Law Firms Are Raking in Millions From Pandemic-Era Retail Bankruptcies
Several Am Law 100 firms are reaping the rewards from some of this spring's most active bankruptcies, including J. Crew, Neiman Marcus and J.C. Penney—some to the tune of more than $10 million.
July 06, 2020 at 01:41 PM
4 minute read
The original version of this story was published on The American Lawyer
The legal industry has been preparing for years for an uptick in restructuring work. The coronavirus pandemic has quickly turned all that anticipation into reality—and enormous revenue.
Recent prefiling fee statements in some of the spring's biggest Chapter 11 bankruptcies show that some Am Law 100 firms stand to gain tens of millions of dollars each for their work with Neiman Marcus, J. Crew and other retail restructurings as hourly billing rates rise at the associate, counsel and partner ranks.
Luxury retailer Neiman Marcus, which filed for Chapter 11 protection in the Southern District of Texas on May 7, paid Kirkland & Ellis, debtor's counsel, more than $14 million in two advance payment retainers in March, according to court documents. Kirkland has not yet filed any monthly fee applications, but the firm said its partners are billing $1,075 to $1,845 per hour; of counsel are billing $625 to $1,845 per hour; associates are billing $610 to $1,165 per hour; and paraprofessionals are billing $245 to $460 per hour.
Local counsel Jackson Walker, which also has yet to file its first monthly fee application, has already been paid a $30,000 retainer for prefiling work, and Neiman Marcus also paid the firm $93,000 in April for filing fee reimbursements and more than $45,000 in May for pre-petition services and fees, according to court documents.
Multiple other big firms also have a role in the Neiman Marcus bankruptcy, including Wachtell, Lipton, Rosen & Katz, which is representing the extended term loan lenders; Paul, Weiss, Rifkind, Wharton & Garrison, which is representing the noteholders; and Latham & Watkins, which is representing the non-debtor parent, Neiman Marcus Group.
Kirkland and Jackson Walker are also teaming up to represent J.C. Penney, which filed Chapter 11 paperwork May 15 in the Southern District of Texas. Kirkland worked with J.C. Penney for 10 months prior to the department store chain declaring bankruptcy, according to court documents, and the company paid the firm nearly $10.9 million in advance payment retainers before the Chapter 11 filing. Co-counsel and conflicts counsel Jackson Walker has been paid a $300,000 retainer by J.C. Penney. Neither firm has filed its first monthly fee applications.
J. Crew, the first major retailer to succumb to the pandemic, shelled out $12 million to its debtors counsel, Weil, Gotshal & Manges, in the 90 days prior to its Chapter 11 petition May 4. Hunton Andrews Kurth and Milbank are also involved in the bankruptcy, as local counsel and counsel to members of an ad hoc lenders' committee, respectively. None of the firms has filed a monthly fee statement for work they have completed since the filing.
Latham is representing health retailer GNC, which filed for bankruptcy June 23 in the District of Delaware. Latham has been counseling GNC since the end of 2018, it said in court filings, and the firm received $10.2 million for work in the 90 days prior to the filing. Partners are charging $1,120 to $1,680 per hour; counsel are charging $1,085 to $1,560; associates are charging $590 to $1,105; professional staff are charging $250 to $850; and paralegals are charging $250 to $540. GNC has also paid the firm a $500,000 evergreen retainer, according to court documents.
GNC co-debtors counsel Young Conaway Stargatt & Taylor, whose lawyers are billing $400 to $970 per hour, received $1.14 million for work in the 90 days prior to the Chapter 11 filing, and to replenish its retainer.
In comparatively smaller Chapter 11 proceedings, discount retailer Tuesday Morning, which filed for Chapter 11 protection May 27 in the Northern District of Texas, has paid debtor's counsel Haynes and Boone more than $1.2 million in prefiling fees, along with a $507,500 retainer, according to court documents. Lawyers on the case are charging much less than their bankruptcy counterparts at Kirkland, Weil and others: two partners are charging $875 and $1,025 per hour; counsel are charging $700 per hour; entry-level associates are charging $460 per hour; and paralegals are charging $385 per hour.
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