It’s been a good time to be a bankruptcy lawyer. Though it’s been almost three years since the economy began its meltdown, several massive bankruptcies are continuing to generate big fees for attorneys.

Take, for instance, the Lehman Brothers Holdings Inc. bankruptcy, which — as widely reported by major news outlets — crossed the $1 billion fee threshold several months ago. Lawyers are earning more in the Lehman bankruptcy because the largest-ever Chapter 11 case involves restructuring $639 billion in assets and $613 billion in debt.

But Lehman isn’t the only fee machine. A quar­tet of other top pending corporate bankrupt­cies, based on assets at the time of filing, are also generating big attorney paydays. Those other megabankruptcies — all resulting from the 2008 economic collapse — involve Motors Liquidation Co., General Motors Co.’s bankruptcy vehicle; Thornburg Mortgage Inc.; Washington Mutual Inc.; and Capmark Financial Group. Here’s an update on those cases.


The fees in the Lehman case can be traced to its massive liabilities, plus complex legal work related to derivatives, the company’s business structure and even insolvency cases in other countries, said Harvey Miller, a business finance and restructuring partner at New York’s Weil, Gotshal & Manges. Weil Gotshal is the lead debtor’s counsel in the case, which was filed on Sept. 15, 2008. “These are very large, very complex cases,” Miller said. “They require and absorb a huge amount of time.”

The bankruptcy has also been heavily litigated, Miller said. Lehman brought a fraud case against Barclays, which bought Lehman’s North American operations for $2 billion a few days after the bankruptcy filing. Lehman claimed Barclays misinformed the bankruptcy judge who signed off on the deal about late deal changes that funneled more money to Barclays.

Lehman and JPMorgan Chase & Co. also have countersuits about events that took place just before and after Lehman’s collapse. Lehman accuses JPMorgan of improperly collecting $8.6 billion of collateral from it days before the collapse.

JPMorgan, in turn, claims that Lehman and Barclays conspired to ensure that JPMorgan would be stuck with $25 billion in bad Lehman debt after the Barclays sale. JPMorgan lent Lehman’s brokerage business money just after the bankruptcy so it could repay its overnight financing.

The case is inching toward conclusion. Lehman and affiliated debtors filed their first joint plan to emerge from bankruptcy last March. The creditors formally objected over the summer and the debtors finally filed an amended plan last month.

Miller also pointed out that turnaround firm Alvarez & Marsal, which is running Lehman’s liquidation and serving as interim management, has collected even more fees for its services than his firm. The Alvarez company’s fees and expenses added up to $393.4 million by the end of December compared with $254.6 million for Weil Gotshal, according to a monthly operating report filed in the case.

Weil’s fees break down to $700 to $1,000 hourly rates for partners and counsel on the case and $225 to $840 per hour for associates, according to another recent court filing.

Partners and Of Counsel | Associates | Non-Legal Staff

BFR – Business Finance & Restructuring, CORP – Corporate, LIT – Litigation, MC – Managing Clerk, LSS – Litigation Support Services
Source: Sixth Interim Fee Application of Weil, Gotchal & Manges, attorneys for debtors and debtors-in-possession in In re Lehman Brothers Holdings Inc., submitted Dec 14, 2010 — covering June 1 to Sept. 30, 2010.

Some two dozen law firms regularly involved in the case have also collected millions or tens of millions of dollars for their trouble. Other top-billing firms include unsecured creditors committee lead counsel Milbank, Tweed, Hadley & McCloy of New York, which has collected $89.9 million in fees and expenses through December, according to the report, and examiner’s counsel Jenner & Block of Chicago, which has picked up $57.9 million. Milbank’s fee requests range from $750 to $1,050 per hour for partners and counsel, and $450 to $720 per hour for associates, with some discounted rates for hours spent on travel. Jenner’s latest fee request lists partners as billing $575 to $975 and associates at $445 to $510 per hour, but the firm’s bill cuts the total fees by 10%. The lead lawyers on the case at Milbank Tweed and Jenner & Block did not respond to requests for comment.


* designates non-working travel time billed at 50% of normal rates.
Source: Sixth Interim Fee Application of Milbank, Tweed, Hadley & McCloy, counsel to the official committee of unsecured creditors in In re Lehman Brothers Holdings Inc., submitted Dec 14, 2010 — covering June 1 to Sept. 30, 2010.

Lehman operated multiple types of businesses, from real estate to derivatives contracts to investment management, which generated different types of liabilities, said Manny Grillo, a New York partner who chairs the financial restructuring practice at Boston-based Goodwin Procter. Goodwin represents a variety of creditors in the Lehman case. “The fees are going to be astronomical,” Grillo said. “This thing is like a jellyfish with tentacles everywhere. [There are] people working credit derivative portfolios and real estate portfolios.”

Goodwin, whose work on the case isn’t enough to warrant a separate line item on the monthly report, is one of many firms toiling quietly behind the scenes. “You can’t not be involved in Lehman,” Grillo said. “It’s the one case where there are probably not necessarily enough lawyers to go around.”


Four General Motors Corp. entities filed for bankruptcy on June 1, 2009, with $82.3 billion in assets and more than twice the amount of debt — $172.8 billion. By July 10, the so-called New GM bought the operations, assets and trademarks of the original company to continue making cars.

Stephen Karotkin, a business finance and restructuring partner at Weil Gotshal, which is lead debtor counsel in this case as well, pointed out that “the business enterprise came out of Chapter 11 in [about] 30 days.”

“Anyone can see the value that was preserved and the jobs that were preserved [by that],” Karotkin said.

The bankruptcy case, now Motors Liquidation Co., continued disposing of claims against the former corporation. A couple of other GM entities that filed in October 2009 were attached to the main case.

Motors Liquidation’s plan, which is slated for a confirmation hearing on March 3, includes a mechanism to deal with environmental problems at industrial manufacturing sites not sold to the New GM, Karotkin said. “In an unprecedented fashion under the plan, a trust is going to be created and funded where those sites will be remediated,” he said.

The creditors committee’s settlement of asbestos claims “at less than the book value estimate,” through litigation and negotiation, is a major achievement in the case, said Thomas Moers Mayer, a partner at Kramer Levin Naftalis & Frankel of New York, which is counsel for the unsecured creditors committee. Mayer also co-chairs Kramer Levin’s corporate restructuring and bankruptcy department.

To date, not including a 10% holdback of fees, Weil has collected nearly $32 million and Kramer $5.6 million. Weil’s hourly fee requests range from $700 to $990 for partners and counsel to $275 to $695 for associates. Kramer’s hourly fees for partner and special counsel on the case range from $690 to $950 and associate fees range from $505 to $690 per hour.


Savings bank holding company Wash­ington Mutual Inc. filed one of the historically largest bankruptcies on Sept. 26, 2008, even after the receiver, the Federal Deposit Insurance Corp., sold WaMu’s banking subsidiaries to JPMorgan for $1.9 billion. A day after the sale, the company sought court restructuring for $32.9 billion of assets and $8.2 billion in debt.

Most of the remaining assets were the company’s good will, not tangible assets, so the case battles centered on finding money to give out to creditors, said Brian Rosen, a business finance and restructuring partner at Weil, which is debtor’s counsel in this case, too.

Rosen’s team estimates that it has collected about $7.5 billion of assets for the estate through “negotiation, litigation and negotiation again,” he said.

That figure appears in a global settlement agreement among the debtors, JPMorgan entities, the Federal Deposit Insurance Corp. and the creditors’ committee. The court is considering the settlement as part of the current bankruptcy confirmation plan.

“This case is so full of many issues with equity committee and examiner that the distribution to creditors has been delayed to allow everyone to have a voice and to do their investigation as to the compromise and settlement,” Rosen said.

While the case marches on, Weil partners bill from $700 to $990 per hour, while associates bill at $395 to $695 per hour, according to the firm’s latest fee request. The fee filing, which is for October 2010 and Weil’s 23d to date, also notes that four contract attorneys are working on the case and billing $225 or $250 per hour. So far, Weil has collected nearly $34 million for work on the case through December, according to a monthly operating report filed in the bankruptcy.

Lawyers for the unsecured creditors committee at Akin Gump Strauss Hauer & Feld and Pepper Hamilton were similarly compensated, documents show. At Akin Gump, partners and counsel collected $525 to $975 per hour, while associates reaped $350 to $525 per hour. Akin has pocketed $16.1 million through December, according to the report. Pepper Hamilton associates collected $275 to $395 per hour, while partners took in $670 to $690. So far, the firm’s total fee awards are $2.4 million, according to the report. Akin Gump and Pepper Hamilton declined to comment.


Real estate company Thornburg Mortgage Inc.’s Mayday calls to creditors temporarily staved off liquidation proceedings, but Thornburg and several affiliates succumbed with a May 1, 2009, bankruptcy filing.

A few months later, Baltimore’s Shapiro Sher Guinot & Sandler came on board as trustee to manage the $24.4 billion in assets and $24.7 billion in debt.

Shapiro Sher partners on the case are charging $375 to $500 per hour, and associates are asking $250 to $350 per hour for unwinding the tangled real estate investment trust and mortgage company. So far, they’ve collected about $2.6 million.

Meanwhile, the creditors committee’s lawyers — partners and of counsel to Los Angeles-based Quinn Emanuel Urquhart & Sullivan — are racking up hourly rates of $700 to $850, while an associate is making $535. So far, they’ve collected about $2.1 million. Lawyers at the firm declined to comment.

In an e-mailed response to questions, Shapiro Sher partner Joel Sher, who is also the Thornburg case trustee, said selling assets and litigating have been the trustees’ major duties. Selling Thornburg’s mortgage servicing rights in February 2010 to Select Portfolio Servicing Inc. yielded about $95.6 million for the bankruptcy estate, for example.

There’s also a pending lawsuit against former directors and officers, which was removed to federal court in Maryland. And there has been litigation against counterparties such as Credit Suisse Group A.G., Citibank and JPMorgan that has just finished.

Hinting that more litigation may be on the way, Sher reported in his Feb. 10 application to the court plans to hire consulting firm BroadStreet Capital Partners.

“We have also been involved in the wind-down of the business and we are reviewing potential causes of actions against one or more parties,” Sher said.


Commercial real estate finance company Capmark Financial Group Inc.’s bankruptcy featured the largest sale of assets at the time of its Oct. 25, 2009, filing, said creditors’ counsel Mayer of Kramer Levin.

The case opened with $20.1 ­billion in assets and $21 billion in debt. By Nov. 24 of that year, the bankruptcy judge approved the $515 million sale of Capmark’s North American servicing and mortgage banking businesses to Berkadia Commercial Mortgage LLC.

The creditors committee also pressed the debtors to file a suit challenging a $1.5 billion bank debt transaction that occurred several months before the bankruptcy filling, Mayer said. Capmark ended up settling with the lenders.

“In the process we did get $135 million for the estate. That’s not so bad.” The court approved Capmark’s settlement with the lenders in November 2009.

For its troubles, the firm has also picked up $4.1 million in legal fees so far, not including 20% the court has held back for future review. Kramer Levin’s associates bill at $455 to $680 per hour, while special counsel and partner rates range from $695 to $950.

The committee also participated in case-related litigation and negotiation of a compensation package for management, Mayer said.

Debtor’s counsel Dewey & LeBoeuf of New York has collected more than $27 million after 20% holdbacks. The pre-holdback fee is based on partner and counsel rates of $675 to $995 per hour and associate hourly rates ranging from $385 to $635.

Another case milestone was a settlement, which the court approved this month, among Capmark entities in the bankruptcy, Japanese lenders and other Capmark affiliates not involved in the bankruptcy, said Judy Liu, a business solutions and governance group partner at Dewey.

Right now the parties are moving toward developing a bankruptcy plan and could emerge from bankruptcy as early as the year’s second quarter, Liu said.

“This is a case where there hasn’t been much contention, but the tax issues, the amount of debt and the overall complexity of the business and sophistication of the business has required a lot of analysis and professional involvement,” Liu said.

Sheri Qualters can be contacted at