court, he said.  The NRA's litigation against its former media consulting firm Ackerman McQueen will also resume in Texas state court, he said.

Attorneys for NRA board member Phillip Journey — whose motion seeking the appointment of an examiner in the Chapter 11 case was denied — said their client is considering whether to appeal the denial of his motion, or whether to pursue an administrative expense claim against the NRA for the fees incurred in litigating the examiner and dismissal motions.

Ackerman McQueen attorneys also said they were exploring whether the dismissal of the Chapter 11 case for a lack of good faith in making the bankruptcy filing could give rise to the shifting of legal fees.  After taking some time to consider the issues, Judge Hale said he wouldn't be altering his dismissal order to retain jurisdiction over the fee issues, saying he trusted the parties and their counsel to resolve any disputes professionally and amicably.

Client Says It Doesn’t Owe Attorney Fees in Patent Action

May 9, 2021

A recent Law 360 story by Diana Novak Jones, “UCANN Says It Doesn’t Owe Atty Fees After Patent Suit,” reports that United Cannabis Corp. is fighting CBD company Pure Hemp Collective's bid for $300,000 in attorney fees after United Cannabis dropped a patent infringement suit against the company, arguing it has no liability because Pure Hemp willingly dropped its claims as well.  United Cannabis, or UCANN, was suing Pure Hemp for infringement on a patent covering a liquid formula for a tincture containing 95% CBD when it entered bankruptcy, but dropped the suit after its Chapter 11 petition was dismissed earlier this year.  Pure Hemp dismissed its counterclaims at the same time, according to court records.

But in April, Pure Hemp asked the judge in the patent suit to award it about $300,000 in attorney fees, arguing in part that UCANN got its patent by misleading the U.S. Patent and Trademark Office, according to court filings.  UCANN pushed back, arguing there's no evidence it misled anyone and Pure Hemp has already dismissed the claims it's trying to use to get the fees.  "Pure Hemp's motion raises several disputed issues of fact as to materiality, knowledge, and intent," UCANN told the court.  "By dismissing its inequitable conduct counterclaims, Pure Hemp waived its right to have these factual disputes adjudicated."

The dispute between UCANN and Pure Hemp, which began in 2018, was closely watched in the cannabis industry as it presented one of the earliest opportunities to see how a federal court handled cannabis patent claims.  UCANN accused Pure Hemp of infringing its patent on the liquid cannabinoids, while Pure Hemp brought counterclaims accusing UCANN of suing to enforce a patent it knew was invalid.  In 2019, UCANN scored a major win when U.S. District Judge William Martinez denied Pure Hemp's motion for summary judgment, holding that liquid cannabinoid formulations were UCANN's creation and did not occur in nature.

In March of last year, the parties agreed to reduce the suit to questions of the patent's validity and enforceability, with Pure Hemp agreeing to pay $4,420 in royalties if UCANN prevailed.  But the next month, UCANN filed its Chapter 11 petition, halting the patent litigation.  The U.S. Trustee and the bankruptcy judge had questions about whether UCANN belonged in bankruptcy court given its connections to cannabis, and ultimately the company's petition was dismissed.  Not long after the dismissal, which UCANN didn't appeal, it told the judge overseeing its suit against Pure Hemp that the parties were dropping their respective claims.

But two weeks later, Pure Hemp filed its motion for fees, court records show. The motion remained sealed, but Pure Hemp's counsel James Gourley of Carstens & Cahoon LLP told Law360 his client alleges that UCANN misled the patent office by copying and pasting text from another product in the paperwork for the patent UCANN was suing over.

NALFA: Hourly Rates Above National Averages in Large Chapter 11 Cases

May 6, 2021

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 beganMost 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 firmsRepresenting 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.

3 Firms Give Up $1M in Fees in Purdue Bankruptcy

May 1, 2021

A recent Law 360 story by Justin Wise, “3 Firms Give Up $1M in Fees From Purdue Ch. 11,” reports that Skadden Arps Slate Meagher & Flom LLP, WilmerHale and Dechert LLP have agreed to a settlement with the U.S. Department of Justice to relinquish $1 million in fees earned in their representation of Purdue Pharma in its ongoing bankruptcy cases, after concerns were raised about the adequacy of the firms' disclosures.

The DOJ Trustee Program said that the firms failed to disclose a joint defense and common interest agreement between Purdue and the Sackler family, the company's owners, in their retention applications.  The agreement created obligations for the firms to the Sacklers in their defense of hundreds of lawsuits relating to Purdue's opioid sales, the DOJ said.  Purdue had invoked the agreement in an effort to avoid turning over documents to unsecured creditors reviewing debtors' conduct.  The settlement is subject to approval by the Bankruptcy Court for the Southern District of New York.

"These disclosure violations are particularly concerning because a central question in these cases has been the independence of Purdue from the Sackler families," Cliff White, director of the DOJ's Trustee Program, said in a statement.  "This agreement reflects the USTP's ongoing efforts to police law firms and other bankruptcy professionals who fail to disclose connections that may raise questions about their ability to perform their duties free of conflicts of interest."

Law firms are required under bankruptcy laws to disclose their connections to other parties who may have a stake in a case.  The three firms did not consider the common interest agreement to represent a "connection" requiring disclosure at the time of their applications, but agreed to the settlement to resolve a dispute with the U.S. Trustee, according to a court filing.  The U.S. Trustee first raised concerns about the firms' disclosures in early March.

The U.S. Trustee said it discovered no "evidence that the failure to disclose in this case was intentional or that there was an effort by any of the firms to mislead."  Under the settlement, Skadden, WilmerHale and Dechert will collectively reduce their pending or future fees by $1 million and file supplemental retention applications to reflect any agreements entered on behalf of debtors and other parties.

The Nation’s Top Attorney Fee Experts of 2020

June 24, 2020

NALFA, a non-profit group, is building a worldwide network of attorney fee expertise. Our network includes members, faculty, and fellows with expertise on the reasonableness of attorney fees.  We help organize and recognize qualified attorney fee experts from across the U.S. and around the globe.  Our attorney fee experts also include court adjuncts such as bankruptcy fee examiners, special fee masters, and fee dispute neutrals.

Every year, we announce the nation's top attorney fee experts.  Attorney fee experts are retained by fee-seeking or fee-challenging parties in litigation to independently prove reasonable attorney fees and expenses in court or arbitration.  The following NALFA profile quotes are based on bio, CV, case summaries and case materials submitted to and verified by us.  Here are the nation's top attorney fee experts of 2020:

"The Nation's Top Attorney Fee Expert"
John D. O'Connor
O'Connor & Associates
San Francisco, CA
 
"Over 30 Years of Legal Fee Audit Expertise"
Andre E. Jardini
KPC Legal Audit Services, Inc.
Glendale, CA

"The Nation's Top Bankruptcy Fee Examiner"
Robert M. Fishman
Cozen O'Connor
Chicago, IL

"Widely Respected as an Attorney Fee Expert"
Elise S. Frejka
Frejka PLLC
New York, NY
 
"Experienced on Analyzing Fees, Billing Entries for Fee Awards"
Robert L. Kaufman
Woodruff Spradlin & Smart
Costa Mesa, CA

"Highly Skilled on a Range of Fee and Billing Issues"
Daniel M. White
White Amundson APC
San Diego, CA
 
"Extensive Expertise on Attorney Fee Matters in Common Fund Litigation"
Craig W. Smith
Robbins LLP
San Diego, CA
 
"Highly Experienced in Dealing with Fee Issues Arising in Complex Litigation"
Marc M. Seltzer
Susman Godfrey LLP
Los Angeles, CA

"Total Mastery in Resolving Complex Attorney Fee Disputes"
Peter K. Rosen
JAMS
Los Angeles, CA
 
"Understands Fees, Funding, and Billing Issues in Cross Border Matters"
Glenn Newberry
Eversheds Sutherland
London, UK
 
"Solid Expertise with Fee and Billing Matters in Complex Litigation"
Bruce C. Fox
Obermayer Rebmann LLP
Pittsburgh, PA
 
"Excellent on Attorney Fee Issues in Florida"
Debra L. Feit
Stratford Law Group LLC
Fort Lauderdale, FL
 
"Nation's Top Scholar on Attorney Fees in Class Actions"
Brian T. Fitzpatrick
Vanderbilt Law School
Nashville, TN
 
"Great Leader in Analyzing Legal Bills for Insurers"
Richard Zujac
Liberty Mutual Insurance
Philadelphia, PA