Oh, you’re good…but not THAT good.
A couple weeks back, I wrote about the increasing number of individuals in this economy who can’t afford to pay an attorney to file bankruptcy. This week I wanted to focus on the other end of the spectrum concerning massive clients that can afford to pay a pretty penny for restructuring. We’re talking Lehman, GM, and WaMu. For example, recently Weil Gotshal & Manges restructured Lehman over a period of 2 years, charging a cool $383 million.
At a public hearing between high-end bankruptcy attorneys and U.S. Justice Department officials, the big boys argued that firms should not have to disclose billing practices, keep within budgets, or have to justify expenses under $500. ( http://ibnlive.in.com/generalnewsfeed/news/us-bankruptcy-lawyers-resist-scrutiny-over-fees/1007690.html) Bankruptcy firms that restructure giants like GM are reputed to have unabashedly astronomical budgets relative to any other field in the practice.
The arguments made on behalf of the firms were two-fold: (1) We get paid a lot because we’re just that good. Our expertise at complex restructuring of colossal players is valued enough to warrant our exorbitant fees (sometimes over $1000 an hour!!!). (2) We shouldn’t have to keep budgets because that’s the ONE thing we’re not awesome at. “Lawyers are notoriously bad at administrative tasks, including putting data in properly," argued one attorney from Cravath, Swaine & Moore. Thus, these stellar firms that are charging an arm and a leg have this immaculately well-oiled machine – EXCEPT the part where they have to punch their time cards. It’s really an absurd argument and one I’m frankly surprised could be made with a straight face.
Regardless, the U.S. Trustee Program is considering instituting a program aimed at requiring higher scrutiny in cases involving assets greater than $50 million. Bankruptcy attorneys are highballing, saying figures should be above $250 million before triggering inquiry into budgets and billing. The coming weeks should prove interesting on this front, however, in the meantime, I think firms like Cravath, Swaine & Moore need to come up with some better arguments than an attorney’s organic ineptitude at time-tracking.
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