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The U.S. trustee overseeing the bankruptcy case of the Los Angeles Dodgers has objected to about $350,000 in legal fees and expenses, arguing that work billed by attorneys to obtain financing over the summer was “not reasonably likely to benefit” the team. The Dodgers’ lawyers at Dewey & LeBoeuf and Young, Conaway, Stargatt & Taylor, in a response filed on Oct. 19, defended their actions, which they insisted ended up benefitting the Dodgers and came at the direction of the lender. A hearing on the objection by U.S. Trustee Robert DeAngelis in Wilmington, Del., where the Dodgers filed for Chapter 11 bankruptcy protection on June 27, was scheduled for Nov. 8. The dispute centered on the first month for which both firms sought fees: June 27 through July 31. The trustee has taken issue with a portion of the fees tied to a proposed financing arrangement designed to meet the team’s payroll. Dewey & LeBoeuf submitted its application on Aug. 22, seeking more than $1.7 million in compensation and about $32,000 in expenses. Of that, more than 2,000 hours, and $1.1 million, were spent on attempts to obtain immediate financing. In an Aug. 23 application, Young Conaway sought more than $267,000 in compensation and $41,000 in expenses. The proposed financing deal accounted for $104,000, or 256 hours. In an objection filed on Sept. 15, Mark Kenney, a trial attorney in the trustee’s office, argued that Dewey & LeBoeuf’s compensation should be reduced by $312,000 and Young Conaway’s by about $41,000, “on account of services rendered that were not necessary to the administration of these cases.” He added that the work provided no benefit to the team. Under the proposed financing arrangement, the Dodgers sought court approval for a $150 million deal from Highbridge Principal Strategies, a hedge fund owned by J.P. Morgan Chase & Co. Under the terms of the deal, the Dodgers would have paid a $5.25 million closing commitment fee and $4.5 million deferred commitment fee. Major League Baseball countered with a competing offer that excluded such fees, but Dodgers attorneys continued to negotiate for the Highbridge deal, according to Kenney. Dewey & LeBoeuf now wants $310,000, and Young Conaway seeks $32,000, for their work in pushing for the Highbridge deal even after Major League Baseball submitted a better option, Kenney wrote. “From that point forward, the services of Debtors’ counsel in seeking approval of the Highbridge Facility were not necessary to the administration of these cases, and were not reasonably likely to benefit the Debtors’ estates,” he wrote. “As such, they were not compensable.” Kenney wrote that the firms want to collectively bill for nearly $11,000, plus expenses, for their work in attempting to keep the Highbridge fee information under seal. “Because the motion to seal the Highbridge fee letter was neither necessary nor reasonably likely to benefit the Debtors’ estates, the services of the Debtors’ attorneys in connection with that motion are not compensable,” he wrote. U.S. Bankruptcy Judge Kevin Gross rejected the Highbridge deal on July 22. A call to Kenney’s office was forwarded to Jane Limprecht, spokeswoman for the Executive Office for U.S. Trustees in Washington, who declined to comment. In a response filed on Oct. 19, Donald Bowman, an associate at Young Conaway, called the trustee’s argument “utterly unrealistic.” At the time of the negotiations, the Dodgers had no guarantee that Major League Baseball’s financing option was superior to the Highbridge deal, he wrote. It was only after Gross ordered Major League Baseball to improve its offer that the deal looked better than Highbridge’s. “At the direction of the Debtors, Counsel sought approval of the Highbridge facility during a period when timing was critical and the Debtors needed immediate and continued access to financing in order to meet their payroll and other pressing obligations,” he wrote. “It was Counsel’s work in support of the Highbridge facility that ultimately resulted in the Court’s direction to MLB to make a superior financing proposal.” As for the request to seal the information about the Highbridge deal, Bowman wrote that the lender had insisted upon the filing. The fee dispute was the second attack on the Dodgers’ bankruptcy counsel. On Sept. 23, Major League Baseball moved to disqualify Dewey & LeBoeuf and Young Conaway on the ground that the lawyers appeared to be working in the interests of Frank McCourt, the team’s owner, instead of the Dodgers. One example cited in that motion was the push to accept financing to meet the team’s payroll through the Highbridge deal, which Major League Baseball said would cost $14 million more than its own proposal but would have helped McCourt to avoid a $5.25 million commitment fee. Both sides dropped that dispute on Oct. 10 on the advice of a mediator, according to court documents. But the similarities between the disqualification motion and the attack on the fee applications didn’t go unnoticed. “Much like Major League Baseball did in its now withdrawn motion to disqualify Counsel, the UST [U.S. Trustee] asserts that D&L [Dewey & LeBoeuf] and YCST [Young, Conaway, Stargatt & Taylor] should not be compensated for a substantial portion of their efforts on behalf of the estates in seeking approval of the Debtors’ proposed financing facility with an affiliate of Highbridge Principal Strategies,” Bowman wrote. Calls to Bruce Bennett, a partner in the Los Angeles office of Dewey & LeBoeuf, and Robert Brady, a partner at Young Conaway, were not returned. Both firms have submitted fee applications for the month of August. Young Conaway seeks $91,000 in compensation and $11,000 in expenses, while Dewey & LeBoeuf wants $669,000 in compensation and $48,000 in expenses. On Oct. 19, Young Conaway filed a fee application for September of $83,000 in compensation and $3,500 in expenses. Contact Amanda Bronstad at [email protected].

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