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Dal/Nwa lawyer fees

Green

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The fees for bankruptcy attornies/paralegals/clerks are astounding...


Lawyers to Profit From Airline Bankruptcy
Monday September 19, 5:00 pm ET
By Harry R. Weber and Joshua Freed, AP Business Writers Creditors May Suffer, but Lawyers Will Profit From Delta, Northwest Bankruptcies


Delta and Northwest have hired law firms to lead their bankruptcy cases. They've tapped legal consultants to handle corporate tax and immigration issues. And they've put on the payroll financial and aviation experts to advise them on government procurement matters.

It's the business of bankruptcy, and these days, with four major airlines in Chapter 11, it's big business.

The litany of firms that will provide professional services to Delta and Northwest as they wade through bankruptcy court will rack up fees of tens, perhaps hundreds of millions of dollars over the next few years. A partner at one of the firms helping Delta charges $795 an hour.

Unlike most creditors, however, those firms in general won't have to worry about getting their money since they are given priority by the court.

"Is there a price that is too expensive for open heart surgery, because that is what we've got here?" said New York bankruptcy lawyer William Rochelle. "We've got a terminally ill patient presented in the emergency room with life-threatening injuries."

He added, "And unfortunately, heroic measures are expensive for lawyers just like they are for doctors."

The new bankruptcy law that goes into effect on Oct. 17 doesn't restrict the amount that bankrupt companies can pay their lawyers, although a bankruptcy judge can.

Just how much the process will cost Atlanta-based Delta Air Lines Inc. and Eagan, Minn.-based Northwest Airlines Corp. is an open question. The bankruptcy case of UAL Corp.'s United Airlines has cost more than $250 million in the nearly three years it has been in court.

In court papers last week, Delta said partners at its chief bankruptcy law firm, Stroock & Stroock, charge $550 to $950 an hour. One of the firm's primary attorneys on the Delta case, Lawrence M. Handelsman, bills at $795 an hour. Paralegals and clerks at the firm bill at $170 to $275 an hour.

Northwest, meanwhile, has already spent almost $12.4 million on retainers and pre-bankruptcy legal advice, according to court records. That includes $5.6 million to its lead bankruptcy lawyers at Cadwalader, Wickersham & Taft LLP of New York before Northwest even entered bankruptcy court. The firm has also already received $1 million toward future fees.

That money will go fast. The firm bills $590 to $800 per hour for partners, and as much as $645 per hour for other attorneys. It bills up to $220 per hour for its legal assistants, according to Northwest's motion seeking permission to pay the firm.

Northwest knows many of the firms well.

Cadwalader, Wickersham & Taft represented it in its buyout of Republic Airlines in 1986, and has represented Northwest on tax issues since 1985. A $300,000 retainer went to Simpson Thacher & Bartlett LLP of New York for "special corporate and litigation counsel." It is already representing Northwest in its fight with two unions over preferred stock it was supposed to buy back under a 1993 wage-cut deal.

"If you talk to the average person, I think there's sort of a feeling out there that professionals are getting paid and creditors aren't, and they don't understand why the system works that way," said Ronald Barliant, a bankruptcy lawyer in Chicago, who has represented clients on both sides of the aisle.

But, Barliant said, creditors in a big case tend to be more understanding. He said they realize that "for them to get maximum recovery, they need professionals working on the estate."

Companies in bankruptcy generally account for their professional service fees in monthly court filings. The lawyers will file claims for the amount of their services, and the court will be asked to approve the payments. In United's case, a committee was set up to review fees paid out for professional services, and legal experts say they believe the same will be done in the case of Delta and Northwest.

A consulting firm called Seabury Group will be deeply involved in Northwest's restructuring. The restructuring firm has worked with troubled airlines before, including helping bankrupt US Airways in its merger with America West.

Barry Simon, a Northwest executive vice president and general counsel, was managing director of Seabury for a year before joining Northwest in October 2004. He had worked at Continental Airlines or affiliates for 20 years before that, and "played a major role in handling the airline's two successful bankruptcy proceedings," according to Northwest's Web site.

Northwest has agreed to pay Seabury $225,000 a month in retainers, or $2.7 million a year.

If Northwest merges with another airline Seabury gets a merger "success fee" of up to $10 million, also. It gets part of any debtor-in-possession loan to Northwest, and a piece of Northwest's exit financing. If Northwest emerges from Chapter 11, Seabury gets a $3 million "restructuring success fee," although some of Northwest's retainer payments apply toward that.

Seabury promised to have workers on Northwest business fly on Northwest whenever possible. They'll want to, because the agreement calls on Northwest to give them the highest-class of seat available on the plane. If they fly another airline, Northwest will only pay for coach.

Meanwhile, Delta's chief executive, Gerald Grinstein, told Georgia lawmakers Monday that the airline will give details of further planned pay and benefit cuts later this week. Since 2001, the airline has already announced it would cut up to 24,000 jobs. Grinstein said he believes Delta will emerge from bankruptcy protection as "a stronger and more viable company" but added that there will be a period of pain.

He also said the company's goal is to come out of bankruptcy as a standalone carrier, though he didn't completely rule out the possibility of a merger.

"Delta is fragile ... and it is not a good time to begin a consolidation discussion," Grinstein said. "The only time to do that is when you have leverage and strength. So that may be somewhere out in the future but that's not now."

Associated Press Writer Dick Pettys in Atlanta contributed to this report.
 

fam62c

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It's absolutely criminal what these companies pay in service fees during a bankruptcy hearing. The judges are always willing to rubber-stamp payments for lawyers and executive retention payments and severence benefits while everyone else is not getting paid. The lawyer fees are bad enough but $100+ dollars an hour for a clerk? On top of being paid all that money they get a bonus for doing their job correctly? Maybe I should get a bonus everytime I complete a flight without killing anyone.......oh wait, that's my job, that's what I'm supposed to do and that's what I get paid to do in the first place.....bonus my rear end.

I hope that the new BK laws will reduce bankruptcies and result in shorter stays in the process. This should help reduce the crazy legal fees. For that matter get rid of Chapter 11 altogether, when your are out of money you are out of the game unless someone will lend you more. I would be willing to bet that half of what these firms are doing involves sending boilerplate paperwork to creditors and judges. They just take all of the paperwork from the last case they handled and change the names and dates and send it out. Need to reject some aircraft leases?......get the lease-termination letter off the computer, fill in the blanks and have a clerk send it out. Then bill the company 10 hours for "drafting" of the document. I wonder how many hours of actual work these attorneys are doing for each hour billed? I would bet that the "padding" is outrageous.

It appears that airline bankruptcies create a "feeding frenzy" for the legal community where no fee, no matter how unreasonable it may seem, is too high. This must be the best thing for the lawyer's wallets since ambulance chasing was invented. Jesus, where does this all end? I hope one of these airlines racks up a fortune in legal fees and then stiffs one of these law firms when they liquidate.
 

IAHERJ

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hmmm?
While I totally agree with your post there is probably another side to the story. We get upset when articles and other employee groups are amazed with our (pilots) compensation packages and productivity. We, or course can paint an entirely different story involving the process it takes to get where we are and the time away from home and the relative decline of our pay/work rules etc. relative to inflation over the last several decades.

I think it is terribly expensive to file CH. 11. I'm not sure these legal firms should be entitled to this kind of compensation, however they have negotiated these deals just as our negotiating commitees negotiate our pilot contracts. It just goes to prove our relative worth in the eyes of today's management teams.

IAHERJ
 

Erndogg

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Join the club! Hawaiian Airlines legal fees amounted to the tune of 30-35 mill for the 2 years they were in BK. Couple that with all the useless consultants etc... the bill is probably into the 40mill range-peanuts compared to NWA and Delta, but if you look at Hawaiian's size and annual revenue-it was highway robbery!

As it turned out Hawaiian's BK was the most costly BK in Hawaiian state history!

Now our former trustee (whom did nothing to bring Hawaiian out of BK and dragged the process out way longer than he should of) is requesting 9 mill for an exit bonus!

These guys should be thrown in Jail!
 
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Green

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This is my favorite quote from the article:

"Is there a price that is too expensive for open heart surgery, because that is what we've got here?" said New York bankruptcy lawyer William Rochelle.

He added, "And unfortunately, heroic measures are expensive for lawyers just like they are for doctors."


Looks like in addition to massive hourly rates ($900+) these guys have massive egos. Yeah right, making 2+million/year filing paperwork and quietly robbing thousands of their pensions/health care while concurrently arguing for management "retention" bonuses is real f#ck#ng heroic. Just like a doctor out there saving lives. I'm sure these guys feal like real samaritans as they drive to court in their Bentley while getting a Bj from their current trophy wife.
 

Erndogg

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Is there a price that is too expensive for open heart surgery, because that is what we've got here?" said New York bankruptcy lawyer William Rochelle


This guy should be taken around the back of the courthouse and shot!
 

BluDevAv8r

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Enough
Green said:
I'm sure these guys feal like real samaritans as they drive to court in their Bentley while getting a Bj from their current trophy wife.

I can assure you with 100% confidence that Mr. Handelsman (mentioned in the article)...

a) does not own a Bentley (or anything like it).

or

b) have a trophy wife.

-Neal
 
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