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Judge Okays Blockbuster Legal Fees

28 Jun, 2011 By: Erik Gruenwedel

Bankruptcy court overrules concerns by Justice Department representative regarding excessive billing and expenses

The U.S. Bankruptcy Court judge overseeing the Chapter 11 filing of Blockbuster Inc. June 28 ruled the movie rental chain can pay its legal fees and related expenses — despite objections raised by a U.S. Trustee.

Judge Burton Lifland, in his ruling, ordered Blockbuster Inc. pay 80% of nearly $9 million in legal fees to 12 firms who handled its bankruptcy from Sept. 23, 2010, through Jan. 31, 2011. The judge also mandated Blockbuster pay more than $220,000 in related in expenses.

Blockbuster Inc. is the remaining legal entity following the asset and brand sale to Dish Network Corp., which incorporated Blockbuster LLC as a wholly owned subsidiary.

In a June 17 filing, Tracy Hope Davis, the U.S. Trustee for Region 2, filed a motion objecting to the scope of the fees charged by nine firms, including Weil, Gotshal & Manges LLP, Cooley LLP and PricewaterhouseCoopers LLP, among others.

The United States Trustee Program is an agency of the DOJ that is responsible for overseeing the administration of bankruptcy cases and private trustees.

Specifically, Davis said the billable hours submitted by the firms warranted scrutiny “given that every dollar expended on legal fees results in a dollar less that is available for distribution to the creditors.”

According to bankruptcy law, any interim fees awarded or paid are payable on account and are subject to the court’s review at the time of final fee applications.

Blockbuster Inc. through May 1 reported a cumulative pre-tax net loss from continuing operations of $224 million. The rental icon generated a net loss after reorganization items, income taxes and the loss from the sale of assets to Dish ($581.9 million) exceeding $774 million.

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