Jones Day Earns $17 Million in Detroit Bankruptcy So Far
The court-appointed fee examiner monitoring Detroit's bankruptcy advisers will have plenty to cover in his first report next month.
The city has paid out nearly $42 million in restructuring-related adviser fees so far in the Chapter 9 case, according to a tally provided to The Am Law Daily on Thursday by Detroit emergency manager Kevyn Orr's office. The list of those being paid includes 41 advisers, 10 of them law firms, that are in line to ultimately earn a collective total of more than $89.3 million under their existing contracts.
Of the fees the city has paid out to date, Jones Day has received $17.3 million—40 percent of the overall total—according to the document provided by Orr's office. Nearly $2 million more in outstanding invoices submitted by the Am Law 100 firm have yet to be paid.
The formal terms of Jones Day's assignment have shifted substantially since it was hired as the city's lead restructuring counsel in March 2013, four months before Detroit became the largest municipality to seek Chapter 9 bankruptcy protection in U.S. history. The initial $3.35 million, six-month contract approved by Detroit's city council was later revised upward to $18 million. That pact became void when the city filed for bankruptcy in July, Orr spokesman Bill Nowling said via email Thursday.
In a footnote, the document detailing the advisory fees paid so far describes Jones Day's work as not being subject to a contract maximum. Nowling said the provision reflects the fact that the city does not disclose its legal strategy, and setting a budget for litigators and attorneys "is part of that legal strategy." At this point, Nowling said, Jones Day's only fee-related obligation is to clear what it earns through fee examiner Robert Fishman.
Fishman has been racking up some bills of his own since taking on the monitor job in August, according to court filings. He and his Chicago-based firm, Shaw Fishman Glantz & Towbin, have requested $165,020 for work on the case between September and November, those filings show. Fishman is due to submit his first report Feb. 4.
Other law firms playing roles in the Detroit bankruptcy (and the fees they have earned so far) include labor and employment counsel Butzel Long ($292,833); Foley & Lardner ($340,174); conflicts counsel Pepper Hamilton ($594,633); and retiree committee counsel Dentons ($3.2 million).
Detroit-based Miller, Canfield, Paddock & Stone is also advising the city under two contracts: one covering collective bargaining advice that is capped at $750,000, and another encompassing restructuring-related issues that is capped at $1.2 million. So far, no payments to Miller Canfield have been recorded in the chart.
U.S. Bankruptcy Judge Steven Rhodes, who is overseeing the Chapter 9 case and has set a March 1 deadline for the city to come up with a plan to steer itself out of bankruptcy, surprised the city's advisers last week by rejecting a $165 million settlement request that would have paid off a 2005 debt deal between the city and UBS and Bank of America Merrill Lynch. According to the Detroit Free Press, Rhodes said in court that he would "not participate in or permit the city to perpetuate the very kind of hasty and imprudent financial decisionmaking" that led to the original deal, and directed the parties to reach a new agreement.
Separately, a settlement is in the works that would protect both city retirees and the Detroit Institute of Arts' collection. The Free Press has more on the proposal, which Michigan Gov. Rick Snyder backed Wednesday with a pledge of $350 million.