Law Fees: $26 Million Is Plenty

Lawyers who helped Orange County get back some of the money lost in its bankruptcy have been paid $26 million so far. That’s plenty, particularly for a case involving public money.

The law firm of Hennigan, Mercer & Bennett wants an additional $48-million payment because of its performance in a complex case, even though its compensation was increased from earlier levels during the litigation. The team of lawyers deserves the county’s thanks, but no bonus.

When Orange County filed for bankruptcy in 1994 because of a $1.6-billion loss in its investment fund, it was entering uncharted waters. The disaster was the biggest municipal bankruptcy ever. It was uncertain how much could be recovered from firms the county accused of helping cause the bankruptcy. The county’s own lawyers were out of their depth.

Several years and many lawsuits later, the county recovered $865 million, far more than anyone expected. Should the lawyers get the bonus, their total would be $74 million. That’s about 8.5% of the money collected, not a huge percentage compared with the one-third or so often collected in civil lawsuits. However, the attorneys would not be taking their bonus from a private corporation or an individual but from funds earmarked for schools, cities and public agencies.

The firm’s compensation depended on hourly fees, the complexity of the case and results achieved. The lawyers received several increases in their hourly billings, approved by the official who administered the county’s bankruptcy litigation, former state Treasurer Thomas W. Hayes. At one point their hourly pay was $450.

Hayes rightly turned down the lawyers’ request for a higher payment. Retired Judge John G. Davies, who in an unofficial capacity subsequently reviewed the fees at the lawyers’ request, said they deserved the extra funds.

Now, one of two federal judges overseeing the cases and about to wrap up the litigation will decide the bonus request. A firm “no” is in order.