Another Court Approves an Arrangement for Paying Most Chapter 7 Fees After Filing
Careful drafting and copious documentation are required for a bifurcated fee arrangement to pass muster in chapter 7.
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Sears Advisers Have Racked Up $200 Million in Fees as Vendors Await Payment
Suppliers that stocked the shelves during Sears Holdings Corp.’s bankruptcy are being forced to swallow losses and some employees won’t get severance they are owed, even as law firms are guaranteed full payment for their work on the retailer’s chapter 11 case, the Wall Street Journal reported. A year after the storied retailer sold its best stores and assets to ESL Investments Inc., the investment firm owned by former Sears Chief Executive Edward Lampert, the shell left behind in bankruptcy is struggling to pay its debts after racking up more than $200 million in bills from lawyers and advisers. White-shoe law firms Akin Gump Strauss Hauer & Feld LLP, which represents unsecured creditors, and Paul, Weiss, Rifkind, Wharton & Garrison LLP, which represents the independent committee of Sears’s board, have earned more than $50 million. Akin Gump has access to another $25 million set aside to cover the cost of pursuing a speculative lawsuit against Lampert, which is billed as a way to return more money to Sears creditors. Bankruptcy Judge Robert Drain, who approved Sears’s liquidation plan last year, pushed vendors to settle for a maximum of 33 cents on the dollar, with the potential to recoup more if a potential lawsuit against Lampert yields more money.
U.S. Trustee Bankruptcy Fee Hike for Exide Technologies Upheld
A huge increase in U.S. Trustee quarterly fees facing bankrupt Exide Technologies is constitutional, even though the hike was imposed years after its reorganization plan was approved in 2015, a Delaware bankruptcy judge held, Bloomberg Law reported. The fee increases aren’t really applied retroactively, Judge Mary Walrath of the U.S. Bankruptcy Court for the District of Delaware ruled. They’re triggered when the bankrupt debtor makes distributions and are similar to a new tax created after a bankruptcy filing, she said. The judge also rejected Exide’s argument that the fee hike wasn’t uniformly applied across the country. (Subscription required.)
Weil Overbilled Bankrupt Ditech by $476,000, U.S. Trustee Says
Expenses from Weil, Gotshal & Manges are among the issues raised by the U.S. Trustee overseeing the case of bankrupt mortgage servicer Ditech Holding Corp., Bloomberg News reported. Lawyers and professionals from other firms have applied to collect more than $50 million in fees and expenses. Some of those applications show “questionable billing judgment” and lawyers appear to have “simply disregarded” established guidelines, a U.S. Trustee lawyer said. The U.S. Trustee said that Weil billed the estate about $18 million for work done from the bankruptcy filing in February to Sept. 30. Weil’s senior lawyers billed the estate at an hourly rate of $1,327, which is $116 higher than it charges non-bankruptcy clients, according to an objection filed on Thursday by the U.S. Trustee. A firm’s rates should not increase because the client files for bankruptcy, said the U.S. Trustee, a division of the U.S. Justice Department which oversees bankruptcy cases.
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