Jones Day cuts $17.7 million from Detroit legal bills

The Jones Day law firm — lead counsel for the city of Detroit in its historic bankruptcy case — agreed to cut $17.7 million from its legal bills to the city, according to a court document filed on Friday to justify the firm's charges.

After the discount, Detroit was left with a $57.9 million tab from Jones Day, which included $2.7 million in expenses for things like lawyers' meals and hotel stays in Detroit.

Jones Day's bills were the most expensive among those from Detroit's dozens of bankruptcy consultants that altogether charged the city about $170 million.

Jones Day's disclosure on Friday was one of several court filings from the consultants explaining their fees to Judge Steven Rhodes, who retains the power to decide whether the fees were fair.

Jones Day and other firms said their fees were reasonable.

"This was the most rigorous and transparent fee process ever utilized in a Chapter 9 case and should be given due and appropriate consideration by the court," the firm said in its filing. "Jones Day has reduced its invoices by almost one-quarter of all fees and expenses incurred during the Chapter 9 case."

With the help of Jones Day and other consultants, Detroit's bankruptcy case ended in December and will allow Detroit to slash $7 billion in liabilities and reinvest $1.7 billion over 10 years in services.

Rhodes had invited bankruptcy professionals to consider revealing how much they reduced their fees before he makes a decision.

The consultants' fees were subject to court-ordered mediation. Mayor Mike Duggan, who participated in the mediation, was concerned in November that the city's bankruptcy fees could approach $200 million, threatening the city's ability to meet terms of the city's bankruptcy exit plan.

Jones Day said the mediation factored into its $17.7 million discount, but exactly how much of the discount resulted from mediation was not specified.

Other bankruptcy consultants to the city also detailed their discounts in court filings on Friday. Some firms disclosed discounts before and after mediation. Other simply shared the total discount Detroit was afforded.

Miller Buckfire, an investment banking firm, cut its bankruptcy bills by more than $6 million as a result of the mediation, according to court records. The final bill of nearly $23 million also reflects negotiations prior to mediation to reduce the firm's charges. Miller Buckfire worked on several crucial aspects of Detroit's case, including the development of the so-called "grand bargain."

Pepper Hamilton, a law firm the city hired in June 2013, was paid $2.69 million for its work. The fees represent a 10% discount from the firm's 2013 rates. (When the firm's rates rose 10% last year, Detroit's fees stayed at 2013 levels and included the 10% discount agreed to when Pepper Hamilton was hired.) Unlike other firms, Pepper Hamilton did not specify in its court filing a dollar amount Detroit saved through the firm's discount.

Dentons' bills totaling $15.4 million came after a discount of $3.8 million, according to the firm's court filing. Dentons was lead counsel for the court-appointed retiree committee. The firm was hired to protect the interests of retirees who faced cuts to pension checks and health coverage. Dentons said it agreed to concessions in mediation, but those terms are confidential.

The fees in Detroit's bankruptcy case are difficult to compare to other bankrupt cities, Dentons said in its court filing.

"There has not been another chapter 9 case of the size of Detroit's chapter 9 case that would serve as a reasonable comparison," the court filing read.

In July 2013, the city of Detroit became the largest municipality to file for bankruptcy protection, citing debts and projected long-term obligations of $18 billion. The city, with about 700,000 residents, saw its population and tax base evaporate over the last 50 years, drastically affecting its ability to deliver basic city services without borrowing. At one time, Detroit had more than 1.5 million residents.

Contact Joe Guillen: 313-222-6678 or jguillen@freepress.com. Follow on Twitter @joeguillen.