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We are seeing more litigation in connection with fees of investment bankers and especially various incentive and bonus arrangements. In one case, the court reviewed a restructuring advisor's fees for reasonableness and applied the lodestar analysis, and rejected the advisor's argument that its fees should be determined on a flat fee basis because that is the way it had historically charged. The Court also noted that, even so, the advisor had gotten $750/hour. In re Citation Corp., 493 F. 3d 313 (11th Cir. 2007). See also Howard v. High River L.P., 369 B.R. 111 (S.D.N.Y. 2007) (generally reducing fee and denying $20MM transaction fee for investment bankers when services not successful; court not bound by prepetition arrangement on fees); In re Crafts Retail Holding Corp., 2007 WL 4078297 (Bk. E.D.N.Y. 2007) (attorneys for financial advisor who were not retained or appointed by court cannot receive fees, and cannot obtain compensation in the form of an out of pocket expense of the financial advisor; court notes important protections in retention process including fee applications and time records, and also notes that services involved the appointment of the financial advisor and prosecution of its fee application and did not benefit the estate).
Several recent cases involve opinions which reject expert testimony on value issues. In re Iridium. Operating LLC, 373 B.R. 283 (Bk. S.D.N.Y. 2007) (long discussion of expert testimony on insolvency and adequate capitalization; rejection of debtor's expert testimony); In re Granite Broadcasting Corp., 369 B.R. 120 (Bk. S.D.N.Y. 2007) (rejecting expert testimony when not supported by actual offer of preferred stockholders); In re Oneida Ltd., 351 B.R. 79 (Bk. S.D.N.Y. 2006) (rejecting testimony because discount was too low and lack of credibility because expert retained on a contingent fee basis); In re Neilson Nutraceutical, Inc., 2006 WL 3438582 (Bk. D. Del. 2006) (expert used metric not generally accepted by experts, and different from 3 other experts in case); In re Med Diversified, Inc, 346 B.R. 621 (Bk. E.D.N.Y. 2006) (expert's application of metrics was subject to manifest, pervasive and systematic bias). The Oneida case also was one of several "loan to own" cases. Another was In re Radnor Holdings Corp., 353 B.R. 820 (Bk. D. Del. 2006) (no subordination or recharacterization).
Court finds Bankruptcy Court finding of solvency at time of $29.5MM preferential transfer to banks was not clearly erroneous. Bankruptcy Court credited bank's expert over debtor's expert, and the data was consistent with marketplace data. Also, bank produced additional evidence regarding the state of the debtors' business that rebutted the statutory presumption of insolvency, and the court rejected arguments that the projections relied on by the bank's expert were not reasonable or reliable when prepared. In re American Classic Voyages Co., 384 B.R. 62 (D. Del. 2008).
Counsel continue to have difficulty in clearly obtaining preapproval of their retention arrangements under section 328(a) with its sharply limited scope of review only if
©2009 Jonathan M. Landers
