Kirkland and Ellis renews fight to stay on lucrative bankruptcy

Kirkland & Ellis will be in court today on the bankruptcy of Caesars Entertainment's casino operations, fighting to stay on a case that has already netted it $21 million in fees.

For the second time this year, the Chicago law firm will challenge claims made by Caesars' creditors that conflicts of interest should bar Kirkland and its top bankruptcy attorney, James Sprayregen, from representing the operating company in court. Bankruptcy Judge Benjamin Goldgar ruled in May that Kirkland could continue on the case, but in October lawyers for Jones Day said newly uncovered documents showed Kirkland had misled the court.

Millions of dollars are on the line. If Goldgar rules against Kirkland, “the immediate effect is they lose their ability to work on the file and lose the fees that would be generated,” said George Spellmire, a professional malpractice lawyer in Chicago. Kirkland is one of the most-profitable firms in the country, with $2.15 billion in revenue in 2014 and $3.5 million in profit per partner.

“They got quite a fight going on over there,” he said.

In addition to the fees it already has received, Kirkland requested the court to approve $13 million for work done between June and September, according to a filing yesterday.

Kirkland spokeswoman Olivia Clarke did not return a message seeking comment on the potential revenue loss, but did say in an Oct. 30 statement that the creditors' assertions were “without merit.” “Mr. Sprayregen testified truthfully and accurately at the retention hearing,” it said. “Kirkland & Ellis is disinterested and fully qualified to represent the debtors, as the bankruptcy court previously ruled.”

But “there are gaping holes in Kirkland's defense of its conduct,” according to a Nov. 16 filing by Jones Day lawyers, who represent the casinos' creditors. While Kirkland was supposed to be representing Caesars Entertainment operating company, it advised the company's corporate parent in August 2014 on a plan to invalidate the subsidiary's legal claims against it—claims that represented much of the subsidiary's value. The fact that operating company and corporate parent “would join forces to destroy that asset … is shocking.”

Creditors have been concerned since the beginning of the case that both Caesars Entertainment operating company and Kirkland would “manage the case in a manner that benefits CEOC's parent company, CEC, and the powerful private equity firms—Apollo and TPG—that control it.” Apollo Global Management and TPG Capital are both clients of Kirkland, which is known for its top-flight private equity practice.

But conflict of interest disputes are complicated in bankruptcy cases, where “it's not just A versus B,” said Francis Buckley, a bankruptcy partner in the Chicago office of Thompson Coburn. “You're dealing with a number of different constituent interests.”

Given the possibility that another entity is controlling the debtor in this case, “I can see why there would be concern about who's really calling the shots,” Buckley said. But bankruptcy cases hinge on a lawyer's ability to gain leverage, and “that's what going on there: the creditors are trying to gain an advantage there. It doesn't mean what they're seeking isn't appropriate … but everybody has an interest to advocate in a bankruptcy. Especially when something is as heavily litigated as this.”

The operating unit of Caesars Entertainment filed for bankruptcy protection in January after struggling with debt from a 2008 leveraged buyout. It owns and manages numerous casinos, notably Caesars Palace on the Las Vegas strip.

Article from:- http://www.chicagobusiness.com

 

 

 

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