Jones Day defends Detroit bankruptcy fees

Robert Snell
The Detroit News

Detroit — The city’s lead law firm during the landmark bankruptcy case says it slashed its bill by more than $17.7 million, according to a court filing Friday.

The Jones Day law firm defended its total bill of $53,726,088 as “entirely reasonable” and argued it was one of the few firms capable of handling “cutting edge” issues posed by the biggest municipal bankruptcy case in U.S. history.

“Ultimately, Jones Day completed what could have been years of work in record-setting time, allowing the city now to move forward with a much needed revitalization,” Jones Day lawyer Heather Lennox wrote Friday.

The city’s bankruptcy lawyers and consultants faced a deadline this week to justify fees. Firms representing the city and retirees charged about $170 million and U.S. Bankruptcy Judge Steven Rhodes wants to hear from the law firms before determining the reasonableness of fees charged during the case.

Detroit stands to realize an estimated $10 billion or more in economic benefits, Lennox wrote. She said the law firm helped Detroit slash total liabilities by about 50 percent, unsecured liabilities by 75 percent, which lets Detroit dodge a projected $3.9 billion deficit over the next decade.

Plus, the restructuring plan approved by Rhodes will enable the city to reinvest $1.7 billion over the next decade on public safety and other services, Lennox added.

“The results obtained in Detroit's case are unprecedented both in their scope and in the short time in which they were achieved,” Lennox wrote.

The cost of Detroit’s bankruptcy has been controversial throughout the case. Mayor Mike Duggan’s administration raised new concerns late last year, worrying that rising costs could derail the city’s restructuring.

Jones Day on Friday said its costs were far below fees charged in other large restructurings, including American Airlines, Kodak and the Tribune Co.

Jones Day’s fees and expenses also represent a “significantly smaller” portion of Detroit’s restructured debt than in other municipal bankruptcies, including Jefferson County in Alabama and Stockton, Calif., Lennox wrote.

“Compared to other large and complex bankruptcy restructurings, the cost to the city for the services Jones Day has provided has been entirely reasonable,” Lennox wrote.

Two more law firm representing Detroit pension funds on Friday also defended fees charged to the city during the landmark bankruptcy case, calling them reasonable and fair.

The firms included Clark Hill, which represented Detroit pension funds, and Pepper Hamilton, which worked on certain legal issues for the city’s primary bankruptcy law firm, Jones Day.

The bankruptcy bill totaled $170.2 million before a state reimbursement of $5.29 million, which brought the total paid from the city’s general fund to $164.91 million.

Among the top paid professionals are investment banking firm Miller Buckfire, $22.82 million; restructuring firm Ernst & Young, $20.22 million; and operational restructuring firm Conway MacKenzie, $17.28 million.

Dentons US LLP, a law firm that represented the official committee of city retirees, received $15.41 million.

The city’s two pension funds paid attorneys at Clark Hill $6.25 million and financial advisers at Greenhill & Co. $5.71 million.

The filing shows bankruptcy mediators were paid $980,000, though none of the money went to federal judges who served on the mediation team. Most of the money went to mediator Eugene Driker’s law firm.

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