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Law Firms Line Up for Potentially Huge MF Global Payday

With MF Global’s assets being attacked on all sides, a protracted litigation battle seems likely and law firms are moving in to secure their piece of the pie. As the 8th largest bankruptcy in U.S. history, and with $600 million dollars missing from customer accounts, lawyers from multiple practice groups, including white collar defense, are attempting to get in on the action. John Pattor, a former attorney at Weil, Gotshal, & Manges and current University of Michigan professor, said that the bankruptcy assignment “will be the biggest golden egg” in this litigation. MF Global has already hired Ken Ziman, a partner at Skadden, Arps, Slate, Meagher & Flom to represent the corporation in the bankruptcy proceedings. Skadden billed about $42 million dollars in its handling of the Refco Chapter 11 bankruptcy filing.

International firm Dewey &LeBoeuf has already secured the representation of the creditors, and multiple plaintiff firms have registered domain names utilizing “MF Global” and “fraud” or “lawsuits”. UCLA is already estimating that the legal bills relating to the bankruptcy may approach $120 million, utilizing a calculator that factors in the various elements of a filing.

One barrier to a high fee for Skadden could be a rapid liquidation of MF Global’s assets. In order to continue some basic operations, the company would need to acquire debtor-in-possession, or DIP, financing. DIP financing allows a corporation in Chapter 11 to continue its essential functions while performing a reorganization. Without a DIP loan, a quick fire sale of all of MF Global’s assets could be the end result.

DIP financing won’t stop the class actions and shareholder derivative suits though, which can potentially garner millions more in legal fees. With the apparent breakdown in corporate governance and risk management procedures, executives may be open to personal liability.

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