CHICAGO — The firm that shuttled Detroit through the country's largest municipal bankruptcy to date said it cut its legal fees by $18 million and defended the remaining $58 million tab as reasonable given the nature of the case.
"The city's Chapter 9 case indisputably has been the largest and most complex in history," said Jones Day in a court filing defending its fees. "The tasks presented not only were complex, numerous and multi-disciplinary but also were on the cutting edge in untested areas of municipal law and Chapter 9 practice," the firm said, calling the city's creditors "sophisticated and well-financed."
Jones Day's disclosure, filed on Jan. 16, follows an order by U.S. Bankruptcy Judge Steven Rhodes for all firms to disclose and defend their legal fees, which collectively climbed to $170 million. Rhodes had previously ordered the parties into mediation with the city to hammer out discounts on final fees.
Jones Day was one in a series of law firms, advisors and consultants that represented the city, its retirees, and pension cuts that agreed to discounts during mediation.
Jones Day's $57.9 million fee is "dwarfed" by the benefits of the bankruptcy and the ultimate restructuring, the firm said in its filing. "The city stands to realize an estimated total of at least $10 billion in purely economic benefits through the Chapter 9 case," the filing said.
The firm's fees include $4.2 million incurred before the bankruptcy, plus $51 million in fees and $2.7 million in expenses from the beginning of the case in July 2013 through its completion in December 2014. The $17.7 million reduction includes a 10% discount on all professional fees, which the firm agreed to as part of its original contract with the city.
Rhodes appointed a fee examiner during the case and the city also conducted its own monthly reviews of the firm's fees in addition to the final mediation order, Jones Day said in its
Separately, Miller Buckfire, the city's investment banking and restructuring firm,
The firm renegotiated its original contract in the spring of 2014, agreeing to shift from a percentage-based fee to a flat fee of $28 million, of which 80% was payable after the judge confirmed the plan of adjustment and the remaining 20% after the consummation of the restructuring.
"Both the per-mediation fees and the reduced fees were finalized late in the city's restructuring process, when the city and state had a good understanding of the work Miller Buckfire had already done, the work remaining, and the value Miller Buckfire has brought to this process," the firm said.
The firm continues to work with Detroit, according to the filing.
Lazard Freres & Co., LLC, which represented Detroit retirees in the case, said it agreed to a 37% cut, bringing its final fee to $5.6 million.
