Lehman filed for bankruptcy in September 2008, and in the five years following, has amassed about $2.2 billion in legal fees. In March 2012, Lehman emerged from Chapter 11 protection, but now only functions as a liquidating trust. It has paid creditors $47.2 billion thus far, and is expected to pay creditors a total of $80 billion over the course of several more years.
Alvarez & Marsal, a bankruptcy consulting firm, has managed Lehman since it filed for Chapter 11. According to court filings, the firm has collected “over $657 million through the end of July. Additionally, the law firm Weil, Gotshal & Manges, which serves as lead counsel for the Lehman estate, has earned over $484 million in legal fees for the work it has done. The firm stated in a court filing last year that its staff members “devoted more than 747,000 hours to the case between September 2008 and its emergence from Chapter 11 protection in March of last year.”
All told, over 30 law firms have been utilized during the bankruptcy or liquidation process. Harvey Miller, an attorney with Weil, Gotshal & Manges justified the enormous fees saying, “[T]hat there were literally hundreds and hundreds of professionals . . . [working] to protect these assets and make them more valuable than they were on September 15, 2008.” Bryan Marsal of Alvarez & Marsal estimates that “the bankruptcy professionals in the case increased the value of the estate by around $50 billion.”
In May 2009, a bankruptcy judge appointed an outside committee to help curtail unnecessary billing and authorize the fees being charged. The committee placed caps on expenses for firms – 10 cents a page for photocopies, $20 for working meals – and required that firms travel in coach class.
James Peck, the judge who presided over the bankruptcy, said that fee total was “appropriate given the scale and complexity of the case.” He went on to say, “It’s a whopping number in a case that started with $613 billion [in debts] in an emergency situation that needed to be managed . . . . There’s a cost to that.”