Thank you for sharing!

Your article was successfully shared with the contacts you provided.
One day after WorldCom Inc. filed the biggest bankruptcy in the country’s history, law firms from coast to coast were already feeling the ripples. According to court documents, Clinton, Miss.-based WorldCom has already sought to retain six firms as it attempts to reorganize under Chapter 11 of the U.S. Bankruptcy Code. And according to many lawyers, this is just the beginning. The company’s vast size and reach, the complexity of its businesses, and the accounting scandal at the heart of its problems, are likely to generate a mountain of bankruptcy work, litigation and attorney fees. “I would expect you would see a lot of firms involved,” said Fenwick & West’s Mark Porter. The sheer size of the WorldCom case suggests that it will create plenty of work. WorldCom’s $107 billion in assets are roughly four times as large as San Francisco-based Pacific Gas & Electric Co.’s, which filed for Chapter 11 in April 2001. So far, PG&E has yielded some $46.1 million in professional fees, with eight law firms on its payroll. Attorneys point out that there are economies of scale involved, so that a bankruptcy case that’s 10 times bigger than another won’t necessarily generate 10 times the work and the fees. And the big fees in the PG&E case are as much because of the case’s complexity as its size. “You had a lot of unique things in PG&E because you had a lot of litigation and regulation,” said Sonnenschein Nath & Rosenthal bankruptcy partner Michael Lubic. “The problem is every one of these big cases has novel issues.” The roster of firms that WorldCom has sought to retain underscores the complexity of the case. In addition to New York-based Weil, Gotshal & Manges, which is the company’s lead bankruptcy counsel, WorldCom has asked the court to let it hire five other law firms. Chicago’s Jenner & Block is slated to handle regulatory matters, including those dealing with the Federal Communications Commission. Washington, D.C.’s Piper Rudnick and New York-based Simpson Thacher & Bartlett have both been tapped to take care of various litigation matters, as well as to help with some of the investigations into the company. D.C.’s Wilmer, Cutler & Pickering will work on accounting review matters. And Patton Boggs, a Washington D.C.-based lobbying firm, is needed because of its “substantial knowledge and expertise of legislative procedure and governmental operation.” And these are just the firms that will represent WorldCom. The exact number of creditors is still unclear, but many San Francisco Bay Area firms say they’re likely to have WorldCom creditors among their clients. “They have creditors all over the country. People will need representation,” said John Hansen, a partner in the San Francisco office of Los Angeles’ Nossaman, Guthner, Knox and Elliott. Hansen said he’s already received a couple of inquiries about the WorldCom case, though his firm hasn’t been retained. New York-based Shearman & Sterling, meanwhile, is already representing JP Morgan, Citigroup and GE Capital. The three banks are among WorldCom’s larger creditors and have agreed to provide the company with so-called debtor-in-possession financing. Many attorneys also expect that WorldCom’s contracts to provide businesses with telephone and Internet service will play a big role in the bankruptcy case. “My guess is everyone who uses WorldCom as a significant vendor is going to be wanting their lawyers to review their contracts and assess the risk,” says Sonnenschein Nath’s Lubic. The U.S. Department of Defense, for instance, has several big contracts with WorldCom — one for $70 million over a three-year period. “If they were to want to terminate these contracts, any legal action would go through the bankruptcy court,” said a representative for the DOD, noting that the department did not anticipate any interruption in service. As the WorldCom case gains momentum, the big question for many firms will be how to handle all the new work. “Bankruptcy lawyers are starting to talk about running out of firms who can handle big cases like this,” said Lubic, “and really running out of qualified bankruptcy lawyers generally.”

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Advance® Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.