Bankruptcy Lawyers Seek $18.50 a Minute From Court
January 28, 2009
Lawyers at Kirkland & Ellis LLP, home to former Whitewater prosecutor Ken Starr, are asking as much as $1,110 an hour for bankruptcy work while creditors are recovering less of their loans through company restructurings.
Kirkland requested a top rate equal to $18.50 a minute for advising Tronox Inc. in its bankruptcy, according to court papers filed Jan. 26. Chicago-based Sidley Austin LLP and New York’s Skadden, Arps, Slate, Meagher & Flom LLP also requested hourly rates exceeding $1,000 in the past two months in separate bankruptcy cases, as lenders’ recoveries are forecast by ratings company Moody’s Corp. to drop 22 percent in the recession.
Professionals’ fees in bankruptcy cases are growing at four times the rate of inflation, estimated Lynn LoPucki, a professor of bankruptcy law at the University of California, Los Angeles. Total fees paid for lawyers, accountants and other professionals in bankruptcies from 1998 to 2007 doubled, while the consumer price index rose about 25 percent, he said.
“As the economy gets worse, the bankruptcy lawyers are charging more,” LoPucki said. “It seems that each month one sets a new record for hourly billing rates. $1,110 is, to my knowledge, a record for the debtor’s bankruptcy counsel.”
Lenders’ average recoveries may shrink to 35 cents on the dollar as the worldwide economic slowdown deepens, compared with 45 percent of the face value of corporate debt in previous downturns, Kenneth Emery, Moody’s Investors Service Inc.’s director of corporate default research, said in an interview earlier this month. Bonds of newspaper publisher Tribune Co., which filed for bankruptcy Dec. 8, are trading at 1.5 cents on the dollar to 4.25 cents, signaling bondholders may get no more than the market value.
‘Need Best Team’
“In this environment, you need the best team of advisers you can find,” Robert Gibney, a spokesman for titanium dioxide- maker Tronox, said in an e-mail.
Kirkland’s Richard Cieri, chairman of the firm’s bankruptcy practice, said he’s charging $965 an hour as the lead lawyer advising Tronox, up from his fee of $925 last year. The $1,110- an-hour rate reflects conversion of a U.K.-based partner’s fee from pounds to dollars, Cieri said.
Partners at Sidley, where U.S. President Barack Obama once worked and met his wife Michelle, want to charge as much as $1,100 an hour to advise Tribune Co. on its restructuring, according to a Dec. 26 court filing. Skadden Arps requested as much as $1,050 an hour for partners counseling Circuit City Stores Inc. in its bankruptcy, according to court papers filed Nov. 20.
Lehman Bankruptcy
The top fees quoted by Kirkland, Sidley and Skadden surpass the rates charged by Weil, Gotshal & Manges LLP in the Lehman Brothers Holdings Inc. case, the largest in history with $613 billion in debt. Weil has asked for $650 to $950 an hour for partners and counsel, and $355 to $595 for associates.
“We do not believe we should be pushing the envelope at the highest edge of hourly rates,” Harvey Miller, a partner at Weil and the lead lawyer advising Lehman, said in an e-mail.
James Conlan, co-chairman of Sidley’s bankruptcy group, didn’t return a call or e-mail seeking comment.
Gregg Galardi, the lead Skadden lawyer on the Circuit City case, said he’s not charging the high rate.
“That’s just our general rates now,” Galardi said. “I’m not sure if anyone on the case is charging that much. I’m not there yet.”
While rates are subject to approval by bankruptcy courts, the judges don’t often deny the law firms’ requests.
‘Glorified Liquidation Tool’
Bankruptcy fees may eventually be challenged on grounds that lawyers are mostly liquidating companies instead of restructuring them, said Stephen Lubben, a professor at Seton Hall University School of Law in Newark, New Jersey.
“There is a limit to how many attorneys can demand these kinds of hourly rates, so long as the credit markets remain tight and Chapter 11 tends to be little more than a glorified liquidation tool,” he said in an e-mail.
Bankruptcy fees continue to rise as the recession shrinks law firm jobs in mergers and acquisitions, structured finance, capital markets and real estate. San Francisco firms Thelen LLP and Heller Ehrman LLP and New York’s Thacher, Proffitt & Wood shut down in the past six months from a lack of business. New York-based Cadwalader, Wickersham & Taft and White & Case LLP and Chicago-based Sonnenschein, Nath & Rosenthal have cut lawyers.
New York’s Cravath, Swaine & Moore LLP said last year it would freeze 2009 billing rates as its clients struggle during the recession. The firm has five bankruptcy lawyers led by partner Richard Levin.
James Sprayregen, a Kirkland bankruptcy partner who returned to the firm in December after two and a half years as a managing director at Goldman Sachs Group Inc., also charges $965 an hour, Cieri said.
‘Avenues to Object’
“This is a market,” Robert Lawless, a professor at the University of Illinois College of Law, said in an e-mail. “No one is forcing anyone to pay those fees, and creditors do have avenues to object.”
Akin Gump Strauss Hauer & Feld LLP partners are asking as much as $1,050 an hour to advise a committee of unsecured creditors in the bankruptcy of Bally Total Fitness of Greater New York Inc., according to a Jan. 22 filing. The most expensive lawyer with “primary responsibility” for advising the committee is Akin Gump partner David Botter, who charges $825 an hour, according to the papers.
New York-based Simpson Thacher & Bartlett LLP, special counsel to Lehman, asked the federal bankruptcy court in Manhattan handling the case to approve as much as $1,000 hourly.
Circuit City spokesman Bill Cimino, Tribune spokesman Gary Weitman and Lehman spokeswoman Kimberly Macleod didn’t immediately respond to requests for comment.
Source: Bloomberg
Lawyers at Kirkland & Ellis LLP, home to former Whitewater prosecutor Ken Starr, are asking as much as $1,110 an hour for bankruptcy work while creditors are recovering less of their loans through company restructurings.
Kirkland requested a top rate equal to $18.50 a minute for advising Tronox Inc. in its bankruptcy, according to court papers filed Jan. 26. Chicago-based Sidley Austin LLP and New York’s Skadden, Arps, Slate, Meagher & Flom LLP also requested hourly rates exceeding $1,000 in the past two months in separate bankruptcy cases, as lenders’ recoveries are forecast by ratings company Moody’s Corp. to drop 22 percent in the recession.
Professionals’ fees in bankruptcy cases are growing at four times the rate of inflation, estimated Lynn LoPucki, a professor of bankruptcy law at the University of California, Los Angeles. Total fees paid for lawyers, accountants and other professionals in bankruptcies from 1998 to 2007 doubled, while the consumer price index rose about 25 percent, he said.
“As the economy gets worse, the bankruptcy lawyers are charging more,” LoPucki said. “It seems that each month one sets a new record for hourly billing rates. $1,110 is, to my knowledge, a record for the debtor’s bankruptcy counsel.”
Lenders’ average recoveries may shrink to 35 cents on the dollar as the worldwide economic slowdown deepens, compared with 45 percent of the face value of corporate debt in previous downturns, Kenneth Emery, Moody’s Investors Service Inc.’s director of corporate default research, said in an interview earlier this month. Bonds of newspaper publisher Tribune Co., which filed for bankruptcy Dec. 8, are trading at 1.5 cents on the dollar to 4.25 cents, signaling bondholders may get no more than the market value.
‘Need Best Team’
“In this environment, you need the best team of advisers you can find,” Robert Gibney, a spokesman for titanium dioxide- maker Tronox, said in an e-mail.
Kirkland’s Richard Cieri, chairman of the firm’s bankruptcy practice, said he’s charging $965 an hour as the lead lawyer advising Tronox, up from his fee of $925 last year. The $1,110- an-hour rate reflects conversion of a U.K.-based partner’s fee from pounds to dollars, Cieri said.
Partners at Sidley, where U.S. President Barack Obama once worked and met his wife Michelle, want to charge as much as $1,100 an hour to advise Tribune Co. on its restructuring, according to a Dec. 26 court filing. Skadden Arps requested as much as $1,050 an hour for partners counseling Circuit City Stores Inc. in its bankruptcy, according to court papers filed Nov. 20.
Lehman Bankruptcy
The top fees quoted by Kirkland, Sidley and Skadden surpass the rates charged by Weil, Gotshal & Manges LLP in the Lehman Brothers Holdings Inc. case, the largest in history with $613 billion in debt. Weil has asked for $650 to $950 an hour for partners and counsel, and $355 to $595 for associates.
“We do not believe we should be pushing the envelope at the highest edge of hourly rates,” Harvey Miller, a partner at Weil and the lead lawyer advising Lehman, said in an e-mail.
James Conlan, co-chairman of Sidley’s bankruptcy group, didn’t return a call or e-mail seeking comment.
Gregg Galardi, the lead Skadden lawyer on the Circuit City case, said he’s not charging the high rate.
“That’s just our general rates now,” Galardi said. “I’m not sure if anyone on the case is charging that much. I’m not there yet.”
While rates are subject to approval by bankruptcy courts, the judges don’t often deny the law firms’ requests.
‘Glorified Liquidation Tool’
Bankruptcy fees may eventually be challenged on grounds that lawyers are mostly liquidating companies instead of restructuring them, said Stephen Lubben, a professor at Seton Hall University School of Law in Newark, New Jersey.
“There is a limit to how many attorneys can demand these kinds of hourly rates, so long as the credit markets remain tight and Chapter 11 tends to be little more than a glorified liquidation tool,” he said in an e-mail.
Bankruptcy fees continue to rise as the recession shrinks law firm jobs in mergers and acquisitions, structured finance, capital markets and real estate. San Francisco firms Thelen LLP and Heller Ehrman LLP and New York’s Thacher, Proffitt & Wood shut down in the past six months from a lack of business. New York-based Cadwalader, Wickersham & Taft and White & Case LLP and Chicago-based Sonnenschein, Nath & Rosenthal have cut lawyers.
New York’s Cravath, Swaine & Moore LLP said last year it would freeze 2009 billing rates as its clients struggle during the recession. The firm has five bankruptcy lawyers led by partner Richard Levin.
James Sprayregen, a Kirkland bankruptcy partner who returned to the firm in December after two and a half years as a managing director at Goldman Sachs Group Inc., also charges $965 an hour, Cieri said.
‘Avenues to Object’
“This is a market,” Robert Lawless, a professor at the University of Illinois College of Law, said in an e-mail. “No one is forcing anyone to pay those fees, and creditors do have avenues to object.”
Akin Gump Strauss Hauer & Feld LLP partners are asking as much as $1,050 an hour to advise a committee of unsecured creditors in the bankruptcy of Bally Total Fitness of Greater New York Inc., according to a Jan. 22 filing. The most expensive lawyer with “primary responsibility” for advising the committee is Akin Gump partner David Botter, who charges $825 an hour, according to the papers.
New York-based Simpson Thacher & Bartlett LLP, special counsel to Lehman, asked the federal bankruptcy court in Manhattan handling the case to approve as much as $1,000 hourly.
Circuit City spokesman Bill Cimino, Tribune spokesman Gary Weitman and Lehman spokeswoman Kimberly Macleod didn’t immediately respond to requests for comment.
Source: Bloomberg
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