Opening Statements

Lehman by the Numbers


$1.4 billion is the projected amount of fees that lawyers, accountants and other professionals may earn from working on the Lehman Brothers bankruptcy.

$53 million Milbank, Tweed, Hadley & McCloy’s estimated fee as counsel for the creditors committee.

$613 billion Estimated amount of Lehman Brothers debt.

Weil, Gotshal & Manges is projected to earn $209 million as Lehman Brothers’ bankruptcy counsel.

Just how much do the lawyers involved in the Lehman Brothers bankruptcy stand to benefit?

If the projections of law professor Lynn LoPucki and re­searcher Joseph Doherty are correct, the major legal players may come out nine figures richer.

LoPucki is a professor at UCLA and also a visiting professor at Harvard; Doherty directs UCLA Law’s Empirical Re­search Group. Over the last six years, the two have been studying the professional fees generated in large bankruptcy cases in order to predict professional fees in future bankruptcies.

To do so, they have collected every court order for professional fees in 101 bankruptcy cases, including those involving Enron, Adel­phia and WorldCom. A regression analysis identified the factors that helped determine those fees.

According to LoPucki, the key to determining fees is the bankrupt’s assets, but factors such as the length of the case, the number of documents listed on the docket and the number of professionals the court has authorized to work on each case also come into play.

So far the pair’s fee projections have been fairly on target. Says Doherty: “Every time we add a new case to our file it’s generally within the range of our predictions. It’s not right on the nose, but very few cases end up outside of our prediction range.”

While the Lehman bankruptcy case is bigger than any other case in their data set, LoPucki says their analysis shows that the predicted professional fees, as a percentage of overall expenses, may not be as large as other bankruptcy cases.

According to LoPucki and Doherty’s analysis, debtors counsel Weil Gotshal may be seeing a nine-figure fee, but that amounts to less than a quarter of all expected fees and expenses.

As counsel to the creditors committee, Milbank Tweed may only be getting 6 percent of the pie.

In both cases, those percentages are less than other fee awards for debtors and creditors counsel.

Doherty says these percentages bear out their research, which shows that there is a scale effect in bankruptcy fee awards in cases as large as that of Lehman Brothers.

“No matter how big the fees get, they always end up being a declining percentage of assets of the case.”

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