‘Staggering’ legal fees in the Boy Scout bankruptcy case

A lawyer negotiating a multi-billion dollar bankruptcy resolution filed by the Boy Scouts of America billed $ 267,435 in a single month. Another billed $ 1,725 ​​for each hour worked. New lawyers fresh out of law school bill at an hourly rate of over $ 600.

The high-stakes bankruptcy case has attracted dozens of lawyers, negotiating how to compensate tens of thousands of people who have filed sexual abuse claims. Lawyers and other professionals – both those representing the Boy Scouts and some representing victims – have submitted claims for fees to the court that have now exceeded $ 100 million. In August, they could reach $ 150 million.

The high fees charged to the Boy Scout Estate, which are money taken from what might be offered to victims, has become a growing point of contention. US bankruptcy judge Laurie Selber Silverstein, who is overseeing the case, called the totals “mind-boggling.” In a case filed last week, one of the insurance companies that will be responsible for paying victims, Century Indemnity Company, asked the judge to withhold part of the legal fees until they can be reviewed further. in depth.

Tancred Schiavoni, a lawyer who represents the insurer, said the problem was not just hourly billing rates, which he said are unusually high, but that law firms are deploying large numbers of members of the well paid auxiliary staff while making little progress towards resolution.

“It’s sickening,” Schiavoni said in an interview. “It’s the legal system going off the rails – quite simply going off the rails. All that money could have been used to fix the problem.

The Boy Scouts’ law firm White & Case reported that 14 lawyers were charging more than $ 1,000 an hour in a recent court case. Company representatives did not return calls seeking comment on the charges, but in the files they described them as reasonable in light of the complexity of the bankruptcy, the costs of comparable labor, and the thousands of hours needed to properly process the case.

Founded in 1910, the Boy Scouts have grown under a rare congressional charter to become an organization that has shaped the values ​​of millions of children. Allegations of abuse began to surface decades ago, but the organization was able to keep the reports largely out of public view until lawsuits help expose cases detailing a long history. abuse.

Amid the growing legal deluge, the Boy Scouts filed for bankruptcy last year, signaling the group’s intention to establish a trust to compensate victims. The organization estimated the likely payment potential of abuse claims at $ 2.4 billion to $ 7.1 billion, according to bankruptcy case records, while a committee representing victims assessed the total of claims to more than 100 billion dollars.

Regardless, the case is far bigger than other recent sexual abuse cases, including those against the Catholic Church and USA Gymnastics.

An estimated 85,000 victims across the country have reported cases of abuse dating back decades. Lawyers fought over how much local Scout councils, which hold many valuable assets, should contribute to the compensation fund. A network of insurance companies jostle in the midst of it all, wondering if all the claims that have flooded the court are legitimate.

While attorney fees in other areas of legal practice are often well under $ 1,000 an hour, the world of expensive bankruptcy courts has become a particularly lucrative practice for top law firms. Some attorneys in the recent USA Gymnastics bankruptcy litigation requested fees of $ 1,000 per hour or more.

Legal fees also exceeded $ 1,000 an hour in running a multibillion-dollar trust for victims that was created after a 2019 settlement to compensate people in California who were affected by the fires. of forest charged to Pacific Gas & Electric. In this case, many victims are still awaiting payments, but documents filed by the court show that the trustee and several people from his legal support team have regularly received substantial hourly charges.

Lynn LoPucki, a law professor at the University of California at Los Angeles who oversees major bankruptcy cases, said the legal fees in the Boy Scouts bankruptcy and similar cases appeared excessive. Mr LoPucki said many large bankruptcy cases over the past few years have seen attorneys’ fees increase, although he said he had never seen a lawyer’s bill of $ 1,725 ​​from l. time – as a court lawyer asked in the Boy Scouts case.

He said fees over $ 1,000 an hour have become almost routine in such cases, which are often handled by the same relatively small group of judges and law firms, as many large bankruptcies tend to be filed in a select group of federal district courts. Given the nature of bankruptcy, lawyers and their clients are essentially spending other people’s money, Mr. LoPucki said, with the costs spread among all parties involved in the outcome, versus what happens. in standard civil litigation, when businesses pay their own legal bills.

“Companies that pay their own costs don’t pay as much as they do in bankruptcy,” LoPucki said.

It’s not just the lawyers asking for large payments in the Boy Scouts case. Financial consultants also billed over $ 1,000 per hour. And the $ 150 million in advance fees to be paid in the bankruptcy process do not include the contingency fees that will be paid to lawyers for victims who have filed a complaint. Emergency agreements generally allow lawyers to receive between 30 and 40 percent of a judgment.

Paul Mones, who represents around 400 clients and is among those who will receive emergency payments once the case is over, said the scale of the costs associated with the bankruptcy process was shocking. But he said the number of lawyers and other professionals is likely proportional to the size and complexity of the case. He said insurance companies that had been collecting premiums for many years were now looking for ways to limit their exposure.

“I think it’s a bland argument on their part to say that they are concerned about the victims at the end of the day,” Mones said.

The court in the bankruptcy case appointed a fee examiner to review the legal fees. That examiner, Justin Rucki, who previously worked as a debtors’ attorney, declined to discuss details, but noted that part of the fee covers legal costs that would be incurred even if the Boy Scouts had not gone bankrupt, as a trademark dispute with the Girl Scouts.

Mr Schiavoni, the lawyer for the insurance company, said the fee review process is not designed to explore what he sees as the real issue – whether the fees are commensurate with the value of services. In his legal brief last week, he proposed that the court withhold 20% of the requested costs to be paid only after the case is completed and that the court can assess whether the costs are reasonable given the scope of the resolution.

Boy Scout leaders have said they hope a bankruptcy plan can be put in place by the end of the summer. But with such deep divisions over the scope and approach to resolving the Boy Scouts’ bankruptcy, it is possible that victims will vote to reject the organization’s proposals and delay any resolution.

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