Editor's note: This is the third in a series of stories taking a deep dive into the U.S. Bankruptcy Court for the Southern District of Florida.

At least 30 cases in South Florida bankruptcy court have cost more than $1 million to litigate in the past three years, raising questions about whether trustees and other professionals are treating creditors' money as though it were their own.

The answer: Not always, according to Robert Kaye, a partner at Pompano Beach-based Kaye Bender Rembaum.

“Bankruptcy is where it goes off the rails,” he said. “Things get complicated.”

Kaye isn't a bankruptcy lawyer. He represents Florida condominium and homeowners' associations, and his firm found itself a creditor in litigation against a former client refusing to pay $80,000 for four years of legal services.

When the client, Spanish Isles Property Owners Association Inc., filed for Chapter 11 bankruptcy protection, trustee Margaret J. Smith filed suit against Kaye's firm. The complaint accused Kaye Bender of negligence that contributed to the association's financial woes.

Court documents show that to wipe out the alleged $80,000 Kaye Bender debt, Smith spent more than six times that amount, or about $500,000, on litigation that the court ultimately dismissed with prejudice — but not until the alleged underlying debt climbed to about $130,000, thanks to additional fees and expenses.

“I don't know the motivation of why they felt it was so important to spend so much money on themselves and their attorneys,” Kaye said. “Our attorney said his opinion was we were facing what amounted to legal extortion.”

Related story: South Florida Lawyers Are Raking In Millions Working in Bankruptcy Court

Smith did not respond to requests for comment by deadline.

But attorneys insist the hefty billings in bankruptcy court have merit.

$11 Million and Counting

The most expensive case in the Southern District of Florida between 2016 and 2018 was a Florida hedge fund's Chapter 11 bankruptcy. It's cost more than $11 million in the last three years, paid to attorneys and other professionals, according to an independent study by ALM's Daily Business Review.

Which cases cost the most?

The second most expensive case on the docket during that period stemmed from the 2012 Chapter 11 proceedings for Majorca Isles Master Association Inc., a 55-unit Miami Gardens community crippled by poor cash flow.

In 2016, trustee Barry E. Mukamal sued developer D.R. Horton over alleged deceptive practices — landing a $16.3 million judgment that eventually became an $11 million settlement.

At least 15 attorneys worked on the case, which has cost almost $7 million in the last three years.

Click here to read the most recent financial report for Majorca Isles 

Almost among the top fee generators: The 2016 bankruptcy of Boca Raton-based life settlement company Mosaic management Group Inc., which has cost more than $4 million, making it the sixth most expensive.

Mosaic bought life insurance policies to carve up for investors worldwide, but it had major management problems, and those covered by its policies were living longer than expected.

Counsel to Mosaic, Kristopher E. Aungst of Wargo French — the 13th highest biller in the court — spent months on the “delicate” task of encouraging bickering investors across the world to come together.

“To get 2,700 creditors all pointing in the same direction, agreeing with your plan was really difficult,” Aungst said.

Many attorneys, Aungst included, claim that less money would be recovered for creditors if the professionals involved weren't so specialized and, therefore, expensive.

“A lot of times, when a business comes to me, the problems they've had have festered for a long period of time,” Aungst said. “It's not as simple as saying, 'Oh, we'll just do A, B and C, and it'll be fine.' It's a complete restructuring, recapitalization and undoing of a company that had issues, and it allows them to regroup, rebuild, get a fresh start and continue on.”

One such case: the Chapter 7 bankruptcy of Claudio E. Osorio, a Venezuelan businessman convicted of defrauding investors, and his wife Amarilis M. Osorio, was the ninth most costly. The litigation has involved 16 attorneys, who've billed more than $3 million in three years.

Related story:  South Florida Lawyers Are Raking In Millions Working in Bankruptcy Court

One mall, 11 attorneys

The third most expensive bankruptcy began with the defunct Fashion Mall in Plantation and became a saga in its own right. Since 2016, it has cost $5.9 million and involved at least 11 lawyers.

The property's manager Chinese investor Wei Chen put its operating companies in bankruptcy proceedings in 2014 because of infighting with business partner, Zhen Zeng Du. According to one of Chen's lawyers, Alen Hsu of Weiss Serota Helfman Cole & Bierman, his client chose bankruptcy as he couldn't focus on redeveloping while legal battles depleted the business.

But once in bankruptcy court, bankruptcy trustee Kenneth Welt saw the case differently. He sued Chen and his family members, alleging fraudulent transfers and seeking more than $10 million. Chen later popped up on an Interpol economic fugitive list released by the Chinese government — something Chen maintained was a set up to tarnish his reputation. Chen was removed from the list, but it wasn't easy getting past that negative connotation, according to Hsu.

“Everybody thought my client was a Madoff or a Rothstein that had looted and depleted these entities, when it was completely not true,” Hsu said.