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While U.S. Bankruptcy Judge Dennis Montali of the Northern District of California seemed assuaged last week by Pacific Gas & Electric Co. that lawyers representing the San Francisco utility should be paid what they ask in fees, U.S. Trustee Linda Stanley remains unsure. Stanley objected to additional fee requests of more than $1 million in the PG&E bankruptcy case. But during a hearing Oct. 22, Montali indicated he would defer to a PG&E executive who asked the judge to approve the fees. The U.S. trustee’s office was not enamored with the developments. “The judge said if PG&E doesn’t care, why should anybody else care,” Stanley said after the hearing. “And I have concerns about that because PG&E is trading in the public good.” While some firms’ fee requests have been dispatched, Stanley’s office still has disputes with three: San Francisco’s Heller Ehrman White & McAuliffe; New York-based Milbank, Tweed, Hadley & McCloy; and the accounting firm PricewaterhouseCoopers. At the hearing, Heller Ehrman retrenched and defended its request. All three offered to submit supplemental requests, but Stanley still wasn’t buying some of the explanations that some firms gave. The lawyers and accountants defended themselves, in part, by pleading either ignorance or hardship. Some said their staffs were unaware of the more stringent time sheets required by a bankruptcy court, while others said the complexity of the case demanded more time and resources. “I’ve never heard anybody say, ‘This case is easy,’ ” Stanley said. “ It’s always, ‘This case is complex.’ “ Stanley also had concerns that firms were now revising their requests when fees are supposed to be tracked on an ongoing basis. She said Pricewaterhouse, for example, was readying its third request. “Everyone up there, including the accounting firms, have been in bankruptcy [court] before,” Stanley said. Since PG&E is in bankruptcy court, any payment for legal work must be approved by the court, even if it is unrelated to the bankruptcy case. The trustee did win some minor concessions during the hearing. Milbank Tweed withdrew a request to be reimbursed $3,000 for a printer, saying it was a mistake (and, for the record, a scanner, not a printer). Skadden, Arps, Slate, Meagher & Flom withdrew a $10,000 request to reimburse a flight to London, saying it actually began as a red-eye on the evening before PG&E filed for bankruptcy. Montali had some pointed questions, notably for Martin Nachimson, managing director of Ernst & Young Capital Advisors. Nachimson bills at $650 an hour. Montali noted that Nachimson used his time to review schedules and familiarize PG&E accountants with bankruptcy law on his way to racking up more billable hours than anyone else at Ernst & Young, even though he costs the most. “That’s the reverse of a pyramid,” Montali said. “Why does it take someone at your level to teach Bankruptcy 101 for accountants?” “This case requires it,” Nachimson said. More fire was directed at Milbank Tweed, representing a committee of PG&E creditors, for submitting fee requests for the monitoring of PG&E litigation unrelated to the bankruptcy case. “Why does the committee need to fly people to San Diego to sit in on some hearing?” Montali asked. “I don’t know what the committee is doing monitoring cases that are not relevant to your interests” as creditors. The issue of travel itself came up. Local rules don’t allow for the reimbursement of travel time, something lawyers in the case want Montali to change. “This is a specialty case,” said PricewaterhouseCoopers’ Thomas Lumsden. Stanley is expected to file responses to Milbank Tweed’s and Heller Ehrman’s revised requests this week. Pricewaterhouse’s request will take longer, she said.

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