The Work

May 18, 2009 12:28 PM

Trustee Objects to Kirkland Hire in General Growth Bankruptcy

Posted by Brian Baxter

UPDATE: 12:23 p.m., May 21. Despite the objections of the U.S. trustee, Reuters reports a U.S. bankruptcy judge has ruled that General Growth can retain both Kirkland & Ellis and Weil, Gotshal & Manges as counsel during its Chapter 11 case.

When General Growth Properties--the second-largest owner of shopping malls in the U.S.--filed for Chapter 11 last month, the company retained an all-star team of bankruptcy lawyers from Weil, Gotshal & Manges and Kirkland & Ellis to serve as restructuring counsel.

Now Reuters reports that U.S. trustee Diana Adams is objecting to Kirkland's role in the case, claiming the firm is conflicted and that two qualified co-debtors counsel will perform "excessive and duplicative services" and increase costs "exponentially" for General Growth.

According to an 18-page motion filed with U.S. bankruptcy judge Allan Gropper in Manhattan, Adams and trial attorney Greg Zipes claim that Kirkland and Weil have similar levels of bankruptcy and business reorganization expertise that precludes the need for both firms to be retained by the debtor.

Adams also specifically cites two "disqualifying conflicts" that several Kirkland clients have with six General Growth subsidiaries. According to a copy of Kirkland's engagement letter filed with the bankruptcy court, one of those conflicts involves of counsel Kenneth Starr, who is representing Los Angeles-based developer Caruso Affiliated Holdings in unrelated civil litigation against a General Growth mall in Glendale, Calif.

Kirkland has maintained in court filings that it has resolved the conflicts with its clients and that Weil will handle any proceedings in which current Kirkland clients might be adversely affected.

Weil business, finance and restructuring chair Marcia Goldstein is serving as counsel to General Growth along with restructuring partners Gary Holtzer and Adam Strochak. Kirkland bankruptcy bigwig James "Jamie" Sprayregen and restructuring partners Anup Sathy and David Seligman also are advising the bankrupt retail REIT.

In the motion objecting to Kirkland's retention, the U.S. trustee states that a $500,000 retainer paid to the firm in January has been "replenished" seven times and increased fives times prior to its bankruptcy filing, pushing Kirkland's total bill for prepetition fees and expenses over $5 million.

Weil itself has billed General Growth for more than $14.22 million in fees and expenses prior to the bankruptcy filing, the trustee states. That puts the debtors' total legal bills at nearly $20 million before the first postpetition applications for compensation have been filed.

Weil has had its own disagreements with the U.S. trustee over debtors counsel appointments in recent weeks. Earlier this month U.S. trustee Roberta DeAngelis objected to Weil's role on the Trump Entertainment Resorts bankruptcy because of an alleged conflict stemming from a previous Chapter 11 case.

But the firm negotiated an agreement with the U.S. trustee on the matter and late last week a U.S. bankruptcy court in Camden, N.J., approved Weil as co-debtors counsel to Trump Casinos along with McCarter & English.

A hearing on the objection by trustee Adams in the General Growth case is scheduled for Wednesday afternoon in U.S. bankruptcy court in Manhattan.

General Growth owns and operates some of the best known retail establishments in the country, such as Chicago's Water Tower Place, Honolulu's Ala Moana Center, Manhattan's South Street Seaport, and the Grand Canal Shoppes at The Venetian in Las Vegas.

The company's official committee of unsecured creditors is being represented by Akin Gump Strauss Hauer & Feld partner Michael Stamer.

Make a comment

Comments (1)
Save & Share: Facebook | Del.ic.ious | | Email |

Reprints & Permissions


Report offensive comments to The Am Law Daily.

Why did the firm retain two law offices?

The comments to this entry are closed.

By: TwitterButtons.com

From the Newswire

Sign up to receive Legal Blog Watch by email
View a Sample