As reported by the Detroit Free Press, the law firm currently representing Detroit’s retirees in the current bankruptcy case is being “challenged for its practice of charging thousands of dollars for media relations services.” The law firm, Dentons, has billed the city of Detroit $3.16 million in the first quarter, with about $27,000 per month “to monitor media coverage, prepare summaries of media coverage and to respond to press reports.”
Tom Petters, a Minnesota businessman, was sentenced to 50 years in prison over four years ago. However, legal and accounting fees associated with his bankruptcy case continue to grow. In June 2014, a federal bankruptcy judge approved a settlement allocating $3.5 million in legal and accounting fees to the many firms involved in the litigation related to his bankruptcy case and clawback scheme.
On Monday, Gov. Rick Snyder of Michigan defended Detroit’s bankruptcy filing as a final effort to prevent the city’s lengthy financial decline. “‘This is a crisis,’ the governor said in United States Bankruptcy Court. ‘It still is a crisis today.’”
The governor was testifying in the trial on whether Detroit met federal eligibility rules when it filed for Chapter 9 bankruptcy in July of this year. He approved the bankruptcy filing on July 18 based on the recommendation of Kevyn Orr, Detroit’s emergency manager.
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.
On June 11th 2013, the Justice Department officials announced that starting November 1st, new attorney fee guidelines for Chapter 11 bankruptcy cases will take effect. The new guidelines seek to reflect “the evolution in law-firm billing practices and technology that have [recently] occurred.” The main focus of these guidelines is to check whether lawyers, some of whom charge over $1,000 per hour, are taking advantage of companies going through financial crises to charge higher rates. “The cornerstone of the guidelines is a requirement that attorneys demonstrate they are not charging bankruptcy estates a premium above fees charged to clients outside bankruptcy,” said Clifford J. White III, the leader of the Justice Department office who monitors all bankruptcy cases for potential abuse.
It’s that time of year again when many Americans receive their federal tax rebates in the mail, but an estimated 200,000 will be breathing a sigh of relief for a quite unexpected reason – their tax rebate will provide them with enough money to file for bankruptcy. A recent joint study from the University of Chicago and Columbia University reported a dramatic spike in bankruptcy filings in previous years right after people received their tax returns. According to CNN Money, the average cost of a Chapter 7 proceeding is over $1500; a price that many individuals, couples and businesses cannot afford.
As reported in the New York Times, Judge Martin Glenn of the United States Bankruptcy Court in Manhattan held that MF Global’s insurance company will be required to pay legal fees for the firm’s employees as they defend themselves against accusations of wrongdoing after $1.6 Billion of customer money went missing when the firm went bankrupt last Fall.
MF Global employees have already spent $8.3 Million on legal fees, and Judge Glenn has authorized them to spend an additional $21.7 Million on the insurance company’s tab. This initial cap may also be increased as litigation costs rise and new cases are brought against the employees.
According to a recent article published by CNN Money, Lehman Brothers’ bankruptcy legal and other professional fees and expenses have reached $1.6 billion as of January 31, 2012. The Lehman Brothers’ bankruptcy, which is the largest bankruptcy in U.S. history, has incurred more than double the fees and expenses that were incurred in the Enron bankruptcy, which is the second largest in history.
The October 2011 Lehman Brothers monthly operating report was recently released. The report contains, among other things, the professional fees paid to the various entities providing services in the bankruptcy case. Fees were paid to a variety of professionals, including attorneys, banking and financial advisors, and fee examiners. For October 2011, these professionals were paid more than $37 million in fees and disbursements. This brings the total received by professionals in the Lehman Brother’s bankruptcy to more than $1.4 billion. It is troubling that the fees paid to these professionals have reached more than one billion dollars, especially since three separate fee examiners were retained by the bankruptcy court.
With MF Global’s assets being attacked on all sides, a protracted litigation battle seems likely and law firms are moving in to secure their piece of the pie. As the 8th largest bankruptcy in U.S. history, and with $600 million dollars missing from customer accounts, lawyers from multiple practice groups, including white collar defense, are attempting to get in on the action. John Pattor, a former attorney at Weil, Gotshal, & Manges and current University of Michigan professor, said that the bankruptcy assignment “will be the biggest golden egg” in this litigation. MF Global has already hired Ken Ziman, a partner at Skadden, Arps, Slate, Meagher & Flom to represent the corporation in the bankruptcy proceedings. Skadden billed about $42 million dollars in its handling of the Refco Chapter 11 bankruptcy filing.