For a mid-sized Eastern law firm that traces its origins to a leading Philadelphia attorney and art patron of the 19th century, "In re: Owens Corning, et al" was the most lucrative bankruptcy case in its 85-year history.
Saul Ewing LLP, the Toledo company's top bankruptcy lawyers in its six-year Chapter 11 case, has billed or was paid $51 million through Aug. 31, a review by The Blade of court documents found.
In a case filled with multimillion-dollar hauls by elite law firms - including one in Toledo - the Ewing firm's payday was the largest, according to records at U.S. Bankruptcy Court in Wilmington, Del.
And although all the bills aren't in, bankruptcy law scholars say that OC's case, while not the priciest, ranks among an exclusive group of big-company cases that have generated massive fees for lawyers.
Through Sept. 30, the Toledo Fortune 500 firm reported in securities filings that it spent $419 million on legal services, consultants, financial advisers, and other Chapter 11 expenses over the course of the case that began in October, 2000. The firm didn't say how much of that went to lawyers.
But at one point or another, the company was paying about a dozen law firms, including Saul Ewing; co-counsel Sidley Austin LLP, of Chicago; and law firms appointed by the judge to represent various creditor groups. Individual lawyers in those firms, many on prestigious Park Avenue in New York, billed as much as $835 an hour.
Jason Saragian, OC spokesman, said, "The company is very proud of how we managed our Chapter 11 case. We believe our case was the largest and most complex asbestos case in history."
And, he noted, fee payments were scrutinized by Bankruptcy Judge Judith Fitzgerald; an auditor specially appointed by the judge for that purpose; creditors; and representatives of the U.S. bankruptcy trustee in Philadelphia.
OC, with $6.3 million in annual sales and 20,000 employees worldwide, is the nation's largest insulation producer. It filed Chapter 11 to resolve more than $9 billion in claims expected from people exposed to asbestos insulation made by the firm decades ago. The firm exited Chapter 11 Oct. 31 as part of an $8.6 billion case settlement.
In a case involving a firm as large as OC, legal fees were not excessive, said the head of the Ewing firm's bankruptcy group. The lawyers not only represented OC at bankruptcy hearings and in creditor negotiations, but also served as case coordinator.
"I think we were very efficient," said Norman Pernick, who became the face of OC at bankruptcy hearings in Delaware.
For Saul Ewing, "It's the largest [bankruptcy] case we've ever done," Mr. Pernick said.
The firm has 280 lawyers in eight offices in four states. It was founded in 1921 but traces its origins to John G. Johnson, a top Philadelphia lawyer of the late 1800s who donated his large art collection to the Pennsylvania Academy of Fine Arts.
The end of the OC case means the loss of a chunk of business that generated more than $8 million a year over the last six years.
"It was a nice piece of revenue for us," Mr. Pernick said. The firm did not hire additional lawyers specifically for the case.
Five members of the 25-person bankruptcy practice were assigned full time to OC. Colleagues helped out. Periodically, the firm brought in lawyers with other specializations from Saul Ewing offices outside Delaware, Mr. Pernick said.
The firm was scrupulous about not overstaffing the case or, as is common at some large firms, assigning newly hired lawyers to give them a learning opportunity, Mr. Pernick said.
Ironically, Saul Ewing was not OC's original choice to lead the case. The firm was hired after Skadden, Arps, Slate, Meagher & Flom LLP in New York - the nation's third-largest law firm - was forced to withdraw as lead bankruptcy counsel early in the case because of a conflict of interest, lawyers said. Skadden continued to advise OC, however.
A Toledo law firm, Shumaker, Loop & Kendrick LLP, was among those that worked on the case.
Hired in late 2001 to work with OC on issues related to its business operations, real estate holdings, and reorganization, Toledo's largest law firm billed or collected $3.9 million in fees and $105,000 in expenses through Aug. 31, court documents show.
Compared with fees charged by some East Coast firms in the case, Shumaker, Loop, was a relative bargain. For example, the firm charged $260 an hour for services of H. Buswell Roberts, Jr., a top lawyer there who specializes in bankruptcies.
At least five firms were paid or billed for more than $10 million through Aug. 31. Other top earners were:
Kaye Scholer LLP, New York, counsel to a lawyer appointed by the court to represent the interests of future asbestos-injury claimants, $18.6 million; Debevoise & Plimpton LLP, New York, OC lawyer that specialized in asbestos issues, $13.5 million; Sidley Austin, Chigaco, $12.5 million; and Anderson Kill & Olick PC, New York, employer of J. Andrew Rahl, lawyer to unsecured creditors committee, $11.5 million.
The amounts include expenses, which typically represented 5 to 7 percent of charges. An expense statement submitted by Sidley Austin for June, which is typical for top firms in the case, included $15,000 for airfare, $9,900 for hotels, $2,400 for meals, $6,400 for taxis and car rental, and $3,000 in copying charges at 10 cents a page. In all, the firm billed OC in June for $58,000 in expenses and $1.7 million in legal fees.
The size of payments to Skadden Arps, which also played a major role in the early years of the case, weren't readily available in court documents.
Legal experts disagree about whether OC paid too much to lawyers.
Legal fees in a bankruptcy case as long as OC's at a firm with similar assets should be about $72 million, according to a formula developed by law professor Lynn LoPucki.
OC appears to have exceeded that. "These are really high for a firm of that size," said Mr. LoPucki, a visiting professor at Harvard University who normally teaches at the University of California at Los Angeles.
But he conceded it is difficult to estimate appropriate fees given the length of OC's case. "There have only been two or three six-year bankruptcies the last 20 years," he said.
"Owens Corning is a huge case," said Professor Robert Lawless, of the University of Illinois law school.
"These fees may seem large when considered in isolation, but you have to consider them in the context of the size of the case and the time it took."
Contact Gary T. Pakulski at: email@example.com or 419-724-6082.