Complaining about air travel has become a cliché — but it’s still fun. The other night, while flying out to San Francisco for an event I’m doing on Monday (to which you’re invited), I was delayed by two and a half hours — due to a plane turned “biohazard.”
My experience — with United Airlines, which I generally like — pales in comparison to what the novelist Gary Shteyngart experienced recently with American Airlines. He wrote about in a New York Times piece that’s horrifying and hilarious.
But some folks have much warmer feelings for AA — namely, the lawyers and law firms that are making millions from the American Airlines bankruptcy case. Let’s find out how much they are seeking in fees….
AMR Corp., the bankrupt parent of American Airlines, is paying nearly $20 million a month in fees and expenses to 34 law firms, consultants and advisers, recently filed bankruptcy documents show.
AMR’s legal and consulting fees total $77,676,873 for the period April 1 through July 31, say documents filed in U.S. Bankruptcy Court for the Southern District of New York.
Wow — $78 million is a nice chunk of change. You could buy a Gulfstream jet or two with that kind of money (although a 747 will set you back quite a bit more
, and don’t even think about a Dreamliner (UPDATE (11:55 PM): Actually, as noted by a commenter, the list price of a Dreamliner is lower than that of a 747.).
But let’s not be unsophisticated; the cost is understandable, given the size and nature of the case. As the Tulsa World notes, American operates in 250 cities in 40 countries and has been in Chapter 11 for almost a year. And it isn’t like AMR is flying coach in terms of its advisers:
AMR’s consultants include four bankruptcy law firms (Weil Gotshal & Manges LLP, Dewey & LeBoeuf LLP, Harris Finley & Bogle PC and Yetter Coleman LLP), four law firms specializing in labor and bankruptcy law (Ford & Harrison LLP, Groom Law Group, Morgan Lewis & Bockius LLP and Mullin Richter & Hampton LLP), and three aircraft restructuring consultants (AvAirPros, Debevoise & Plimpton LLP and SkyWorks Capital LLC).
That’s some first-class legal talent — led by Weil Gotshal, which seems to have a hand in every major bankruptcy matter. The firm famously handled the Lehman Brothers bankruptcy back in 2008, a matter that dragged on for more than three years and generated more than $350 million in fees for WGM.
Compared to Lehman, the American Airlines case amounts to a bag of airline pretzels. For its work in the AMR Corp. bankruptcy, Weil is seeking $18,387,010 in fees and expenses during the period from April 1 through July 31; according to its fee application, Weil lawyers and staff spent 30,612.35 hours on the case. If you divide the $18 million over the 30,000 hours, you get the lofty figure of $600 an hour (but note that the $18 million includes expenses as well as fees, and that the hours figure includes both lawyer and staff hours.)
Here’s more specific info about the WGM billing rates:
Five Weil Gotshal attorneys – Harvey R. Miller, Thomas A. Roberts, Steven A. Newborn, Stephen Karotkin and Stuart J. Goldring – are billing AMR at $1,075 per hour, while two of the firm’s lawyers are charging $1,050 an hour, another two are billing at $1,025 per hour and three more at $1,000 an hour, court records say….
“It was an extremely difficult and enormously time-consuming case,” Miller, lead attorney in the Lehman case, told Reuters. “I had to increase my high blood pressure pills.”
Miller, dean of the bankruptcy bar, has worked on every major case under the sun — Lehman, GM, Texaco, Global Crossing, Trump. If American Airlines is driving up his blood pressure, you know it’s got to be bad.
Harvey Miller might be superhuman, but he’s not the only one working on this case. For shepherding an airline through bankruptcy, it takes a village:
Weil has 86 lawyers working on AMR’s case, billing the company from $450 to $1,075 per hour. In addition, 47 paralegals, clerks, library staff and other non-legal staff are costing AMR from $80 to $320 per hour for their work on the case, court filings show.
So presumably Weil first-years bill out at $450 an hour these days. Who says junior associates aren’t profitable?
Weil isn’t the only Biglaw shop that’s flying high thanks to American. For its work during the same April-through-July period, Paul Hastings seeks $8,859,960 and Debevoise & Plimpton seeks $8,457,971.
If Gary Shytengart’s account is even half-true, flying on American Airlines these days can be a pretty miserable experience. Working on the carrier’s bankruptcy case is probably also less than fun — but at least it pays well.
UPDATE (11:55 PM): Just to clarify, as noted in the comments, these appear to be the amounts that AMR Corp.’s advisers are seeking in their fee applications. What they actually receive will turn on bankruptcy court approval — and will probably be significantly lower.
(If you’re interested, flip to the next page for a more detailed list of law firms working on the AMR Corp. case.)