The Dallas office of Weil, Gotshal & Manges will be the venue for the Aug. 4 auction of the Texas Rangers baseball team.
Speculation has swirled in the financial and sports media about who will bid. But another question is how U.S. Bankruptcy Judge D. Michael Lynn of Fort Worth will rule on the Office of U.S. Trustee’s objection to Weil, Gotshal’s application to serve as debtor’s counsel for the baseball team’s owner, Texas Ranger Baseball Partners (TRBP), in TRBP’s bankruptcy proceedings. The trustee’s office alleges that “conflicts of interest” should bar Weil, Gotshal from permanently representing TRBP.
TRBP filed a voluntary Chapter 11 bankruptcy petition on May 24 in the U.S. Bankruptcy Court for the Northern District of Texas. The same day, Weil, Gotshal applied to the same court to serve as TRBP’s debtor’s counsel. Weil, Gotshal reported in that application that TRBP and Thomas Hicks, an investor who owns the majority stake in and controls TRBP, had paid the firm more than $7.7 million for “professional services and expenses incurred” over the previous 12 months.
On June 14, the Office of U.S. Trustee, which monitors the conduct of bankruptcy parties to ensure compliance with applicable laws, filed a motion opposing Weil, Gotshal’s application. According to the motion, the trustee’s objections include concerns about Weil, Gotshal’s longtime representation of Hicks.
In a supplemental declaration filed with the bankruptcy court on June 24, Weil, Gotshal partner Martin Sosland, the lead lawyer for TRBP, discloses that the firm also represents some of Hicks’ other companies; Hicks and companies he controls paid Weil, Gotshal $8.7 million from June 1, 2009, to May 31 for work performed, a figure Sosland notes constitutes less than 1 percent of the firm’s revenues; and Weil, Gotshal received $500,000 as part of its retention agreement for representing TRBP in the bankruptcy. In the same filing, Sosland reports that TRBP hired Fort Worth’s Forshey & Prostock as “special conflicts counsel.” Forshey & Prostock will “represent the debtor [TRBP] should a matter be encountered which may not be appropriately handled by WG&M because of potential conflict of interest issues,” Sosland writes.
J. Robert Forshey, a partner in Forshey & Prostok, confirms he serves as conflicts counsel but declines further comment.
In a July 6 supplemental brief, the Office of U.S. Trustee writes:
WGM’s disclosures of Hicks and Hicks-related-entities representations have trickled out through WGM’s first disclosure, the employment hearing, and the supplemental disclosure. WGM’s disclosure relating to payments and retainers remains confusing. These evolving disclosures correspond to WGM’s admission that Hicks and his entities are significant WGM clients. . . .WGM’s loyalty and confidences will necessarily be tested. That plan’s evaluation and ongoing negotiations about the plan cannot occur without questions about WGM’s impartiality. WGM’s retention should be denied.
In a July 14 order, Lynn — a former Weil, Gotshal partner — postponed ruling on the trustee’s motion opposing Weil, Gotshal’s application as debtor’s counsel. In the same order, Lynn allowed the firm to serve as interim counsel to TRBP until Lynn revisits the issues raised by the Office of U.S. Trustee.
Sosland and Weil, Gotshal partner Ronit Berkovich, both of whom represent TRBP, each did not return a telephone call seeking comment. George Sard, a spokesman for the firm, also did not return a call. Lewis LeClair, a partner in McKool Smith in Dallas who represents Hicks in the bankruptcy proceeding, declines comment.
Lisa L. Lambert, a trial attorney for the Office of U.S. Trustee, refers questions to spokeswoman Lisa Limprecht, who declines comment.