Disputed MF Global Fees for Dewey, Proskauer Approved
A U.S. bankruptcy judge in New York has approved fee requests totaling $9 million submitted by Proskauer Rose and Dewey & LeBoeuf in connection with their work on MF Global Holdings Ltd.'s Chapter 11 case, despite a claim by the defunct commodities broker's plan administrator that the fees were excessive.
The approval came during a Tuesday hearing before Judge Martin Glenn, a clerk for Glenn confirmed Wednesday.
Dewey began advising MF Global's creditors committee in November 2011, soon after the commodities broker sought bankruptcy protection and six months before Dewey itself filed for Chapter 11 protection. The assignment moved to Proskauer Rose when bankruptcy lawyer Martin Bienenstock and his team left Dewey in the run-up to the firm's May 2012 collapse.
Last week Jones Day partner Bruce Bennett, representing the MF Global plan administrator, requested that the court slash $750,000 from a $3.8 million fee and expense request Dewey submitted. Bennett also sought to cut $1.75 million from the $5.2 million requested by Proskauer. Alternately, Bennett suggested appointing a fee examiner to review the bills.
Bennett, himself a former Dewey partner, accused Bienenstock and his team of spending an inordinate amount of time monitoring insolvency proceedings for MF Global affiliates abroad and criticized them for duplicating the efforts of MF Global Chapter 11 trustee Louis Freeh.
In a fiery defense filed Friday, Proskauer and Dewey insisted that the objection was "founded on misstatements and half-truths."
Countering Bennett's assertion that the fees racked up by Dewey and Proskauer were allowed to escalate unchecked, the firms argued that Freeh, his lawyers, members of the creditors committee and the committee's professional advisers "constantly reviewed the fees." Dewey and Proskauer also argued that it would have been foolish to sit "idly by and merely monitor" the foreign proceedings, which they call "the debtors' estates most valuable assets and bargaining tools."
Responding to Bennett's suggestion that a fee examiner be appointed, Proskauer posited that such an appointment would set a dangerous precedent for other bankruptcies that, like the MF Global proceedings, have already been put in the hands of a liquidating trustee. MF Global's liquidation plan went into effect in June.
In making its case, Proskauer also said that the firms continued to represent their clients even when faced with the prospect of not being paid at all should the estate lack the necessary funds. According to court filings, the six MF Global subsidiaries involved in the New York bankruptcy had $130.9 million in assets and $3.5 billion in liabilities.
Reached Wednesday, Bienenstock said, "I'm very pleased justice was done." Bennett did not return a call seeking comment.
Though the court rejected Bennett's objections, both firms agreed to voluntarily trim their fee applications slightly: Proskauer cut $14,510 from its request; Dewey trimmed its by $20,537. A majority of the $9 million owed to the firms has already been paid out.
Dewey's attempts to collect money from another Chapter 11 assignment it took on in the months before plunging into bankruptcy itself has also hit a roadblock. Last month, attorneys advising American Airlines parent company AMR Corp. in its Chapter 11 case proposed trimming $644,000 from a $4.6 million bill Dewey submitted for its role as special litigation counsel on the case. That objection is pending.
While money collected in the bankruptcy matters is earmarked for Dewey's bank lenders, the firm's liquidation trustee, Alan Jacobs, has continued his effort to bring more money into the estate for unsecured creditors through so-called preference actions, which seek the return of money Dewey spent in the 90 days before it filed for bankruptcy.
In the latest round of such actions, Jacobs filed suits this week seeking a total of $545,000 against vendors, legal staffing agencies, and others, bringing the total amount sought through preference actions to $9.8 million. Eventually, any money collected from those actions will be distributed to creditors.
Finally, this week also brought a bit of bad news for Dewey, as a former client sued Jacobs and the firm's liquidation trust for malpractice stemming from tax advice given by a former Dewey partner beginning in the early 2000s. The plaintiffs, Chenery Associates, Roy Hahn and Larry Austin, insist that Dewey owes them $50 million. Jacobs had no comment Wednesday on the suit.