"Significant Fee Enhancement" Request Almost Causes Judicial Heart Attack

There's been a lot of discussion lately about the bills submitted by receivers and trustees in bankruptcy to compensate lawyers for marshaling up assets.

David notes Vanessa Blum's excellent coverage of the recent hearing before Judge Moreno, where Roberto Martinez argued for an $11 million "enhancement" for his and KTT's work on the MBC receivership.

As reported by Vanessa, the Judge in his usual manner had something funny and charming yet witty to say:

“I needed a defibrillator,” he joked. “We’re talking about a lot of money.”

He's right, but to be fair I pulled the final fee app, which you can review here.

Roberto basically argues that his firm and KTT agreed to discount their rates back in 2004, have not sought any increases during the five years of the receivership, and did incredible work very efficiently which resulted in a big distribution to investors. Accordingly, they ask for 10 percent of what they collected as a bonus, which apparently was an option contemplated in the original fee agreements.

Michael Hanzman, who served as counsel in a related class-action case involving MBC, approves:

“If you want to attract the best and the brightest people to take these cases, you have to pay a reasonable fee,” Hanzman said. “This is not a pro bono case.”

I think the Judge's comments highlight where he is going with this.

However, I wonder whether these firms could have billed at incrementally higher rates over the last five years and possibly recouped a chunk of this bonus back through regular applications to the Court without ever garnering this kind of headline?

Indeed, consider what's going on with our friend Allen Stanford and his receivership, which is just off the ground and has accrued over $36 million in fees -- or $100,000 a day. Not good.

The Judge also referenced the Supreme Court's recent dismay over how much it costs to litigate cases nowadays, though that involved a fee-shifting statutory question not at issue here.

My own take is this is probably not the best case or the best time to make a request like this, and you definitely do not ever want to make Judge Moreno's eyes boggle if you can avoid it.

Let's see what he does with it.