At least one firm has requested hourly raises for work in Title III bankruptcy
By The Star Staff
With the start of a new year, some of the firms and individuals working in the five Title III bankruptcy cases filed under the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) are raising their hourly rates.
Zolfo Cooper LLC2, financial adviser to the Official Committee of Unsecured Creditors of all Title III Debtors, other than the Puerto Rico Sales Tax Financing Corp. (COFINA by its Spanish acronym) and the Public Buildings Authority, was the first to announce that as of Jan. 1, 2021, rates will increase, reflecting firm-wide annual rate increases.
More firms and professionals are expected to follow suit. Court-appointed fee examiner Brady Williamson said in July that fees had already reached the $735 million mark. As of December, they were expected to surpass the $800 million mark.
Depending on the official, the hourly rate increases sought by professionals at Zolfo Cooper were expected to go up from as little as 3 percent to as high as 12 percent. For instance, the hourly rate for Eric Deichmann, the firm’s director who charges about $735 per hour, is expected to go up to $825 per hour, or 12 percent.
“The foregoing hourly rates do not take into account the 20 percent end of case reduction to which Zolfo Cooper has agreed pursuant to its retention order,” the firm said.
Increasing rates is not that easy. In 2018, Judge Laura Taylor Swain, to avoid excessive rates, established certain presumptive standards, which the fee examiner must apply in the review of fee applications filed in the Title III cases. The standards were suggested by the fee examiner initially.
She said professionals seeking fees or expenses through the Title III fee process were not supposed to submit reimbursement requests for any other firm’s professional services, whether or not those subretained services are characterized as independent contractor, expert witness, or consultant fees.
The fee examiner, she said, will continue to identify hourly rate increases and will evaluate such increases for reasonableness on a timekeeper-by-timekeeper basis taking into account a number of factors, including but not limited to whether the change is consistent with the terms of any contract between any professional and a debtor or commonwealth entity.
The fee examiner takes into account whether the increase is the result of a promotion; whether the individual timekeeper has advanced within their organization based on demonstrated developing skill, experience, or competency within that timekeeper’s organization and whether the increase is at or below the reported rate of inflation as published by the Bureau of Labor Statistics.
He also takes into account whether the budget and certification process mandated by PROMESA directly affects professional compensation and whether and to the extent to which the professional has agreed to a fee reduction or discount.
Every professional fee applicant proposing an hourly rate increase for any reason other than pursuant to the terms of a contract must file a sworn certification signed by the professional verifying that the professional’s client authorized the rate increase, both with respect to effective date and specific amount.