The Work

July 15, 2010 6:22 PM

Cleary Killing It in Nortel Bankruptcy

Posted by Brian Baxter

Once one of the largest telecommunications companies in North America, Nortel Networks filed for bankruptcy in January 2009. Since then the Toronto-based company has helped its Chapter 11 counsel at Cleary Gottlieb Steen & Hamilton and several other firms earn a fortune in bankruptcy fees.

Earlier this week Nortel, which has spent the past 18 months selling off assets, filed a reorganization plan to repay creditors. Bloomberg reports the company has raised about $2.8 billion from asset sales, but has yet to detail how it plans to distribute those funds to creditors.

As noted in a recent feature story by sibling publication Corporate Counsel, breaking up what used to be one of Canada's largest companies has involved the efforts of hundreds of lawyers. And as lead debtor's counsel to Nortel, Cleary has been the beneficiary of much of that work.

A recent examination of bankruptcy court records by The Am Law Daily shows that the firm has billed Nortel for more than $76 million in fees and expenses from January 2009 through April of this year. James Bromley, the head of Cleary's global bankruptcy and restructuring practice, was named an Am Law Dealmaker of the Week last year for taking the lead advising Nortel on its asset sales. (Bromley did not respond to a request for comment.)

Bromley and fellow financial restructuring partner Lisa Schweitzer are billing $995 and $905 per hour, respectively, in leading a massive team from the firm working on Nortel's Chapter 11 case, according to bankruptcy court records. Over 300 Cleary timekeepers--more than 200 of them lawyers--have billed on the Nortel matter, according to a recent quarterly compensation request filed by the firm in the case.

According to the most recent Am Law 100 financial data, Cleary had gross revenues of $965 million last year. The firm also has 992 lawyers, according to the survey. That would mean about 21.5 percent of the firm's lawyers have worked on the Nortel case, and almost 6 percent of Cleary's gross revenues in 2009 would stem from Nortel-related billings (the firm's 2009 earnings from Nortel amount to $56.7 million).

Cleary has represented Nortel--whose most valuable remaining asset is a patent portfolio valued at roughly $1.1 billion--on the sale of key assets to Nokia, Ericsson, and Avaya, while helping the company overcome objections to some of those sales in bankruptcy litigation. But the firm is not the only one racking up the billables for Nortel.

Linklaters and Ogilvy Renault are serving as European and Canadian counsel to Nortel, respectively. Delaware's Morris, Nichols, Arsht & Tunnell is serving as local counsel to the company in its U.S. bankruptcy case. The debtor has also employed Crowell & Moring, Shearman & Sterling, and Jackson Lewis as special counsel.

Akin Gump Strauss Hauer & Feld, cocounsel to Nortel's official committee of unsecured creditors, has billed for more than $14.3 million in fees and expenses from January 2009 through April. Delaware's Richards, Layton & Finger has billed $685,192 for its work as cocounsel to the committee. Ashurst is serving as the committee's European counsel.

The mounting legal fees have not come without scrutiny. Late last month, Nortel sought to cut off health care and benefits to more than 4,000 former employees in the U.S. to save money, focusing attention on how much the company has been paying its advisers.

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This is disgraceful! Disabled Nortel employees stand to lose all of their benefits at the end of this year while fat cat lawyers reap huge payouts from Nortel. Disabled employees may have their very lives shortened as a result of this action, but the lawyers will just move on to their next victims. In addition many thousands of Nortel pensioners will suffer tremendous cuts in pension payments, while the Government turns a blind eye and lets the lawyers feast on the carcase. Is this the New Canada?

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