4/7/12- Joe Louis fist sculpture in Detroit, Mi. (flickr)
Jones Day’s work for the City of Detroit during its bankruptcy earned the firm nearly $58 million in legal fees and high praise from the federal judge overseeing the Chapter 9 case. Now Jones Day’s work is being questioned—and the firm’s managing partner is fighting back.
Detroit Mayor Mike Duggan last month threatened to sue Jones Day after he said the firm and the emergency manager it represented, Kevyn Orr (who has since returned as a Jones Day partner), hid from the mayor’s office figures used to estimate the cost of the Motor City’s pension liability as part of a bankruptcy exit plan approved in 2014. That came after new estimates show that pension liabilities have grown by nearly $500 million since the plan was approved.
Jones Day isn’t taking those allegations sitting down. Stephen Brogan, who has headed the secretive Am Law 100 firm for the past 15 years, slammed Duggan as a “political hack” in a 13-page letter obtained by the Detroit Free Press that was sent in response to a draft complaint against the firm. Brogan detailed the firm’s defenses to the complaint and said the suit was politically motivated, vowing that his firm would defend itself and seek sanctions against the city.
“While it is predictable that an elected politician would want to take credit for surpluses and look to blame others if financial questions arise, and the Mayor’s latest comments obviously illustrate that, we will not allow this meritless action to be so used,” Brogan wrote in the letter dated Feb. 23. “Filing this action would place the Mayor in a long line of corrupt Detroit politicians who placed personal political ambition above an objective determination of the City’s best interests.”
A spokesman for Jones Day declined to comment on the letter.
Duggan, who is running for re-election, has begun setting aside tens of millions of dollars to make up for the estimated pension shortfall when the city’s payments begin in 2024, the Free Press reported.
The dispute is over the mortality rates used to estimate how long pensioners would receive their checks, and over the projected rate of return on the pension fund’s investments. Brogan (pictured right) defended the firm by stating that those metrics were negotiated between the city and pensioners during the bankruptcy and were not hidden from Duggan.
“The allegation that Jones Day and Milliman conspired to understate pension obligations through far less significant actuarial assumptions makes no sense in light of these realities,” the letter said in a reference to Milliman, a New York-based financial consulting firm that advised on Detroit’s bankruptcy.
The letter also notes that Duggan himself testified during Detroit’s Chapter 9 case that he reviewed “every number” in the bankruptcy plan before voicing support for the agreement. The pension payments were a central aspect of the Motor City’s massive liabilities, which Detroit reduced by about $7 billion through the largest municipal bankruptcy filing in U.S. history.
“If this case goes forward, we will prove that it does not—and cannot—serve the interest of your real client, the city of Detroit, but instead is designed only to serve the venal interests of a political hack who has placed personal animus and self-interest ahead of the truth,” Brogan wrote. “If any complaint is filed against Jones Day, the firm will aggressively pursue all available defenses and remedies, including sanctions against the city and its lawyers.”
Meanwhile, Jones Day touted this week its No. 1 rank in BTI Consulting Group’s Brand Elite 2017 survey. It was the second survey in as many months that ranked the firm as the best-known legal brand. Acritas Research Ltd. put Jones Day No. 1 in its 2017 U.S. Law Firm Brand Index in February.
“Top legal decision makers recognize Jones Day as the absolute best-branded law firm,” said BTI president and founder Michael Rynowecer about the new ranking.