UPDATE: 7/20/13, 6:20 p.m. EST. A statement from Clark Hill has been added to the 15th paragraph of this story.

In filing for Chapter 9 protection Thursday, Detroit took its first legal step toward the largest municipal bankruptcy in U.S. history—and set off a scramble among a bevy of firms eager to land assignments on the record-setting case.

The 207-year-old city, which for years served as a beacon of American industrial might before beginning its long, slow descent into insolvency, has seen its population drop from nearly 2 million people in 1950 to just 650,000 today, according to a bankruptcy court filing detailing the city’s deteriorating finances.
And while books, feature stories, films, and seemingly endless slideshows chronicling that decline have become popular of late, former Jones Day partner Kevyn Orr—appointed to serve as the city's emergency financial manager roughly four months ago by Michigan Governor Rick Snyder—has now turned to bankruptcy court to help reverse the city's grim reality.
Among those taking part in the push to put Detroit on a sound fiscal footing are a fast-growing army of legal, financial, and restructuring advisers that are grabbing roles in a Chapter 9 case that, as of Friday, is being overseen by U.S. Bankruptcy Judge Steven Rhodes. The professionals advising the city must now convince Rhodes—a reportedly tough bankruptcy veteran who presided over the Chapter 11 case of now-defunct auto parts maker Collins & Aikman—that Chapter 9 was their only viable option.


Even before Rhodes approves Detroit's Chapter 9 petition, many large firms with Motor City roots have been retained by clients with interests—some of them not always aligned—in the proceedings.
Consider Clark Hill, a firm with designs on The Am Law 200 after a merger earlier this year with Pittsburgh’s Thorp Reed & Armstrong. Clark Hill had been handling lobbying work for Detroit before suing Orr and Snyder this week on behalf of two pension funds trying to block the bankruptcy filing. (The filing's timing drew the ire of a state court judge hearing arguments on the move's constitutionality Friday.)
Ronald King—a Clark Hill commercial litigation partner and executive committee member—and Lansing office managing partner Aaron Matthews are representing the plaintiffs in the suit, who went to court in a preemptive move aimed at blocking any attempt to slash the benefits of the Detroit police officers and firefighters whose funds they represent. Joseph Turner, a partner in Clark Hill’s education and municipal group, was elected in June to serve as interim general counsel for The Police and Fire Retirement System of Detroit.
Turner's predecessor as the fund’s legal chief, Ronald Zajac, was arraigned earlier this year on bribery and conspiracy charges related to his contacts with disgraced former Detroit mayor, attorney, and convicted felon Kwame Kilpatrick. Turner's selection to replace Zajac was controversial as a result of the Clark Hill partner admitting that he is the unnamed "Attorney B" cited in Zajac's federal indictment, according to sibling publication Corporate Counsel.
U.S. Senate records show that Clark Hill government policy partner Reginald Turner, another member of the firm’s executive committee, was working with director of governmental affairs Lucius Vassar in handling lobbying work for the city of Detroit before Congress, primarily on transportation issues involving “law enforcement grants, tracking diminution in funds or programs, and opportunities to increase funding in future budget amendments.”
Clark Hill has been paid $120,000 from a $330,000 contract that began in April 2012, a few months after K&L Gates dumped Detroit as a client when the cash-strapped city had trouble paying its lobbying bills, according to a story at the time by sibling publication The Blog of Legal Times. (Patton Boggs and McGuireWoods handle lobbying work for Wayne County, of which Detroit serves as county seat.)
The blowback from Clark Hill’s decision to represent pensioners in litigation against Orr while also handling lobbying work for Detroit didn’t take long to materialize.
“We believe it’s a huge conflict,” says Orr spokesman Bill Nowling, who spoke Friday with The Am Law Daily. Nowling adds that Detroit’s Water and Sewerage Department has already severed its ties to Clark Hill and that the city itself is going to “take a close look” at its relationship with the firm. (Richardo Kilpatrick of Detroit's Kilpatrick & Associates filed a notice of appearance in the bankruptcy court Friday on behalf of the Water and Sewerage Department.)
Turner, Vassar, King, and Matthews did not respond to requests for comment about their firm’s dual roles in the Detroit case. And though John Hern Jr., CEO of Clark Hill, declined a request for comment Friday, a firm spokeswoman sent The Am Law Daily the following statement over the weekend to clarify the situation.
"[Clark Hill] has represented both the City of Detroit and the pension funds for a number of years—and had a conflict waiver in place to do so," according to the firm's spokeswoman. "In light of the recent court filings related to [Detroit's] bankruptcy, it was mutually determined—by both our firm and the City of Detroit—to end our representation of their federal lobbying interests."
For now, Nowling says Jones Day and Miller, Canfield, Paddock and Stone will continue to advise the city under contracts already in place. Jones Day’s $3.35 million contract is set to expire on September 15; Miller Canfield's pact, which is capped at $300,000, runs until June 30, 2014. Both contracts will undoubtedly be revisited in the months ahead if the firms continue to serve as counsel to Detroit. ( The Am Law Daily reported earlier this month on the nearly $1.4 million in legal bills accrued by Jones Day in its first six weeks of work.)
Nowling says that while Orr and other city officials want Detroit taxpayers to feel that they are getting value for their money, having what he calls an “A-Team” of advisers is key to turning the city around. Unfortunately, Nowling adds, it “costs money” to get people to Detroit in order to assist in its potential recovery. And as substantial as those costs are likely to be, a key distinction between Chapter 9 cases and other forms of bankruptcy will make them somewhat difficult to track.
As Douglas Bernstein, head of the banking and bankruptcy practice at Detroit-based Plunkett Cooney, notes, law firms and other professional advisers working on Chapter 9 cases do not require court approval in order either to work for—or be paid by—the debtor that hires them. So even while Orr will have to file periodic reports that include expenses related to the bankruptcy if it proceeds, Bernstein says, the kind of itemized billing records open to public scrutiny in a Chapter 11 case won’t exist in the Detroit matter.
(Unlike many local lawyers, Bernstein does not have a role in the Detroit case. He has, however, quickly become a go-to source for local media seeking insight into the legal proceedings. Bernstein says he has been inundated with calls from journalists over the past 24 hours and plans to appear regularly as a commentator on Detroit’s NBC affiliate.)
Meanwhile, Miller Canfield, which has long-standing legal ties to Detroit, is among several large firms with local roots advising various clients with a vested interest in the future fiscal solvency of the Motor City. One of the firm's current assignments involves its representation of Olympia Development, an entity controlled by Detroit Red Wings owner and Little Caesar’s Pizza billionaire Michael Ilitch that is pushing to build a new 18,000-seat downtown arena for the National Hockey League franchise.
The Am Law Daily reported on the agreement announced last month outlining a framework for the proposed $650 million project's financing, although a construction schedule has not yet been set. Dickinson Wright is serving as bond counsel to Detroit’s stadium authority on the deal, which is to rely on $367 million in private money and $283 million in public economic development funds that will go toward building additional office, residential, and retail space.
Dickinson Wright CEO William Burgess declined a Friday request for comment about the work his firm is doing related to Detroit’s Chapter 9 filing, though he did confirm that the firm, which has a robust gaming practice, is advising a client with a more direct role in the proceedings. Documents filed with the bankruptcy court Friday, as well as U.S. district court records filed earlier this month, show that the client in question is the MGM Grand Detroit casino, with Dickinson Wright gaming and regulatory partner Peter Ellsworth leading the firm's efforts.
In his role as Detroit’s emergency manager, Orr has been battling insurers in state court in recent weeks to maintain the city’s access to tax revenue from three local gambling outfits—the MGM Grand Detroit, MotorCity Casino Hotel, and Greektown Casino. Chicago’s Shefsky & Froelich is serving as outside gaming counsel to Detroit, which under Orr has leaned on the casino revenue as the city’s economic situation grew increasingly dire over the past month.
One of the insurers at odds with Orr, Bermuda-based Syncora Capital Assurance— which the emergency manager sued earlier this month for moving to capture casinos revenues—is being advised locally by McDonald Hopkins and a team of Kirkland & Ellis lawyers led by restructuring partner James Sprayregen. McDermott Will & Emergy has also been involved in the wranglings over casino revenue, according to court filings.
Detroit's municipal bond insurers and creditors have retained their own teams of Am Law 100 firms.
Arent Fox is advising Ambac Assurance; Sidley Austin and Michigan’s Jaffe, Raitt, Heuer & Weiss are representing the National Public Finance Guarantee Corporation; Winston & Strawn has been retained by Assured Guaranty; and Weil, Gotshal & Manges is counseling the Financial Guaranty Insurance Company.
Michigan’s Foster, Swift, Collins & Smith is advising Minneapolis-based U.S. Bancorp, parent company of U.S. Bank and a trustee for Detroit pension holders. Another Michigan firm, Warner Norcross & Judd, is serving as local counsel to UBS and Bank of America’s Merrill Lynch Capital Services unit, both of which reportedly reached a deal with Orr to accept 75 cents on the dollar to settle claims stemming from swaps and derivatives transactions with the city.
Edwin Smith, cochair of the financial services practice at Bingham McCutchen, and complex commercial and bankruptcy litigation partner Jared Clark, bankruptcy partner Steven Wilamowsky, and finance counsel E. Marcus Marsh III are advising Swiss banking giant UBS in connect with the secured swaps negotiations. None were available Friday to discuss the nature of their work with The Am Law Daily.
Cadwalader, Wickersham & Taft partner Lary Stromfeld, founder and head of the firm’s municipal derivatives practice and cohead of the firm’s distressed municipal finance practice, is counseling Bank of America, along with financial restructuring cochair Mark Ellenberg, financial institutions partner Howard Hawkins Jr., and litigation partner Jason Jurgens. Stromfeld declined to comment about his firm’s role when reached by phone Friday afternoon.
Cadwalader took a lead role advising the U.S. Department of the Treasury on its auto industry restructuring initiatives during the government-backed bankruptcies of GM and Chrysler four years ago. Two of the Cadwalader partners who took the lead on that matter—former financial restructuring cochairs Deryck Palmer and John Rapisardi— have since moved to Pillsbury Winthrop Shaw Pittman and O’Melveny & Myers, respectively, according to our previous reports. (Palmer, who helped lead a restructuring of Detroit's school system during his Cadwalader tenure, did not respond to a request for comment.)
Honigman Miller Schwartz and Cohn, which is representing the MotorCity and Greektown casinos in litigation with the city, has also filed appearances on behalf of both General Motors and the Detroit Institute of the Arts, which in May also retained Cravath, Swaine & Moore restructuring chair Richard Levin on a pro bono basis to fight a possible sale of its art collection to satisfy creditors.
Detroit-based GM, the world’s largest auto manufacturer, said in a statement Thursday that it hopes its hometown’s bankruptcy filing will smooth the way for a “clean start” for the city. Honigman, of course, helped guide GM through government-backed bankruptcy proceedings four years ago, as well as the subsequent sales of its Hummer and Nexteer Automotive units to Chinese buyers. (The Hummer deal later fell through and GM scrapped the brand.)
Dykema Gossett, which along with a slew of other firms earlier this year lost out in the bidding for the job of serving as Detroit's restructuring counsel, has teamed up with K&L Gates to serve as cocounsel to the Health Alliance Plan of Michigan.
Other firms filing appearances with the bankruptcy court include Katten Muchin Rosenman (for AT&T Michigan); Kramer Levin Naftalis & Frankel and Carson Fischer (for both BlackRock Financial Management and Nuveen Asset Management); Bodman (Blue Cross Blue Shield of Michigan); Gold Lange & Majoros (Birmingham, Michigan–based US Health and Life Insurance Company); and Gudeman & Associates (for both Enjoi Transportation Solutions and Upright Wrecking Demolition).
Detroit's lawyers from Jones Day and Miller Canfield filed more than 3,000 pages of documents, including a list of the city's 20 largest unsecured creditors, statements detailing the municipality's financial affairs and mounting pension obligations, and case management and scheduling procedures. About half of the Detroit's $18 billion debt load is owed to pension funds, some of which is in the form of health care benefits for the city's roughly 20,000 retirees.
Additional reporting by Sara Randazzo.