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Federal-Mogul Global Corp. emerged from bankruptcy Dec. 27, having clawed its way through more than six years of costly litigation in Delaware. And it’s not over yet. U.S. District Judge Judith Fitzgerald approved the Chapter 11 reorganization plan in November, but the parties have yet to settle on its exact terms. That means more pleadings, more hearings, and more money. At last count, the $6.3 billion Southfield, Mich.-based auto parts maker had sunk approximately $650 million — much of it on legal fees — into the case, which flowed from hundreds of thousands of asbestos injury claims related to gaskets, brake pads, and other parts the company manufactured. More than 50 law firms, from Delaware to Los Angeles, have staked out a piece of the action. There are 114 pages of lawyers’ names in the case file, and the docket is more than 14,000 entries thick. The billable hours span several lifetimes. And D.C. lawyers have billed their share. Thus far, Federal-Mogul’s team from Sidley Austin — a soup of about 60 lawyers from the firm’s Washington, Chicago, Los Angeles, and London offices — recorded nearly $80 million in fees and more than $6 million in expenses, according to monthly reports filed in the U.S. Bankruptcy Court for the District of Delaware. (In its most recent fee request, the firm was seeking approval for about $2.5 million more — its desired pay for the month of December.) In November, Federal-Mogul, which has several manufacturing and distribution centers scattered in Europe, paid more than $1,200 an hour for some of Sidley’s London-based bankruptcy lawyers, on down to $260 an hour for the lowest stateside corporate associates. Guy Neal, a longtime bankruptcy partner in Sidley’s D.C. office, billed $650 an hour. The firm expensed $15,715.23 on airfare alone. Travel and lodging expenses totaled $26,713. “When you’re talking about a case of this size, it’s not an aberration for there to be fees of this magnitude,” says Andrew Currie, a partner at Venable representing a creditor in the litigation.
The Federal-Mogul Global Corp. bankruptcy has produced some eye-popping billables over the years. As of December, the company had handed over nearly $80 million in fees to its lawyers at Sidley Austin. The company’s holdings in Europe spawned parallel litigation in the United Kingdom, and lawyers from Sidley Austin’s London office have figured prominently in the work, both here and abroad. London’s involvement — and the fact that lawyers there are charging fees in British pounds, not the weaker American dollar — is helping pump up the value of the case. A quarterly report filed in January showed four partners from the London office pulling down more than $1,000 an hour. Between August 2007 and October 2007, bankruptcy lawyers Patrick Corr and Robin Parsons and tax lawyer Drew Scott each commanded $1,169, or �575, an hour. Struan Oliver, a corporate lawyer, billed $1,009 an hour, or �500, and Dorothy Cory-Wright, an insurance lawyer, $958, or �475. By comparison, the highest-paid American-based Sidley Austin lawyers — Chicago’s James Conlon and Larry Nyhan, co-chairmen of the firmwide bankruptcy group — billed $825 an hour. To put things in perspective, fourth-year associate Paul Atherton, a tax attorney in the London office, billed $854 an hour. Down the food chain, the disparity was even more pronounced. Janine Dewsnap, a first-year trainee solicitor, rated $469 an hour (or �220). Stateside, some of Sidley’s first-year associates barely cracked $190 an hour. In the firm’s November fee application, the dollar had dampened further. Corr, Scott, and Parsons were up to $1,228.37 an hour. Parson’s 150 hours in November alone cost Federal-Mogul $184,501. Though Conlon, not to be outdone, clocked 227 hours that same month, for a total compensation of $184,800. — Joe Palazzolo

A herd of insurers and creditors, who are not required to file their legal fee requests with the court, have placed their faith in the Beltway’s vintage. The firms include Orrick, Herrington & Sutcliffe; Akin Gump Strauss Hauer & Feld; Crowell & Moring; Wilmer Cutler Pickering Hale and Dorr; Venable; Hamilton Altman Canale & Dillon; and Jackson & Campbell. As one lawyer representing an insurer puts it, “At times, it’s like Washington in Delaware.” Though bankruptcy litigation in Washington is comparably lean, the legal aces here regularly parachute into big cases in New York, Texas, and Illinois — and Delaware, where Federal-Mogul and thousands of other entities are incorporated. “In bankruptcy law, like anything else, clients seem to look to folks in Washington when they have legal problems that go beyond the cookie-cutter, day-in day-out stuff,” says Wilmer partner Craig Goldblatt, who is representing Hartford Accident and Indemnity Co. The problems for Federal-Mogul started in 1998, when it acquired a British company and several American businesses that had previously produced or used asbestos in their products. Most of the injury claims stem from the acquisitions, but former employees in an engine gasket division that Federal-Mogul unloaded in 1981 also sued the company for exposure to asbestos. Federal-Mogul, which employs about 45,000 people in 35 countries, filed for Chapter 11 in October 2001. The reorganization plan, which had undergone a series of revisions, divides the company’s stock, allowing it to rake the asbestos claims off its balance sheet and into a trust. A little less than half of its existing stock will eventually be listed. The other shares were issued to the Federal-Mogul Asbestos Personal Injury Trust. The most recent dispute centers on a provision of the plan that would extend Federal-Mogul’s bankruptcy spoils — transfer of claims liability to the trust — to third parties Pneumo Abex and Cooper Industries, former parent companies to the businesses Federal-Mogul acquired in the 1990s. Federal-Mogul supports the provision, but insurers say Pneumo and Cooper should not shielded from asbestos liability because they are not in Chapter 11. Lawyers on both sides say it’s a novel take on bankruptcy code. The issue has been briefed heavily by both the insurers and Federal-Mogul. A hearing is scheduled for March 17. “From a legal perspective, it’s very aggressive,” says Akin Gump partner Stanley Samorajczyk, who is representing insurance giant Liberty Mutual. “They’re testing the reach of bankruptcy code protections.” A lawyer for Federal-Mogul, who spoke on the condition of anonymity because he was not authorized to discuss the case publicly, says that the provision is “unconventional” but that the law provides for such relief. And after more than six years and hundreds of millions of dollars in legal fees, it’s clear that the Federal-Mogul bankruptcy is anything but conventional. “If this were a bread-and-butter bankruptcy case, we’d be through with it, and everybody would be dancing in the streets,” the lawyer says.

Joe Palazzolo can be contacted at [email protected].

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