Law firms and other professional advisers with roles related to the City of Detroit's pursuit of Chapter 9 protection will soon see their bills for working on what is potentially the biggest municipal bankruptcy in U.S. history scrutinized by Chicago lawyer Robert Fishman.
In an order issued Monday, U.S. Bankruptcy Judge Steven Rhodes installed Fishman, a partner at 26-lawyer Shaw Fishman Glantz & Towbin, as the fee examiner in the case to ensure that all professional fees paid by Detroit in connection with the bankruptcy "are fully disclosed and are reasonable."
In performing his watchdog role—and keeping a close eye on the bills submitted by lead Detroit bankruptcy counsel Jones Day; Michigan law firm Miller, Canfield, Paddock and Stone; and others with a hand in the landmark case—Fishman will likely accumulate sizable fees of his own. According to Rhodes's order, Fishman plans to bill $600 an hour in 2013, down from his usual rate of $675, with other Shaw Fishman lawyers billing between $250 and $550. Fees billed by Fishman and his firm will be capped, however, at a blended hourly rate of $430.
Financial firm Kapila & Company will work alongside Fishman, according to the order, with accountant rates ranging from $100 to $442 an hour and a capped blended hourly rate of $300.
Under Chapter 9 bankruptcy law, professional fees paid by a debtor do not require court approval as they do in Chapter 11 and other types of bankruptcy. By appointing Fishman as fee examiner, Rhodes ensures that if he ultimately approves Detroit's Chapter 9 petition, the public will have a complete accounting of those fees.
Before that can happen, though, Detroit will have to overcome objections filed ahead of a Monday deadline by scores of creditors seeking to derail the case and keep the city out of Chapter 9.
As The Am Law Daily has previously reported, Jones Day has taken the lead role in advising Detroit in connection with the financially crippled city's efforts to restructure its massive debt. Currently working under a $3.35 million, six-month contract signed before the city filed for bankruptcy protection, the firm is expected to earn much more than that. In its first six weeks on the job, Jones Day lawyers billed $1.37 million, with hourly rates for some partners, Corinne Ball among them, hitting $1,000.
Jones Day partner David Heiman, one of the lead lawyers on the case, said by email Tuesday that the firm welcomes Fishman's arrival and "will work with him constructively." Lawyers from Miller Canfield, which is expected to earn $1.2 million on Detroit's bankruptcy, could not immediately be reached for comment Tuesday.
The Monday order did not specify how Rhodes selected Fishman, whose resume details his work in "the areas of debtor-creditor relations, insolvency, and bankruptcy," without specifically mentioning any fee examiner assignments. Fishman, an Illinois native who spent a year in that state's attorney general's office before going into private practice in 1980, did not respond to a request for comment Tuesday.
After consulting with the city's legal team, Fishman is expected to file procedures soon for how the firms will disclose their fees, how he will review the bills, and how his own fees will be disclosed, according to the Monday order. In addition to monitoring the bills submitted by law firms and other consultants working for Detroit in its capacity as the debtor, Fishman will also examine those racked up by any advisers employed by a yet-to-be-formed official creditors committee designed to represent the interests of retired city workers.
The U.S. Trustee's Office is in the process of forming that committee, which Rhodes ruled August 2 should have a voice in the proceedings. A meeting to interview potential members of the committee was held in Detroit on Tuesday, U.S. trustee spokeswoman Jane Limprecht said by email. (The Detroit Free Press reported Monday that the city's emergency financial manager, Kevyn Orr, met with representatives from Detroit's two pension systems this week to begin determining just how underfunded the plans may be. Initial estimates vary from $640 million, a number offered by counsel for the pension systems, to Orr's $3.5 billion figure.)
Since Rhodes indicated in late July that he planned to name a fee examiner, one firm, Wisconsin's Godfrey & Kahn, expressed interest in the position in a July 25 bankruptcy court filing. In the filing, Godfrey & Kahn lawyers cited their role as fee examiner in the Chapter 11 bankruptcies of General Motors—which the document says involved professional fees exceeding $120.5 million—and as counsel to a fee committee in the Lehman Brothers Chapter 11, which topped $1.18 billion in professional fees.
Reached Tuesday, Godfrey special counsel Carla Andres said the firm wanted to "lend expertise" to the court and declined further comment.