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It was a Saturday in late March 2004 and Brian Leitch was in a favorite place: a glittering curve of the southern Caribbean called Petit Byahaut, on the southwestern side of St. Vincent. He had just anchored the 12-berth catamaran he’d chartered, the Two Purrfect, and was looking forward to a second week of an extended vacation captaining his sister, his two nieces, and his wife and four children through the shoals and islets of the Grenadines. Then he picked up the phone to check his voice mail. One message was from Daniel Lewis, a partner of Leitch’s at Arnold & Porter and head of its bankruptcy practice. Another was from Elizabeth Lanier, the general counsel of Arlington, Va.-based US Airways Group Inc. The airline, which had just emerged from bankruptcy in 2003, was again teetering and was holding a beauty contest to hire restructuring counsel. Could Leitch get home to pitch the work on Wednesday? The opportunity was huge, but so was the vacation. The boat had already been chartered, and Leitch was the only one in the family who knew how to sail. “There wouldn’t have been any way they could continue the trip,” Leitch says. Leitch’s choice was the family vacation or the deal, and he chose the deal. For Arnold & Porter it turned out to be a good call, because Leitch helped nail down the restructuring work, which later metastasized into lucrative merger work for the firm’s corporate lawyers when US Airways struck a tentative merger deal with America West earlier this year. And they outmuscled larger, more experienced New York firms to do it. After a family conference and a series of calls back to the mainland, it was decided: Leitch would go. Thus began a two-day odyssey: Leitch sailed the family to Mayreau, another island in the Grenadines, and deposited them at a resort. He then sailed to Canouan, a third island, where he hopped the first of six puddle-jumper flights that would take him as far north as Puerto Rico, where he scrambled aboard a jet to Dulles, arriving the night before the presentation. “It ruined his vacation,” Lewis says. The next morning, in Arnold & Porter’s D.C. office, Leitch, Lewis, and New York partner Michael Canning made the pitch to Lanier and her legal selection committee. “In walked Brian Leitch, who announced that he had to be given this work,” Lanier says. “He had left his wife and children on an island. . . . He was just, ‘I’m here. I’m great. I want the work.’ “ Though Leitch, Canning, and Lewis are all well-respected bankruptcy specialists with years of airline experience, it wasn’t clear they were the favorites to win the work. Leitch, who would take the lead, had an advantage in having represented an investment group in US Airways’ bankruptcy the previous year, as well as investors in the bankruptcies of Continental Airlines Inc. and America West Holding Corp. But the competition was stiff. Skadden, Arps, Slate, Meagher & Flom’s John Butler had steered US Airways through its last bankruptcy, in 2003, and D.J. Baker, an experienced partner in Skadden’s New York office, was pressing for the work this time around, along with partner Van Durrer. Plus there were other New York bankruptcy lions in the running: Myron Trepper of Willkie Farr & Gallagher, Robert Rosenberg of Latham & Watkins, and Bruce Zirinsky of Cadwalader, Wickersham & Taft. But the Arnold & Porter team won. “You wouldn’t necessarily think they’re the most obvious choice,” Lanier says. “We didn’t want someone to come in with a big bankruptcy firm and charge through [every expense].” Yet despite US Airways’ efforts to restructure during the spring and summer of 2004, its financial plight worsened. In September of that year, Leitch, along with co-counsel at McGuireWoods, filed the company’s second bankruptcy in U.S. Bankruptcy Court for the Eastern District of Virginia. PROJECT BARBELL Leitch’s odyssey to win the bankruptcy work helped set the stage for another meeting in an Arnold & Porter conference room less than a year later. Though US Airways had won significant concessions from its unions during the bankruptcy process, it was still unclear how the troubled airline would survive. By January of this year, Lanier says, the company had formulated a plan to bounce back from insolvency. But that plan was based on a too-rosy prediction of fuel costs, the airline’s second-biggest expense. With the price of oil then hovering around $50 per barrel � roughly 45 percent more than the company’s executives had anticipated � the company had to find a suitor. It found one in Tempe, Ariz.-based America West. By March, Leitch had pitched his partner Kevin Lavin to serve as the company’s mergers and acquisitions counsel. Over dinner at Washington’s McCormick & Schmick’s seafood restaurant, Lanier hired Lavin. The hiring marked a second coup for Arnold & Porter, which isn’t ranked among the Top 30 M & A law firms of 2004 in data published by The American Lawyer, Legal Times‘ sister publication. “Obviously, we had other law firms with great M & A talent,” Lanier says. But since the proposed merger was fundamental to the company’s plan to emerge from bankruptcy, Lanier says she chose to keep the work with Arnold & Porter. One week after the dinner at McCormick & Schmick’s, top executives from America West and US Airways, financial advisers to the two companies, and lawyers from Skadden (which, ironically, are representing America West in the proposed deal � a relationship US Airways signed off on) gathered with Lavin at Arnold & Porter. That meeting, chaired by US Airways CEO Bruce Lakefield and America West CEO Douglas Parker, set in motion a merger code-named “Project Barbell,” an image picked to reflect the linking of US Airways’ large East Coast network with America West’s West Coast presence. The executives set an ambitious goal: Sign the merger agreement by April 24. “We didn’t make it,” Lavin says. But by the end of May, the merger team had come up with $1.5 billion in new financing to fund the deal, and the agreement was signed. Yet the deal could still be derailed. Another suitor could make a bid for US Airways’ assets before July 1, and the merger proposal is due to be reviewed by the bankruptcy judge July 7. It also must gain the backing of the airlines’ unions and clear a number of regulatory hurdles. One of those hurdles fell June 23, when the Justice Department announced it would not block the merger on antitrust grounds. If successful, the merger could be completed as early as September. HIGH-FLYING FEES The bankruptcy and merger have brought a welcome dose of fees to Arnold & Porter’s bottom line. Bankruptcy court records show that Judge Stephen Mitchell approved $3.8 million in compensation for the firm during the last three and a half months of 2004. Those records include 2004 billing rates for Leitch of $630 per hour; Canning, $580; and Lewis, $603. Last month, Lewis told Legal Times the combined bankruptcy and merger work was netting the firm $1.2 million in fees per month. It’s also meant substantial fees for O’Melveny & Myers’ Robert Siegel, who’s led US Airways’ negotiations with its unions over reducing its pension and benefits packages. Court records show that O’Melveny was approved to receive $1.4 million in fees during the last three and a half months of 2004, the last period for which records are available. Siegel billed at a rate of $660 per hour, and his partner Thomas Jerman billed at $635, making them the two highest-billing attorneys in the case. McGuireWoods, which has served as local co-counsel in the case, was authorized by the court to collect $1.5 million last year. Its top-billing partner, Lawrence Rifken, charged an hourly rate of $425. Siegel and Rifken did not return telephone calls seeking comment. But as top-tier bankruptcies go, the airlines’ legal bills don’t appear to be excessive, at least when compared with those of UAL Corp., the parent company of United Airlines. In March, one of United’s unions filed objections in court over the $54 million in fees Kirkland & Ellis had billed the company during the first 27 months of its bankruptcy. The legal fees for this bankruptcy have also been significantly less than those of US Airways’ first bankruptcy. According to data from court documents compiled by the airline, the company incurred $13.7 million in fees for the first eight months of the current bankruptcy. By comparison, it paid $28.3 million in fees during the first eight months of its previous bankruptcy, when Skadden headed its legal team. “If you look at the numbers between Arnold & Porter and Skadden’s from the first bankruptcy, it’s like night and day,” says one of the lawyers who has represented US Airways’ unsecured creditors in both cases. Skadden’s Butler says the comparison isn’t entirely fair because the first bankruptcy involved a number of different elements not present in the current one. This bankruptcy, he wrote in an e-mail, “has relied on much of the work completed earlier, especially with respect to financing, aircraft and real estate.” Lanier, who became general counsel at the airline in March 2003, as it was exiting its first bankruptcy, says she was pleased with Skadden’s work in the first bankruptcy. But when it came time again to look at retaining restructuring counsel, Leitch, Canning, and Lewis sold her. “They made a very persuasive pitch,” she says. WINGING FORWARD Part of Arnold & Porter’s original pitch to US Airways was based on the fact that the firm, like the airline, is a home-grown enterprise. M & A specialist Lavin says he’s aware of the human impact that the transaction he’s helping run will have in the D.C. area. Though the exact number of jobs that will be affected by the merger is not known yet, US Airways currently employs roughly 600 people in its headquarters near Ronald Reagan National Airport. The new airline’s corporate headquarters will be moved to Tempe, Ariz. “For the rank and file, this is actually a good thing,” Lavin says. “A lot more people will be employed than if [US Airways] went on their own. As of today there isn’t really a good stand-alone reorganization plan.” Whether the combined airline will succeed is unclear. America West has had its own financial struggles, and in 2001 relied on a $429 million federally backed loan to keep its fleet in the air. The new company will face stiff competition from low-fare carriers such as Southwest Airlines Co. and JetBlue Airways Corp. Given the state of the airline industry, it isn’t impossible that another big carrier could teeter into bankruptcy within the next few years. And Leitch might have to interrupt another vacation. Jason McLure can be contacted at [email protected].

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