How Much Can Bankruptcy Lawyers' Fees Be Raised in the Final Application?

U.S. Bankruptcy Judge Dennis Montali approved nearly all of the final fee requests for law firms and other consultants working on the massive Pacific Gas & Electric Co. bankruptcy.

Montali's OK puts the final tally for more than 3 years' worth of work at about $450 million to $475 million, according to an accounting by the Office of the U.S. Trustee. Of the total, about $100 million goes to law firms representing the utility in different capacities.

That makes the case one of the most expensive bankruptcy matters ' if not the most expensive ' in the history of the Northern District of California.

“We like to think this is a success, but others not close to it might think it was a waste of money,” Montali said, prompting laughter from the courtroom.

The rulings don't translate into a single big payday. Law firms, accountants and other hired help have received incremental payments as the case progressed.

Montali heard protests to the final round of fee requests ' but there weren't many. A gaggle of lawyers piled into his courtroom, but most only had to stay long enough to hear the judge say “no objection.”

One notable exception involved the Los Angeles office of Milbank, Tweed, Hadley & McCloy, which represents the former Official Committee of Unsecured Creditors. The committee was appointed after PG&E declared bankruptcy in the midst of California's 2001 energy crisis.

Milbank had originally agreed to charge $595 per hour, which the firm said was a discount from its top rate of $725. Now that the case is finished, Milbank wants to be compensated at a higher hourly rate and has asked Montali to increase its fees by about $780,000.

In 3 years of work, the firm has already billed about $14 million.

The U.S. Trustee and PG&E have objected to the request and asked Montali to deny it.

“It seems that what they're really asking for is a bonus,” said Edward Myrtle, trial attorney for the trustee.

But Milbank partner Robert Jay Moore argued that there was nothing in the original agreement that prevented the firm from asking for the higher rate. He said Milbank put down $595 to avoid a fee fight in the early stages of the high visibility case.

“We were not intending to waive our right to come back in the final fee application,” Moore told Montali.

Montali seemed truly divided on the matter. He said $780,000 is an “infinitesimal” amount of money compared to the total spent on law firms and other consultants. On the other hand, that's also a lot of money.

“What do I do with [the suggestion] that you reduced your rates to get the business?” Montali asked Moore.

But the judge was no easier with Myrtle, nor with Howard, Rice, Nemerovski, Canady, Falk & Rabkin partner James Lopes, who represents PG&E.

“I think the issue here is they were employed on the basis that those were the rates they were going to charge,” Lopes said.

“But don't we have … an application with ambiguity?” Montali asked.

The judge said he needed several days or at least several hours to come to a decision.

In the meantime, a handful of other firms got the okay for their total bills. All of the firms represented PG&E in some capacity.

Cooley Godward billed about $14.1 million; Heller Ehrman White & McAuliffe, $24.8 million; Keker & Van Nest, $1.8 million; Steefel, Levitt & Weiss, $1.9 million; Skadden, Arps, Slate, Meagher & Flom, $4 million; and Chicago's Winston & Strawn, $3.8 million.

The utility's main counsel, Howard Rice, billed $37.1 million

U.S. Bankruptcy Judge Dennis Montali approved nearly all of the final fee requests for law firms and other consultants working on the massive Pacific Gas & Electric Co. bankruptcy.

Montali's OK puts the final tally for more than 3 years' worth of work at about $450 million to $475 million, according to an accounting by the Office of the U.S. Trustee. Of the total, about $100 million goes to law firms representing the utility in different capacities.

That makes the case one of the most expensive bankruptcy matters ' if not the most expensive ' in the history of the Northern District of California.

“We like to think this is a success, but others not close to it might think it was a waste of money,” Montali said, prompting laughter from the courtroom.

The rulings don't translate into a single big payday. Law firms, accountants and other hired help have received incremental payments as the case progressed.

Montali heard protests to the final round of fee requests ' but there weren't many. A gaggle of lawyers piled into his courtroom, but most only had to stay long enough to hear the judge say “no objection.”

One notable exception involved the Los Angeles office of Milbank, Tweed, Hadley & McCloy, which represents the former Official Committee of Unsecured Creditors. The committee was appointed after PG&E declared bankruptcy in the midst of California's 2001 energy crisis.

Milbank had originally agreed to charge $595 per hour, which the firm said was a discount from its top rate of $725. Now that the case is finished, Milbank wants to be compensated at a higher hourly rate and has asked Montali to increase its fees by about $780,000.

In 3 years of work, the firm has already billed about $14 million.

The U.S. Trustee and PG&E have objected to the request and asked Montali to deny it.

“It seems that what they're really asking for is a bonus,” said Edward Myrtle, trial attorney for the trustee.

But Milbank partner Robert Jay Moore argued that there was nothing in the original agreement that prevented the firm from asking for the higher rate. He said Milbank put down $595 to avoid a fee fight in the early stages of the high visibility case.

“We were not intending to waive our right to come back in the final fee application,” Moore told Montali.

Montali seemed truly divided on the matter. He said $780,000 is an “infinitesimal” amount of money compared to the total spent on law firms and other consultants. On the other hand, that's also a lot of money.

“What do I do with [the suggestion] that you reduced your rates to get the business?” Montali asked Moore.

But the judge was no easier with Myrtle, nor with Howard, Rice, Nemerovski, Canady, Falk & Rabkin partner James Lopes, who represents PG&E.

“I think the issue here is they were employed on the basis that those were the rates they were going to charge,” Lopes said.

“But don't we have … an application with ambiguity?” Montali asked.

The judge said he needed several days or at least several hours to come to a decision.

In the meantime, a handful of other firms got the okay for their total bills. All of the firms represented PG&E in some capacity.

Cooley Godward billed about $14.1 million; Heller Ehrman White & McAuliffe, $24.8 million; Keker & Van Nest, $1.8 million; Steefel, Levitt & Weiss, $1.9 million; Skadden, Arps, Slate, Meagher & Flom, $4 million; and Chicago's Winston & Strawn, $3.8 million.

The utility's main counsel, Howard Rice, billed $37.1 million