November 07, 2024
Business

Great Northern’s attorneys haggle over their paychecks

BANGOR – Attorneys involved in the Great Northern Paper Inc. bankruptcy case are nickel-and-diming it over how much each should be paid.

From whether an attorney can charge 15 cents for every page they photocopied or 10 cents, to whether an attorney can charge $35 for listening to a telephone message from a reporter, attorneys are going over each others’ bills with a fine-toothed comb and are arguing that some expenses are excessive.

Only the invoices of court-approved attorneys and professionals such as financial advisers and management consultants are being put under the microscope, and the people who are peering through the glass at every dollar are attorneys working on behalf of specific creditors.

All told, invoices of more than $2.54 million have been submitted for payment from Great Northern’s bankrupt estate. Early on in the bankruptcy, $2 million was set aside to pay only court-approved attorneys and professionals, and now their invoices are subject to the approval of U.S. Bankruptcy Judge Louis H. Kornreich.

Also, former Great Northern president and co-owner Lambert Bedard and his son’s consulting firm, Bilodard Inc. of Quebec, want to be paid $65,000 for their services from the same $2 million fund.

Bangor attorney Gary Growe, who serves as trustee for Great Northern’s bankrupt estate, is objecting to Bedard and Bilodard being paid anything right now because they may be the subject of future lawsuits, according to court documents.

Bedard, Bilodard, the court-approved attorneys and other professionals will have a chance to defend their invoices beginning at 1 p.m. Wednesday, Oct. 29, in U.S. Bankruptcy Court in Bangor.

A number of the invoices are being challenged by one attorney who is arguing that law firms should not profit from making photocopies, sending or receiving faxes or performing computer-assisted research.

“The issue is significant because bankruptcy courts universally forbid professionals to profit from in-house disbursements such as photocopying, facsimile communications and research, while the American Bar Association permits lawyers to enhance such charges to reflect some reasonable overhead recovery component,” wrote Robert Checkoway, assistant U.S. trustee in Portland.

The computer-assisted research charge appears on an invoice submitted by Mintz Levin, a Boston law firm hired to take over the bankruptcy case in early February after new management was put into place at Great Northern. The law firm has submitted a bill for $806,226, plus almost $110,000 for expenses.

The entire bill is not being challenged, just a request for $26,300 to cover computer-assisted research charges that Checkoway said he believes are an overhead cost that shouldn’t be expensed separately.

Checkoway said most law firms pay a fixed rate to access research services such as Westlaw and LexisNexis, and those companies “make no secret of the fact” that their software will allow subscribers such as Mintz Levin “to charge clients higher retail connection rates.”

Great Northern’s bankruptcy case undoubtedly is resulting in a financial windfall for attorneys and other professionals who put in thousands of hours of work in less than five months earlier this year.

Great Northern entered Chapter 11 bankruptcy protection on Jan. 9, and its two mills in Millinocket and East Millinocket were sold in late April. Great Northern’s bankruptcy status was converted to Chapter 7, or liquidation of remaining assets, in late May.

At the case’s peak in February and March, 37 attorneys would be sitting in bankruptcy court all day when the court was in session. Ten of the attorneys actively participated in the process, and one of them commented afterward that the collective per-hour rate of the group was about $10,000.

Not all of the 37 attorneys are being paid from the bankrupt estate, just the dozen or so approved by the court. The other attorneys were to be paid from their clients, who were major creditors of the paper company and wanted representation in court. Boeing Capital Corp., Great Northern’s primary creditor, stated in court documents that it paid its attorneys $719,000, excluding expenses, between Jan. 9 and May 22.

Under bankruptcy law, court-approved attorneys and professionals are given a higher priority for payment from all of the other creditors because, without their services, the bankruptcy case could not proceed for the betterment of creditors and employees, according to court experts.

But work performed on behalf of the creditors by a Portland attorney and a Portland law firm is being challenged by Boeing, which lent Great Northern’s bankrupt estate the $2 million to cover professional fees. Boeing was paid more than $40 million that it was owed from Great Northern through the sale of the mills, but still is owed about $10 million, according to court documents.

Jay Geller, an attorney representing the official committee of creditors, and the Nixon Peabody law firm, which advised Geller, have submitted invoices for services and expenses totaling $540,240.

In Boeing’s objection to the committee’s fees, which the creditor called “excessive,” attorney Alex Terras said the amount of work invoiced by the creditors committee was not necessary and yielded no specific result for creditors. In comparison, Terras said, the work performed by him and other attorneys on behalf of Boeing, and by Great Northern’s attorneys at Mintz Levin, was exhaustive. He said they negotiated and sold two paper mills in a matter of months, yet their bills were not that much more than those submitted by the creditors committee.

“Creditors counsel accomplished nothing, and, if nothing could be accomplished, failed to discover this sad fact,” wrote Terras, in his objection. “The time recorded is simply excessive. The critic is never paid as well as the tenors, nor the umpire as well as the slugger.”

Geller, however, said in court documents that his fees were reasonable because a number of his suggestions on how to approach the bankruptcy, such as installing a new management team at the mills, were approved by Gov. John Baldacci and others in closed-door meetings. Geller said he then performed legal work to help make those plans happen. He said he also tried, through a couple of lawsuits, to protect the rights of unsecured creditors, but his efforts were challenged by Boeing, “which controlled the purse strings” of Great Northern throughout the bankruptcy case.

“Although unsecured creditors have not received to date, and may never receive, a distribution of their claims, the committee was the architect of the strategy that was pursued throughout the balance of the Chapter 11 case,” Geller wrote.

Plus, Geller added, he is not billing for sending faxes to attorneys located in the same town as him.


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