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July 8, 2009 3:46 PM

The Bankruptcy Files: Up First, Lenny Dykstra's Legal Bills

Posted by Brian Baxter

If The Am Law Daily were so inclined, we could probably dedicate an entire column to the creditors list in Lenny Dykstra's personal bankruptcy filing.

The ex-baseball star known to Mets and Phillies fans as "Nails" astonished many by gaining a well-regarded reputation as a financial wizard in recent years. He invested in a Southern California car wash chain that he later sold for millions, bought a mansion once owned by Wayne Gretzky, launched a glossy magazine called The Players Club, and was featured on HBO's Real Sports with Bryant Gumbel for his savvy business strategies.

Now more than a year later Dykstra is getting nailed on all sides. TheStreet.com dumped his stock column, his financial acumen was questioned by Forbes, his home went into foreclosure, his magazine collapsed as employees revolted, the legal woes and creditors started piling up, and HBO returned for a follow-up story documenting Dykstra's downfall.

On Tuesday Dykstra filed for Chapter 11 in U.S. district court in San Fernando Valley, Calif., listing less than $50,000 in assets and between $10 million and $50 million in liabilities. Dykstra also managed to accrue quite a few creditors along the way, among them his many lawyers.

Dykstra's 14-page bankruptcy filing shows that he owes nearly $2 million in fees to K&L Gates and O'Melveny & Myers.

K&L Gates has waged several legal battles for Dykstra but withdrew its representation of the former ballplayer in October, claiming it had not been paid. Dykstra later told ESPN.com that he had already paid K&L Gates litigation partner David Schack in Los Angeles $4 million in fees. Dykstra's bankruptcy filing states that K&L Gates is still owed $1.5 million in fees. (Schack did not immediately respond to a request for comment.)

High-profile O'Melveny litigator Daniel Petrocelli has also represented Dykstra on several engagements over the past few years, including a suit filed by a Manhattan-based accounting firm and another filed by a former business partner to whom he sold his car wash business. Dykstra's bankruptcy filing states that O'Melveny is owed $342,493 in fees. (Petrocelli also did not immediately respond to a request for comment.)

But the two firms shouldn't feel alone getting left in the lurch by Lenny. Court records show that Dykstra also owes bankrupt Doubledown Media, publisher of the now-defunct Players Club, $350,000, and New York literary agent David Vigliano another $229,000. Vigliano sued Dykstra in January.

Dykstra's bankruptcy counsel is solo practitioner M. Jonathan Hayes in Northridge, Calif.

In other Chapter 11 news...

Evident Technologies

Once one of upstate New York's first companies dedicated to developing nanotechnology--the study of atomic and molecular matter--Evident Technologies filed for bankruptcy in Albany on Monday.

The Troy, N.Y.-based company stated that mounting legal fees associated with an ongoing patent suit in Texas had forced it to file for Chapter 11 after efforts to refinance its debt outside of bankruptcy failed.

Evident was sued by Invitrogen, a Carlsbad, Calif.-based life sciences company now known as Life Technologies, in April 2008 over products made from nanocrystals called quantum dots.

Evident's counsel in the case, IP firm Kenyon & Kenyon, is listed in court documents as one of the company's largest creditors with $951,184.88 owed in attorneys' fees.

Richard Weisz, a bankruptcy and commercial litigation partner with Hodgson Russ in Albany, is serving as Chapter 11 counsel to Evident. The firm had not yet filed billing information with the bankruptcy court.

CCS Medical Holdings

Medical supplies provider CCS Medical filed for bankruptcy in Delaware on Wednesday, seeking to secure $10 million in debtor-in-possession financing in order to help trim its debt load from $522 million to $200 million.

CCS Medical, which is owned by New York-based venture capital firm Warburg Pincus, stated that it had reached an agreement with lenders on a restructuring plan.

Bankruptcy court filings reveal that the Clearwater, Fla.-based company owes $1.3 million to Ropes & Gray, which lists New York-based patent litigation partner Bradford "Jim" Badke as the contact for the debt.

Willkie Farr & Gallagher business reorganization and restructuring partner Michael Kelly in New York is serving as bankruptcy counsel to CCS Medical. Delaware counsel is being provided by Robert Brady, chair of the bankruptcy and corporate restructuring practice at Young Conaway Stargatt & Taylor.

Neither firm had yet to file billing information with the bankruptcy court.

The Oceanaire

Upscale seafood restaurant chain The Oceanaire filed for Chapter 11 protection in Dallas on Sunday, announcing the closures of four underperforming locations in Charlotte, Cincinnati, Philadelphia, and Seattle. (The Emerald City seems to be taking its Oceanaire closure particularly hard.)

The Minneapolis-based chain--because nothing says seafood like a landlocked state, albeit one with 10,000 lakes--stated that its restaurants in 12 other cities would remain open. The company said it had reached an agreement with secured lenders on a restructuring plan and that it hoped to emerge from bankruptcy later this year.

Duane Morris business reorganization partners John Weiss and Rosanne Ciambrone in Chicago are serving as Chapter 11 counsel to The Oceanaire. Haynes and Boone bankruptcy partner Robert Albergotti in Dallas is local bankruptcy counsel.

Neither firm had yet to file billing information with the bankruptcy court.

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the part on the CCS medical holdings are truly surprising, but what are your thoughts on the motives of bankruptcy?

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