The Work

May 3, 2011 6:05 PM

Howrey: Still Doing Business?

Posted by Brian Baxter

Despite its dissolution in mid-March, Howrey is seeking a flat fee contract worth at least $10.5 million to do work for New York State's North Country Power Authority (NCPA).

The NCPA was created by legislation signed into law last October by former New York State governor David Paterson, a move that expedited the formation of a public utility system for 24 municipalities in St. Lawrence and Franklin counties in upstate New York.

In December, Paterson named the new chairman of the NCPA, State University of New York at Canton physics professor James Monroe. Monroe is a past president of the Alliance for Municipal Power (AMP), an organization that pushed for the creation of the NCPA.

Since January, the NCPA has gradually been taking shape. The governor is in charge of appointing all nine board members, seven of which are suggested or designated by the towns and villages that comprise the NCPA.

It's those board members who currently are being asked to sign a contract with Howrey for legal services provided to AMP and the NCPA "in connection with the legislative process, preliminary feasibility studies, energy studies, and PSC proceedings, and other projects relevant to establishing a public utility," according to a copy of the proposed agreement provided to The Am Law Daily by an anonymous source.

The nine-page contract calls for the AMP and NCPA to retain Howrey as counsel "to represent it in connection with the establishment of the NCPA and the acquisition of assets necessary to operate an electric power authority created by the state legislature." The contract says Howrey has been engaged under a "success-based contingency agreement" and states that the NCPA board will retain no other law firm outside of upstate New York shop Lekki Hill Duprey & Bhatt to represent it "without the prior written consent of Howrey."

Peter Lekki, a founder of Lekki Hill and special counsel at the firm, is representing the NCPA's board in its negotiations with Howrey. He was out of the office on Tuesday and unavailable for comment on the proposed contract. Robert Best, Jr., current chairman of the AMP and an NCPA board member, did not respond to a request for comment. (The NCPA currently has only five board members; New York governor Andrew Cuomo must appoint the rest.)

Monroe, the NCPA's current chairman, tells The Am Law Daily that Howrey's relationship with the AMP dates back to late 2005/early 2006. He says the firm "did a great job getting a law passed by the legislature that allowed us to have something we've been working for almost 17 years, which was a municipal power company."

Howrey's work for the AMP paved the way for the creation of the NCPA, Monroe says. He credits antitrust of counsel Kenneth Anderson with handling the bulk of the regulatory work. All of Howrey's legal work was done on contingency, Monroe says, noting that the firm has yet to be paid for its efforts. (Anderson did not respond to a request for comment.)

"The NCPA does not have any contract with anybody yet, although I think the general feeling is that we will compensate them for the representation they did for AMP," says Monroe, adding that those fees will likely approach $3 million. "So while [those fees] were for AMP, we as the NCPA will accept those charges and obligations."

But Howrey also wants to continue doing work for the NCPA, according to a copy of the proposed contract provided to The Am Law Daily. The unsigned contract, which cites agreements with the AMP on February 17 and 18 of this year, calls for the NCPA to pay Howrey between $10.5 million to $15.5 million depending on the "closing of the sale of bonds or other financing to fund the acquisition of assets by the NCPA...which shall include any out-of-pocket expenses incurred by Howrey."

The NCPA currently is negotiating the terms of a contract with Howrey, Monroe says. Given the tenuous status of those negotiations, he declined to comment on the contract's terms, outside of confirming that the Lekki Hill firm is advising the NCPA. The NCPA needs outside lawyers to negotiate the terms of its power contracts as the utility gets up and running. So far, no other firms outside of Howrey has pitched the NCPA to handle future legal work, according to Monroe.

The name of Howrey litigation partner Robert Green, Jr., a member of the firm's dissolution committee, appears on the proposed contract with the NCPA. Green did not respond to a request for comment. Both he and antitrust counsel Anderson have not yet joined new firms. Latham & Watkins restructuring partner Peter Gilhuly, who is advising Howrey as the firm winds down its operations, also did not respond to a request for comment.

According to a draft copy of the minutes of a meeting of the NCPA's negotiations committee in Potsdam, N.Y., on April 14, both Green and Anderson (who took part in the proceedings via speaker phone) addressed questions about Howrey's ability to take on new assignments.

Green told the NCPA's negotiations committee that Howrey could legally enter into a new contract and that there was no legal impediment to having a downsized firm handle future work for the NCPA, according to a draft of the minutes. Both of the NCPA's outside attorneys--Peter Lekki and associate Robert Poyer of Syracuse's Hancock Estabrook--agreed with that assessment when asked about it by NCPA board members. (Monroe declined to comment on the meeting because he was not present for it.)

Howrey has the appropriate structure and financial conditions to carry out the contract to conclusion, Green told the NCPA board members, stating that the firm possesses the necessary financial resources and staff members to successfully complete its obligations to its client.

On March 31, Citibank, a secured lender owed roughly $75 million by Howrey, cut most payroll funding to the firm, resulting in a series of mass layoffs and subsequent WARN Act lawsuits being filed against Howrey. Citi is providing funding for a select group of individuals assisting a dissolution committee for the firm, which is also facing an involuntary bankruptcy petition by several unsecured creditors.

It's not just millions of dollars in legal work that Howrey will be responsible for if it gets a new contract with the NCPA. The firm's obligations under the proposed agreement call for it to pay certain consultants for a required environmental study and to negotiate a settlement with National Grid to purchase an electrical distribution system in the region.

Meeting minutes show that Green told the NCPA committee that he was confident most costs could be kept down, but he expressed reservations about the environmental study. He requested that the NCPA provide additional compensation to Howrey if the cost exceeded $250,000.

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What's wrong with the other attorneys representing the NCPA that they're not telling them to run in the opposite direction? And they're not even talking to other firms? This makes no sense.

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