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 The tab for professional services covers the period beginning with
Detroit's July 18 bankruptcy filing until the end of September and
likely has mushroomed since then, as lawyers spent significant time
before U.S. bankruptcy judge Steven Rhodes, even throughout the
holiday season.
The fees and expenses Detroit incurred through the end of September
were "substantial" but also unavoidable given circumstances of the
bankruptcy, wrote Robert M. Fishman, who was appointed fee examiner
in August, in his first quarterly report to the U.S. bankruptcy
court.
"Due to the magnitude and complexity of the case, the novelty of the
legal issues, the extremely tight time frames imposed by the court
and the strong differences in opinion between the various parties
about what to do and how to do it, it was (and continues to be)
inevitable that the costs associated with the services provided by
the various professionals were going to be significant," Fishman
said in the report.
The fees date from July 18, when Detroit filed the biggest municipal
bankruptcy in U.S. history in an effort to address more than $18
billion in debt and other liabilities. The city's labor unions,
pension funds, bond insurers and other creditors have fought various
aspects of the case, efforts that have churned up large fees for
Detroit's team of bankruptcy professionals.
Detroit's bill for fees was $11.4 million, with the biggest fees,
$6.59 million, coming from Jones Day, the law firm that previously
employed Kevyn Orr, the city's state-appointed emergency manager.
Jones Day's top bankruptcy attorneys, Bruce Bennett and Corinne
Ball, both billed at the highest rate of any of the firm's lawyers,
at $1,000 per hour. That is a raise for both from what they received
in major cases of recent years. Ball led Chrysler through its
Chapter 11 case, initially billing $900 per hour, while Bennett took
the Los Angeles Dodgers through its bankruptcy at $975 an hour,
according to public records in those cases.
Expenses from Jones Day and other parties working on Detroit's case
totaled about $348,000, according to Fishman's report. Detroit also
is responsible for bills incurred by a committee of its retired
workers that was created by the federal court at the city's request.
The committee's fees totaled nearly $1.96 million while the expenses
were $61,500.
By comparison, fees and expenses in the first 90 days of Chrysler's
bankruptcy case, also led by Jones Day, totaled about $36 million
for armies of lawyers, bankers and advisers from 13 different firms,
according to court records in that case. Professional fees
eventually topped $100 million in the Chrysler bankruptcy.
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Jefferson County, Alabama, which was the largest municipal
bankruptcy before Detroit, spent about $25 million on its two-year
stay in court protection, according to court records.
The fee examiner's report provides 1,600 pages of details of how
each professional hired by Detroit has spent their time spending
taxpayer money, broken down into six-minute intervals.
On the first day of the bankruptcy filing, Bruce Bennett spent 96
minutes on conference calls regarding Ernst & Young, another 12
minutes on calls with Miller Buckfire and 96 minutes discussing an
alternative restructuring proposal with insurance companies. Total
bill: $3,400. Corinne Ball spent nine hours and 36 minutes the first
day dealing with issues relating to the city's water and sewer
department for a little under $10,000.
Bankruptcy is normally practiced in a fish bowl compared with other
areas of law. Lawyers, accountants and other advisers have to
provide detailed logs of their time billed on a case, broken down
into six-minute intervals.
But thanks to a quirk in the bankruptcy code, Chapter 9 municipal
cases do not require disclosure of what is spent on lawyers and
advisers. Despite that, Judge Rhodes, who is overseeing Detroit's
case, appointed a fee examiner to ensure bills were reasonable.
While no one likes to have their bills picked over, some attorneys
said Fishman's appointment to review invoices might actually be
welcome, because it may be seen in some quarters as evidence that
lawyers billing $750 an hour might be considered reasonable.
(Reporting by Karen Pierog and Tom Hals;
editing by David Greising
and Ken Wills)
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