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Capital Business
Posted at 02:16 PM ET, 07/17/2012

Howrey creditors could get a cut of $44.5 million


Howrey Bakerbotts LLP’s former office in Washington. (Jeffrey MacMillan - Capital Business)
Creditors of Howrey, the Washington law firm that filed for bankruptcy protection in 2011, may soon get a cut of $44.5 million, following a judge’s approval of attorney’s fees in a large contingency fee case handled by former Howrey lawyers.

A federal judge in Tennessee last week approved $48.3 million in attorney’s fees in an antitrust lawsuit that former Howrey attorneys — now at Baker Hostetler — brought on behalf of dairy farmers who alleged they had been victims of price fixing. The lawsuit, known as the “milk case,” ended in a $145 million settlement between the dairy farmers and two defendants, Dean Foods and dairy industry trade group Southern Marketing Agency, neither of whom conceded wrongdoing. A third of that settlement will go toward paying the attorneys, according to an order signed by Judge J. Ronnie Greer on Wednesday.

Of the $48.3 million, $44.5 million will be split between Baker Hostetler and the Howrey estate, said Allan Diamond, the trustee in the Howrey bankruptcy who represents the Howrey creditors. Diamond said he’s currently negotiating with Baker Hostetler management to figure out how the money will be allocated, and they could reach an agreement within 60 days.

A spokeswoman for Baker Hostetler declined to comment Tuesday.

The milk case is one of 27 contingency fee cases and hundreds of other pending matters that former Howrey attorneys continued to work on after they left Howrey for other law firms. They raise the question of whether attorney’s fees recovered in those matters should go toward repaying Howrey’s creditors, or stay with the new law firms. $44.5 million is the single largest potential recovery to date for the Howrey estate.

At the time the Howrey attorneys on the milk case — led by antitrust litigator Bob Abrams, who now chairs the antitrust group at Baker Hostetler — left last year for Baker Hostetler, Howrey had invested $40 million into litigating the case, Diamond said.

At that time, the Howrey dissolution committee reached an agreement with Baker Hostetler that entitled Baker Hostetler to a percentage of future recoveries, in exchange for taking in Howrey attorneys as the firm was dissolving, Diamond said. He declined to provide details about the agreement, which has not been made public.

“I’m now looking at this [agreement] and asking, ‘Was it fair to the creditors of Howrey that the members of the dissolution committee cut this deal with Baker, giving Baker this substantial interest in recoveries?’” Diamond said. “That’s the question on the table.”

Citibank, Howrey’s largest creditor — and sole secured creditor — is owed about $40 million, according to bankruptcy filings.

By  |  02:16 PM ET, 07/17/2012

 
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