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Lehman Dec 22
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Lehman Committee Members Say They Deserve $20M Payback
Dec 21, 2015 | Law360
By Jeff Zalesin
Banks and other creditors' committee members from the New York bankruptcy of Lehman Brothers Holdings said Friday they deserve about $19.6 million in fees and expenses, arguing they helped clean up an extraordinary mess by sorting through assets including complex derivatives and private equity interests.
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Lehman Committee Members Say They Deserve $20M Payback
Dec 21, 2015 | Law360
By Jeff Zalesin
Banks and other creditors' committee members from the New York bankruptcy of Lehman Brothers Holdings said Friday they deserve about $19.6 million in fees and expenses, arguing they helped clean up an extraordinary mess by sorting through assets including complex derivatives and private equity interests.
The Bank of New York Mellon, Elliott Management Corp. and other members of the unsecured creditors committee said they should be paid fees and reimbursed for expenses because they made a “substantial contribution” to resolving the Lehman Brothers Holdings Inc. bankruptcy. The request follows a 2014 district court ruling that overturned an award of over $26 million and sent the issue back to bankruptcy court.
The committee members argued they shouldn’t be treated like ordinary Chapter 11 committee members because Lehman was no ordinary case.
“If ever there was a unique Chapter 11 case that required extraordinary efforts above and beyond those normally required of members of a creditors’ committee, it was Lehman,” they said. “Following the debtors’ sudden collapse and the mass departure of its employees, applicants were tasked with far more than the usual committee duties of oversight and consultation.”
The committee members said that because of the global financial crisis — which they blamed partly on Lehman’s collapse — they decided not to sell off most of Lehman’s assets immediately. Rushing to liquidate would have meant selling the firm’s assets at steep discounts, they said.
Instead, the creditors’ committee and various subcommittees followed what they called a “hold and manage” strategy, sorting through assets of various classes and developing plans to wind down the estates. That was no easy task, since Lehman’s assets were “complex, esoteric and sophisticated,” ranging from derivatives to real estate and private equity investments, the committee members said.
Ultimately, the creditors said, they helped develop both official and informal protocols that streamlined the proceedings and facilitated the settlements that made up Lehman’s confirmed bankruptcy plan.
“Extraordinary results — including the avoidance of what is estimated to be hundreds of millions of dollars in litigation expense — were achieved in these remarkably complex Chapter 11 cases and in a short time frame,” the committee members said. “This was accomplished, in significant part, by applicants’ exceptional efforts.”
The creditors said that if not for the attorneys who represented each committee member individually, they would not have been able to make those contributions. They also said that they reasonably ran up legal expenses when they were hit with discovery requests in litigation involving the Lehman estate.
The law firms that performed work underlying the repayment applications include Kleinberg Kaplan Wolff & Cohen PC, Greenberg Traurig LLP, Sheppard Mullin Richter & Hampton LLP, Loeb & Loeb LLP, Covington & Burling LLP and others.
The committee members have been fighting for fees and expenses on and off for years. Then-U.S. Bankruptcy Judge James Peck sided with the committee members in 2013, ruling the fees and expenses could paid by consent under the confirmed bankruptcy plan.
More than $26.6 million of those fees and expenses were paid out, according to the committee members. But the U.S. Trustee appealed the ruling authorizing them, and U.S. District Judge Richard Sullivan reversed the bankruptcy court ruling last year.
Judge Sullivan remanded the dispute, telling the bankruptcy court to look into whether the committee members made a “substantial contribution in a case.” Only if they made such a contribution could they obtain an award, the judge ruled.
On remand, the committee members have reduced their request to $19.57 million, but they said they reserve the right to seek more in an eventual Second Circuit appeal.
Alongside Friday’s omnibus application for fees and expenses, BNY Mellon filed a supplemental motion requesting that some of the fees and expenses already paid to the bank be treated as distributions on bankruptcy claims, thus protecting that money from being taken back in the event that the bank loses on the fee-and-expense issue.
Committee co-chairs Wilmington Trust Co. and Mizuho Bank Ltd. also made separate filings, arguing in part they went above and beyond the contributions of their fellow committee members.
Representatives of the individual committee members, the committee itself, the U.S. Trustee’s office and the Lehman estate did not immediately respond to requests for comment Monday.
Wilmington Trust Co. is represented by Dianne F. Coffino of Covington & Burling LLP and Walter H. Curchack of Loeb & Loeb LLP...For full story: http://www.law360.com/articles/740351/lehman-committee-members-say-they-deserve-20m-payback
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