The Boston-based counsel for the NMI Retirement Fund has disclosed that the filing of Chapter 11 bankruptcy petition was already being talked about with the Fund's outside counsel, Braddock Huesman, since September 2011.
The Fund filed the Chapter 11 bankruptcy petition in the U.S. District Court for the NMI on April 17, 2012. The filing surprised many CNMI government officials and lawmakers as well as Fund retirees and members.
Attorney Jeremy B. Coffey, one of the partners for the law firm Brown Rudnick LLP, said the Fund turned its consideration to restructuring its obligations through a proceeding under Chapter 11 of the Bankruptcy Code after exploring and exhausting all other options.
Coffey said the Fund then contacted their law firm in Boston in September 2011 to discuss the implications of a potential Chapter 11 filing.
Also discussed was how the tools provided under the Bankruptcy Code might be used to enhance the Fund's estate and modify obligations to Fund members so as to prevent the Fund's collapse, said Coffey in his law firm's application for payment.
The Fund has repeatedly announced that its assets will be depleted by July 2014.
Coffey said that given the many unusual aspects of the Fund and its obligations, the prospect of a Chapter 11 filing raised numerous novel, complex issues to be considered. He said their law firm researched relevant issues and participated in many conference calls with the Fund and its outside counsel, Huesman.
Coffey and Huesman reportedly went to the same college and graduated together.
Coffey claimed that between September 2011 and March 2012, their law firm provided the Fund services with an approximate value of $187,000 yet they did not charge the Fund for these services.
Once the Fund made the decision to pursue Chapter 11 petition, Coffey said, their law firm and the Fund agreed on a discounted rate structure.
Under the agreement, Coffey said, their attorneys whose hourly rates range from $325 to $955, would all be filled at a flat “blended rate” of $475 per hour.
In addition, Coffey said, their law firm voluntarily discounted the billing rates of its paralegals by 20 percent.
He said their law firm agreed to cap at $125,000 the amount it would be paid in any particular month during a Chapter 11 proceeding in an effort to assist the Fund in managing its cash flows and expenses on a month-to-month basis while the Chapter 11 proceeding remains pending.
Coffey said their law firm agreed that it would not incur fees and expenses in excess of $750,000 without prior consent from the Fund's board.
He said they further agreed that, if their law firm's fees and expenses were to exceed $750,000 during the course of the Chapter 11 case and the Fund's board does not approve the fees above the cap, either party could terminate their engagement.
Attorneys' fees and expenses being demanded by the lawyers involved in the Chapter 11 case have reached a total of $844,650.93, covering the period from April 17, 2012, to June 13, 2012.
Of that amount, Coffey and his law firm's demand payment is $719,293.50 for professional services plus reimbursement of $46,644.32 in expenses, for a total of $765,937.82.
Coffey listed 10 lawyers, including himself, and two paralegals that incurred the $704,293.50 in attorneys' fees. Coffey's fee reached $117,895.
Huesman, the Saipan-based counsel for the Fund, on the other hand, is demanding $9,201 in attorney's fees plus reimbursement in the amount of $2,046 for a total of $11,247.
Colin Thompson, the Saipan-based counsel for the Official Committee of Unsecured Creditors, is seeking total compensation of $2,341.50. Don Jeffrey Gelber, the Hawaii-based counsel for the creditors' committee, is demanding total compensation of $65,124.61.