Supervisors Won’t Appeal Bankruptcy Lawyer Bonus

The Board of Supervisors has voted not to appeal a federal judge’s decision to award Hennigan, Mercer & Bennett an extra $3 million for the law firm’s handling of Orange County’s bankruptcy litigation.

The move formally clears the last hurdle in the distribution of the $865 million in settlements the county and 200 government agencies and school districts reached with Wall Street investment companies accused of aiding in the county’s 1994 financial collapse.

“If we appealed, we would take a huge risk,” Supervisor Todd Spitzer said.

The settlement payments were held up by a last-minute demand in September from the law firm, which sought a $48-million bonus on top of the $26 million in fees it had already received. U.S. District Judge Gary L. Taylor ruled earlier this month that the firm deserved a bonus but only of $3 million.

Spitzer said that a contract signed by former state Treasurer Thomas W. Hayes, the appointed representative for the county and other investors, “left the door open” for extra compensation for the law firm.

He said appealing the case could mean another judge might rule for even higher fees for the firm.

J. Michael Hennigan, a founding partner in the law firm, said he’s glad all sides can now move forward.

“This paves the way for the distribution of the [settlement] that people have been waiting for anxiously,” Hennigan said Tuesday. “We are very pleased with that.”

Hennigan, Hayes and the pool of public investors have agreed not to appeal Taylor’s ruling. The county’s decision to join in the agreement means Hayes is now free to submit his final report to the bankruptcy court. Hayes said Tuesday he will do so within the next two weeks.

The disbursement of the settlement money is expected to begin early next year.