Milwaukee-based law firm Godfrey & Kahn SC, playing a fee-review role in its second mega-bankruptcy case, will be paid about $6.5 million for its work on the Lehman Brothers Holdings Inc. case, according to an attorney in the firm's Madison office.
Godfrey & Kahn served as counsel to the fee committee in the Lehman Brothers case in New York City, which is the biggest bankruptcy in American history. The committee consisted of independent representative Richard Gitlin, the U.S. trustee on the case and representatives of both Lehman Brothers Holdings and the creditors committee.
Lehman filed for bankruptcy in September 2008 and the investment banking firm’s failure was an exclamation point in the so-called 2008 financial crisis.
Professional fees paid in the complex case ultimately reached about $2 billion, an amount that generated instant criticism earlier this year.
Bankruptcy professionals speaking at a hearing on bankruptcy reform at the American Bankruptcy Institute, said lawyers’ and other professionals’ fees in bankruptcy cases are so high that they are damaging the filing company’s value and investor recoveries, according to CFO.com.
James Peck, the U.S. Bankruptcy Judge on the Lehman Brothers case, acknowledged during court proceedings that the fees were “extraordinarily expensive.” But Peck said the system, including the fee committee, provides transparency and in this case held fees to 3 percent of the $60 billion in assets being distributed to creditors.
“The fees and expenses...are reasonable and proportionate,” Peck said in court.
Katherine Stadler, an attorney at Godfrey & Kahn’s Madison office, said less than $1 billion of the fees went to actual bankruptcy-case work. The remainder was for continuing business operations of Lehman Brothers’ multiple business units in numerous countries.
So the $2 billion figure is sensible for what was easily the largest Chapter 11 case in American history, Stadler said.
“If you isolate from the big headline numbers that everyone focuses on, the percentage of fees related to the bankruptcy is a much smaller number,” she said.
Godfrey & Kahn recommended cuts in fees throughout its assignment that started in late 2010, but Stadler did not have a figure on the total amount.
Although Lehman Brothers Holdings emerged from Chapter 11 protection in March 2012, Godfrey & Kahn is awaiting final approval for its fees and completing some follow-up work, Stadler said.
Six attorneys with the firm — including Stadler, Brady Williamson and Eric Wilson — and four paralegals worked on what Stadler called a “firm-wide” effort.
Godfrey & Kahn has experience with cases of this scope from its role in the General Motors bankruptcy case. The firm was paid about $1.5 million for that assignment that ran through late 2011.
Williamson was appointed in December 2009 to review and analyze bills from law firms and other professional services providers in the GM bankruptcy case. Williamson, in turn, won court approval to hire Godfrey & Kahn as his legal counsel.