TMST, Inc., 8% Senior Notes (TMA.GB)

[Enterprising Investor]

Application for Compensation (of Contingency Fee) for Susman Godfrey LLP, Special Counsel, -, Fee: $7, 500, 000.00, Expenses: $0.00. (8/20/14)

2. With the Settlement Agreement in place Jurisdiction and Venue , the Trustee seeks approval to compensate Susman Godfrey from the proceeds of the Settlement pursuant to the terms of the Retention Agreement approved by the Court in the Order Approving Chapter 11 Trustee’s Application for Entry of an Order Authorizing the Employment and Retention of Susman Godfrey LLP As Special Litigation Counsel to the Trustee [Dkt. No. 1316] (the “Employment Order”) in an amount equal to Seven Million Five Hundred Thousand Dollars ($7,500,000.00), the capped contingency fee amount the Trustee agreed to pay Susman Godfrey .

Before any believes the compensation is too high, the Trustee points out that "Susman Godfrey is one of the nation’s leading litigation boutiques specializing in high stakes commercial litigation..."

7. With respect to compensation, the Trustee sought to engage Susman Godfrey on the following variable contingency fee basis: twenty percent (20%) of the gross sum recovered by a settlement up to and including September 30, 2011; thirty-three and one third percent (33-1/3%) of the gross sum recovered by a settlement that is agreed upon, or other resolution that occurs, on or before the 60th day preceding any trial or arbitration setting that is then in place; and forty percent (40%) of the gross sum recovered by settlement or otherwise after that date, plus reimbursement of reasonable out-of-pocket expenses and disbursements incurred in connection with the litigation.

8. The Court held a hearing on the Initial Application on April 21, 2011. No interested party objected to the Initial Application or the contingency fee arrangement provided for therein. Importantly and notwithstanding the aforesaid, any contingency fee awarded to Susman Godfrey would not exceed $7,500,000. In the Initial Application, the Trustee submitted that this contingency fee arrangement was reasonable.

[...]

26. There have been no developments in the Barclays Case since the entry of the Employment Order that were incapable of being anticipated when the contingency arrangement was approved and/or render the contingency fee arrangement between the Trustee and Susman Godfrey improvident. “A settlement prior to trial is capable of being anticipated.” Merry-Go-Round, 244 B.R. at 337. A pretrial settlement and a recovery of $23 million in the Barclays Case were capable of being anticipated. See id. (concluding pretrial settlement of $185 million though highly unlikely when the contingency fee was approved was not incapable of being anticipated and explaining, “it would be ironic to deprive counsel of the benefits of its contingency fee agreement because counsel was successful in obtaining a highly successful result against great odds”). Most importantly, the amount sought to be paid to Susman Godfrey under the Retention Agreement – the capped contingency fee amount of $7.5 million - was contemplated and thus foreseeable because the Retention Agreement expressly set the amount as the ceiling fee capable of being paid to Susman Godfrey for their legal services in the event of a recovery. Indeed, absent the cap, Susman Godfrey would otherwise be entitled to compensation in the amount of $9.2 million, as this matter settled within sixty (60) days of trial.

27. Without the skill, time, and reputation expended by Susman Godfrey in the Barclays Case, the Trustee has no doubts that the Settlement would have been unachievable. The contingency fee to be paid to Susman Godfrey under the Settlement Agreement was and remains more than reasonable. Indeed, if the Retention Agreement did not include a cap of $7.5 million, the Trustee would enthusiastically advocate for the payment of Susman Godfrey in an amount equal to 40% of the Settlement amount or $9.2 million. As it stands, the Trustee enthusiastically advocates for approval of this Application and the approval of the payment of $7.5 million to Susman Godfrey upon the Trustee’s receipt of the $23 million in proceeds from the Settlement.

http://dm.epiq11.com/TMI/Document/GetDocument/2513354