
Here is an interesting, fairly balanced New York Times article examining the fees charged by law firms and consultants in a few of the blockbuster bankruptcy cases from the last couple years. Bankruptcy Fees Add Up
I spent a time in my Georgia legal practice litigating bankruptcy matters, most on one big matter involving a group of nursing homes. Every court appearance was a lesson for me. I never saw previously or since so many dark suited young white men (including myself, except for the young part) with heads down typing into blackberries in one place, usually in one fairly small court room. Every side had several lawyers, and there were sometimes twenty sides in these cases. The debtor company was always represented by six or more attorneys. Even at depositions, we needed the larger conference room to hold all of the legal talent.
I was curious as to the purpose of all of that talent. Even today I wonder at the huge legal bills submitted by these firms in a matter where the debtor is seeking the protection of the bankruptcy court from its creditors. Everybody still had bills that got submitted and paid. I don't remember one not getting approved. Millions of dollars. Every month.
What did that money buy? According to Harvey Miller, a partner at Weil Gotshal & Manges, the lead counsel firm for Lehman Brothers in its huge bankruptcy case, "The legal skill we used to sell Lehman's North American capital markets business to Barclays saved 10,000 jobs and preserved the business itself, capturing value that otherwise would have been lost."
According to Stephen J. Lubben, a professor at Seton Hall University School of Law, "Lehman is a sufficiently complicated company that it would be safe to assume that if it weren't for equally sophisticated professionals running the Chapter 11 case, that the creditors would essentially receive nothing."
The NY Times article also pointed to fitness club fees, dry cleaning bills and $500 an hour first and second year associate fees. Clearly out of scope of your local hardware store bankruptcy case.
The close of the article is just the right pitch -
Mr. Miller sees his own work as a battle between corporate life and death, with the money spent on photocopies and dry cleaning an insignificant detail.
"If you had cancer and you were going into an operation, while you were lying on the table, would you look at the surgeon and say, 'I'd like a 10 percent discount?'" he explains. "This is not a public, charitable event."