Debtors Response to Objections Re Retention

7/31/2019 Debtors Response to Objections Re Retention

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TOGUT, SEGAL & SEGAL LLPOne Penn PlazaSuite 3335New York, New York 10119(212) 594-5000Albert TogutScott E. Ratner

Lara R. Sheikh

Proposed Counsel to theDebtor and Debtor in Possession

UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK---------------------------------------------------------------X

:In re: : Chapter 11

:DEWEY & LEBOEUF LLP, : Case No. 12-12321 (MG)

:Debtor. :

:---------------------------------------------------------------X

DEBTORS OMNIBUS REPLY TO OBJECTIONSTO DEBTORS RETENTION APPLICATIONS

12-12321-mg Doc 177 Filed 07/05/12 Entered 07/05/12 16:35:46 Main DocumentPg 1 of 32


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TABLE OF CONTENTS

PRELIMINARY STATEMENT................................................................................................... 2

REPLY............................................................................................................................................ 7

A. The Proposed Retentions Do Not Overlap and Should Be Approved asNecessary to the Administration of the Debtors Estate ............................................ 7

B. The K&A Retention.......................................................................................................... 9

(i) Overview............................................................................................................... 9

(ii) K&As Services Are Not Duplicative of Other Firms Services................... 11

(iii) Application of pre-petitioner retainer to first interim fees .......................... 13

(iv) Disclosure of representation of party in interest........................................... 14

(v) Application of Section 330 to K&As Fees and Expenses............................. 14

C. The Proskauer Retention............................................................................................... 14

D. The Sitrick Retention ..................................................................................................... 17

E. The On-Site Retention ................................................................................................... 18

(i) Overview............................................................................................................. 18

(ii) The On-Site Receivables Liquidation Agreement is a ContingentFee Contract that is Appropriate for Pre-Approval...................................... 19

(iii) On-Site's Services are Necessary and Do Not Overlap WithAny Other Professionals Services................................................................... 21

(iv) On-Site's Retainer Is an Advance Payment and MinimumGuarantee of Compensation............................................................................. 23

(v) The JPMorgan Chase Engagement Has Been Completed............................ 24

(vi) None of the Advance Goes to Pay Expenses ................................................. 24

F. The DSI Retention .......................................................................................................... 24

G. Proposed Application of Togut Firms Pre-Petition RetainerIs Reasonable and Appropriate.................................................................................... 25

CONCLUSION........................................................................................................................... 30



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TOGUT, SEGAL & SEGAL LLPOne Penn PlazaSuite 3335New York, New York 10119(212) 594-5000Albert TogutScott E. Ratner

Lara R. Sheikh

Proposed Counsel to theDebtor and Debtor in Possession

UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK---------------------------------------------------------------X

:In re: : Chapter 11

:DEWEY & LEBOEUF LLP, : Case No. 12-12321 (MG)

:Debtor. :

:---------------------------------------------------------------X

DEBTORS OMNIBUS REPLY TO OBJECTIONSTO DEBTORS RETENTION APPLICATIONS

TO THE HONORABLE MARTIN GLENN,UNITED STATES BANKRUPTCY JUDGE:

Dewey & LeBoeuf LLP, as debtor and debtor in possession (DL, theFirm or the Debtor) in the above-captioned case (the Chapter 11 Case), by its

proposed counsel, Togut, Segal & Segal LLP, respectfully submits this omnibus reply

(Reply) to the objections (each, an Objection and, together, the Objections) to the

Debtors applications to retain professionals (collectively, the Retention Applications);

Objections have been filed by: (1) the Pension Benefit Guaranty Corporation (PBGC)

to the Debtors applications to employ (a) Keightley & Ashner LLP (K&A) as special

pension benefits counsel (the K&A Application) and (b) Proskauer Rose LLP

(Proskauer) as special employment and litigation counsel (the Proskauer

Application) [Docket No. 141]; (2) the United States Trustee (the UST) to the



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Debtors applications to employ (a) Togut, Segal & Segal LLP (the Togut Firm) as

bankruptcy counsel (the Togut Application); (b) Proskauer; (c) K&A; (d) Goldin

Associates, LLC (Goldin) as special consultant (the Goldin Application); (e) On-Site

Associates, LLC (On-Site) as collection agent (the On-Site Application); (f)

Development Specialists, Inc. (DSI) as wind down consultant (the DSI Application),

and (g) Sitrick & Company (Sitrick) as corporate communication consultant (the

Sitrick Application) [Docket No. 142]; and (3) the Official Committee of Former

Partners (the Former Partners Committee) and the Official Committee of Unsecured

Creditors (the Creditors Committee and, together with the Former Partners

Committee, the Committees) to the Debtors applications to employ (a) the Togut

Firm; (b) Jonathan A. Mitchell and Zolfo Cooper Management LLC (Zolfo Cooper) as

Chief Restructuring Officer and wind-down consultants (the Zolfo Application); (c)

Goldin; (d) Sitrick; (e) On-Site; (f) DSI; (g) Proskauer, and (h) K&A [Docket No. 157].

The Debtor respectfully represents:

PRELIMINARY STATEMENT

It is important to note at the outset that the Retention Applications were

only made after close consultation with the secured lenders and their counsel, Kramer

Levin Naftalis & Frankel LLP and Bingham McCutchen LLP, who were diligent in in-

sisting that the Debtor be careful in who it hired and at what cost. After all, the profes-

sional fees are being paid out of the lenders cash collateral, pursuant to a tight budget.

Indeed, at this point in the case, the entire Chapter 11 proceeding is being funded by thesecured lenders whose more than $225 million of claims, at least in terms of priority of

payment, represent the largest stake in the case. The Debtor did not make these reten-

tion choices in a vacuum; it made them with serious creditor oversight. The Debtors

retention choices were closely scrutinized. They were made with rhyme and reason. It



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is not a coincidence that the Retention Applications were filed just two days after this

Court entered the Final Cash Collateral Order (as defined below).

As detailed below, the Debtors choices should be approved and the Re-

tention Applications granted. The Objections raise three key concerns relating to the Re-

tention Applications.

First, the Objections insist that the Debtor has not established the neces-

sity for hiring multiple professionals.

Specifically, the Objections question the necessity for the retention of three

sets of lawyers to represent the estate but the Objections ignore the obvious and are

thus mechanical, and not thoughtful. The Togut Firm regularly appears before this

Court and the Objectors know that Togut Firm is a highly specialized bankruptcy bou-

tique that has particular expertise in bankruptcy and reorganization matters but does

not have other departments to handle tax, employee and other practice areas. When-

ever the Togut Firm is hired, the Debtor must also rely on other counsel to handle non-

bankruptcy matters. As explained below and in the Declaration of Harold Ashner in

support of this Reply, that is why the Debtor retained K&A to advise the Debtor on

PBGC-related issues regarding its pension plans, and Proskauer, the Debtors long-

standing employee benefits counsel, to advise the Debtor on issues relating to its 401(k)

plan (which includes a profit sharing contribution) based on Proskauers 14 years of in-

stitutional knowledge as special counsel to DL and its predecessor firms on employ-

ment related matters. This is not a proliferation of counsel that can be objectionable.The services provided by each of these firms are separate, distinct, necessary and in the

best interests of the Debtors estate. Moreover, there is a strong argument that since

each firm is addressing discrete, specialized needs of the Debtor, the estate benefits by

getting the best services for those particular needs. And the cost is less too; the Togut



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Firms billing rates are below those of a megafirm that has all of the practice areas that

may be implicated in what is believed to be the largest bankruptcy case ever to involve

a law firm. So while one could argue that there should be only one megafirm instead of

three firms doing the work, the cost would be greater. And as explained below, con-

tinuing to use Proskauer is more efficient and less expensive than any alternative. So, if

efficiency and cost matter, on that basis alone, the Objections should be overruled.

The retentions of Zolfo Cooper, DSI and On-Site are also necessary and

beneficial to the administration of the Chapter 11 Case, as each firm serves a distinct

and important purpose. As set forth in the Declaration of George Abodeely in support

of the Reply, On-Site was retained (only) as a collection agent to assist the Debtor in all

matters relating to the collection of receivables, its largest asset. As set forth in the Dec-

laration of William A. Brandt, Jr. in support of the Reply, DSI was retained to provide

pre-petition wind-down consulting services in connection with lease and property dis-

position matters. Zolfo Cooper was retained to pick up where DSI left off by providing

a Chief Restructuring Officer and post-petition wind-down services to the Debtor in this

Chapter 11 Case. The only reason that DSI and Zolfo Cooper worked together in the

initial post-petition period was for a smooth transition, and at the Chief Restructuring

Officers request. DSIs work is now nearly complete.1 As set forth below and the dec-

larations in support of this Reply, the services provided by DSI, Zolfo Cooper and On-

Site have been carefully structured -- in consultation with the Debtor and its secured

lenders -- to avoid any risk of overlap.

_________________________

1 To be paid for its work under the Bankruptcy Code, DSI must be first retained. That is not to say thatDSI will have a continuing role in the case after a retention order is entered.



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Second, the UST and the Committees argue in their Objections that retain-

ers held by the Debtors professionals should be disclosed and applied against the re-

spective professionals first interim fees awarded in the Chapter 11 Case. Additionally,

the Committees argue that such retainers should reduce the approved budget allotted

to each respective professional pursuant to the Courts Final Order (1) Authorizing Use

of Cash Collateral, (2) Granting Adequate Protection, and (3) Modifying the Automatic

Stay, dated June 13, 2012 [Docket No. 91] (the Final Cash Collateral Order). While not

required by applicable law, each of the Debtors professionals holding retainers as of

May 28, 2012 (the Petition Date), except for the Togut Firm and On-Site, has agreed to

apply their respective retainers to the first interim fees awarded in the Chapter 11 Case.

As noted, the cash collateral budget is the result of hard bargaining by the

secured lenders to keep costs contained and it puts the professionals at risk. There is an

assurance of budgeted funds to pay Court-allowed compensation for services rendered

through the end of July, but not beyond. Until a further cash collateral budget covering

the post-July period is negotiated by the parties and approved by Court order, the pro-

fessionals can only look to the dark side of the moon. So, with good reason, none of the

Debtors professionals can reasonably be asked to forfeit the amounts allocated to them

under the highly negotiated and agreed budget approved by the Court pursuant to the

Final Cash Collateral Order, and none of them will do so. Any such reduction would be

contrary to the terms of the Final Cash Collateral Order and was not contemplated by

the Debtors professionals or the secured lenders when they agreed to the budget setforth therein. The Committees argument that they were not aware that the Debtors

professional held retainers as of the Petition Date is simply not credible and should not

be a basis to overturn the budget approved by the Courts Final Cash Collateral Order.

In a case like this one, the Togut retainer is more important than ever. If the Commit-



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tees are unhappy with the Final Cash Collateral Order, they are required to follow the

appropriate procedures to amend it.

Third, the Objections loudly contend that the Proskauer retention does not

meet the conflict standards applicable to professionals retained under section 327(e) of

the Bankruptcy Code, again ignoring what makes sense to do in this case. As detailed

below and in the annexed supplemental declaration of Lawrence Sandak, Proskauer has

been retained for a limited discrete purposes to continue its long representation of the

Debtor in maintaining the tax qualified status of the Debtors 401(k) and profit sharing

plan, to represent the Debtor with respect to alleged violations of the WARN Act, and to

act as litigation counsel with respect to a dispute with the PBGC. Proskauer has coun-

seled the Debtor and its predecessor firms on its employee benefit plans for many years

long before the Debtors wind-down and the departure of certain DL partners, attor-

neys and staff for Proskauer. Proskauer has counseled the Debtor and its predecessor

firms on its employee benefit plans for the past many years long before the Debtors

wind-down and the departure of certain DL partners, attorneys and staff for Proskauer.

Especially where costs matter, as they do here, it would be entirely inefficient for an-

other firm to step in to learn what Proskauer has already done on matters that

Proskauer is about to complete. The potential conflicts of interest raised by the Objec-

tions are entirely academic and, more importantly, totally unrelated to Proskauers

work or the Debtors estate. For extra comfort, ethical walls have been built to screen

the former DL partners and staff from the work that Proskauer will perform for theDebtors estate. For these reasons, as described more fully below, Proskauers limited

retention is appropriate under the applicable standards of section 327(e) of the Bank-

ruptcy Code and should be approved.



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Fourth, the USTs Objection to On-Sites retention and payment of contin-

gent fees without the need for filing a fee application should be overruled. As ex-

plained below and in the Declaration of George Abodeely in support of this Reply, simi-

lar arrangements have been approved in several law firm bankruptcy cases and the

proposed retention is entirely appropriate and consistent with section 328(a) of the

Bankruptcy Code. And again, those fees are coming out of the secured lenders collat-

eral and the secured lenders participated in, and approved, the contingency arrange-

ment.

Finally, the UST raises a number of discrete objections relating to disclo-

sures, each of which is cured herein or in supplemental declarations filed contempora-

neously with this Reply. For the avoidance of doubt, each of the Debtors professionals

will disclose any rate increases during the pendency of the Chapter 11 Case and each

proposed retention order will be revised to incorporate the language requested by the

UST to address this point.

REPLY

A. The Proposed Retentions Do Not Overlap and Should Be Approved asNecessary to the Administration of the Debtors Estate

1. Under section 327(a) of the Bankruptcy Code, a debtor may seekcourt approval to employ attorneys, accountants, or other professional persons to repre-

sent or assist the trustee or debtor in possession in carrying out the duties to the estate.

See 11 U.S.C. 327(a). In order to be retained under section 327(a), the professional

must be both disinterested and not hold or represent any interest adverse to the estate.

In re Borders Group, Inc., 456 B.R. 195 (Bankr. S.D.N.Y. 2011) (quoting In re Project Orange

Assocs., LLC, 431 B.R. 363, 369 (Bankr. S.D.N.Y. 2010). Although not supported by the

text of section 327(a), some courts also read in a requirement that the retention be rea-



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sonably necessary in the administration of the estate. See 3 Collier on Bankruptcy

327.02[1] (16th Ed. Rev.).

2. Section 327(e) of the Bankruptcy Code authorizes the retention ofcounsel who previously represented a debtor prepetition provided that: (a) the ap-

pointment is in the best interest of the debtor's estate; (b) counsel does not hold an in-

terest adverse to the estate with respect to the matter for which counsel is to be employed;

and (c) the specified special purpose for which counsel is being retained does not rise to

the level of conducting the bankruptcy case for the debtor in possession. See 11

U.S.C.A. 327(e). See alsoIn re AroChem Corp., 176 F.3d 610, 622 (2nd Cir. 1999); JMK

Constr. Group, Ltd., 441 B.R. 222, 230-31 (Bankr. S.D.N.Y. 2010).

3. The language of section 327(e) expressly states that counsel re-tained under such provision must be an attorney that has [previously] represented the

Debtor. Its intended use is for counsel that was handling work prepetition be permit-

ted to continue its work in the bankruptcy case. See In re Polaroid Corp., 424 B.R. 446,

451-52 (Bankr. D. Minn. 2010) (Trustee successfully retained law firm as special counsel

under 327(e) where law firm previously served as Debtors counsel in adversary pro-

ceedings before the case was converted and the law firms employment was in the best

interests of the bankruptcy estate since the law firm had significant expertise in the

subject matter as result of its previous employment by the Debtor).

4. Whether employment is reasonable cannot be determined throughthe benefit of hindsight. SeeIn re Borders Group, Inc., 456 B.R. 195 (Bankr. S.D.N.Y. 2011).In determining whether services were or are necessary, the court must not penalize at-

torneys by viewing the efforts of counsel with the benefit of 20/20 hindsight. In re

Korea Chosun Daily Times, Inc., 337 B.R. 758, 767 (Bankr. E.D.N.Y. 2005) (quoting In re

Drexel Burnham Lambert Group, Inc., 133 B.R. 13, 23 (Bankr. S.D.N.Y. 1991)).



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5. The PBGC and the Committees argue that it is unnecessary to re-tain Sitrick, K&A and Proskauer because their services are largely complete and are no

longer necessary to the administration of the estate. In other words, the PBGC and the

Committees ask the Court to penalize these professionals for performing their services

so efficiently that they largely completed the tasks for which they were retained before

their retention applications could be heard by the Court. This would not only be mani-

festly unfair but is contrary to the standards authorizing a debtor in possession to retain

professionals necessary to the administration of the estate. As detailed below, while the

services required of Sitrick, K&A and Proskauer going forward may be minimal to non-

existent, the post-petition services that they have already provided were necessary and

their retentions should be approved nunc pro tunc to the Petition Date. Without a reten-

tion order, they cannot be paid.

B. The K&A Retention(i) Overview

6. The K&A Application requests authorization for the employmentand retention of K&A as special pension benefits counsel to the Debtor to provide ad-

vice and guidance relating to Pension Matters, which the K&A Application defined as

employee benefits issues, including advice and guidance that will allow the Debtor to

evaluate the claims filed by PBGC in the [Debtors bankruptcy case] and to develop a

strategy to resolve such claim (emphasis added). The non-exhaustive listing of exam-

ples in the retention application (regarding evaluation and resolution of PBGCs claims)looked to the future as of June 15, 2012, when the retention application was filed, rather

than to the future as of May 28, 2012, the Petition Date. K&A performed the bulk of its

services during the May 28 to June 15 period.



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7. As of the Petition Date, a PBGC lawsuit against DL was pending inthe Southern District of New York, the resolution of which could have had significant con-

sequences for the DL bankruptcy estate, as discussed in the supplemental Declaration of

Harold Ashner (the Ashner Declaration) in support of the Reply. That lawsuit, which

K&A was heavily involved in, was settled on June 13, 2012, in a manner that was advan-

tageous and beneficial to the Debtors estate, as discussed in the Ashner Declaration.

8. In part because of the pendency of this litigation on the PetitionDate, and the consequences its resolution could have on the DL bankruptcy estate, the

Debtors retention application for K&A requested approval of K&As employment nunc

pro tunc to the Petition Date, noting both the extraordinary circumstances presented by

these cases and that the complexity and intense activity that have characterized this

case has necessitated that the Debtor and its professionals focus their immediate atten-

tion on certain matters and promptly devote resources to the affairs of the Debtor pend-

ing submission and approval of this [retention] Application.

9. The legal services K&A provided to DL during the post-petitionperiod went well beyond defending DL against the PBGC lawsuit. Among other things,

K&A assisted the Debtor in connection with evaluating the appropriateness of PBGCs

various requests for information, and developing and reviewing information to con-

sider providing to PBGC; evaluating the legal basis for PBGCs claim that it may enforce

two subpoenas against DL notwithstanding the automatic stay; dealing with PBGC in

connection with its information requests and efforts to enforce its subpoenas againstDL; evaluating issues relating to whether particular entities may be part of a DL con-

trolled group and thus potentially liable to PBGC; evaluating options for settlement

with PBGC in connection with possible sales of foreign interests; advice on PBGC re-

porting requirements; advice on PBGCs ability to pursue collection, and/or perfection



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and enforcement of liens (whether under IRC Section 430(k) or ERISA Section 4068)

against non-debtor entities that are, or may be, part of a DL controlled group; advice on

PBGC rules and practices regarding determinations of net worth for purposes of pursu-

ing liens against non-debtors and pursuing priority bankruptcy claims against debtors;

coordinating with counsel for the secured creditors in connection with positions to take,

and resources to expend, in defending against and in settling the PBGC lawsuit; evalu-

ating the appropriateness of DL cooperating in efforts to ensure payment of various fees

and expenses from plan assets; and addressing concerns of DL partners and employees

regarding pension plan termination, PBGC trusteeship, and related benefit payment

and other issues. PBGC in its objection erroneously assumes that the only legal services

K&A provided during the post-petition period were those involved in defending DL

against the PBGC lawsuit.

10. K&A could potentially continue to provide DL with legal servicesrelating to PBGC matters, including but not limited to issues relating to PBGC claims

that may be asserted against the Debtors estate. Significantly, the PBGC alleges in its

Objection that it is the largest unsecured creditor in this Chapter 11 Case. Accordingly,

it is reasonable to expect that future issues may arise in the Chapter 11 Case that will

require the advice and expertise of K&A, as special pension benefits counsel to the

Debtor. Notwithstanding the potential need for future services, the Debtor and K&A

have agreed that if there is a need for K&A to provide services to the Debtors estate

after July 9, 2012, the Debtor will provide notice to the Committees and the U.S Trusteeand, if appropriate, request further authorization from the Court.

(ii) K&As Services Are Not Duplicative of Other Firms Services

11. PBGC asserts that K&As legal services are duplicative of thoseprovided by Proskauer, and the UST questions whether K&As legal services are dupli-



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cative of those provided by Proskauer and the Togut Firm. K&As legal services in ad-

dressing PBGC-related issues are based on its unique and extensive experience and ex-

pertise in dealing with those issues and are in no way duplicative of legal services pro-

vided by other firms.

12. Although K&A worked with Proskauer in resolving the PBGC law-suit, this is entirely consistent with how K&A works with various other law firms both

within and outside the bankruptcy context. K&As practice focuses very heavily on

PBGC-related issues, based on the extensive experience that K&As professionals have

had working for PBGC in various responsible legal, actuarial, policy, and operational

roles and their additional experience, while with K&A, in providing legal and other

services on a wide variety of PBGC-related issues to major law firms, actuarial consult-

ing firms, investment banking firms, and employers of all sizes, including many For-

tune 100 companies. But K&A is a small firm that does not take the lead in litigation

matters, instead partnering with other firms that have a significant litigation practice,

with K&A providing substantive and technical input on PBGC-related issues. That is

the approach that the Debtor determined was the most efficient and cost-effective

method to resolve the PBGC lawsuit, given K&As expertise and prior involvement

with PBGC in this case (and many others) and Proskauers ability to take the lead in the

litigation.

13. Many important PBGC-related issues have arisen in this case, goingwell beyond those that were involved in the PBGC lawsuit. K&A has unique experi-ence and expertise in dealing with such issues. Taken together, the K&A professionals

have over 150 years of experience in responsible legal, actuarial, policy, or operational

roles working for PBGC, including as General Counsel; Deputy General Counsel; Senior

Assistant General Counsel for ERISA/Bankruptcy Matters; Assistant General Counsel



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for Legislation and Regulations; Assistant Chief Counsel; Senior Legal Advisor; Deputy

Manager, Actuarial Service Division; and Manager, Operations and Policy Support

Staff.

14. The responsibilities of the K&A professional staff, both attorneysand advisors, while working for PBGC included having personal and substantial roles

in many important PBGC cases (either individually or through hands-on supervision of

the assigned teams); developing persuasive arguments regarding PBGCs claims and

presenting the arguments to the stakeholders and courts; in negotiating settlements

with those stakeholders; developing the legal, actuarial, and operational policies and

procedures that defined PBGCs interpretation of its statutory rights and

responsibilities, including those applicable to termination of pension plans and the

liabilities that result therefrom; developing and issuing rulings and regulations to give

those policies the force of law; and preparing legal memoranda and arguments

explaining and defending those policies, followed by pursuing PBGC positions in

courts or otherwise to conclusion, whether by litigation or negotiation.

15. The Debtor in this case was required to make informed judgmentsregarding various PBGC issues in order to maximize the return to all stakeholders to

the extent possible, and needed K&As highly specialized experience and expertise to

help level the playing field in its dealings with PBGC and to do so in a cost-effective

manner, with a minimum of time needed to research the PBGC issues that the K&A

professionals are fully familiar with.(iii) Application of pre-petitioner retainer to first interim fees

16. The UST Objection asked whether K&A has a balance remaining onits retainer as of the Petition Date and, if so, whether K&A will apply the retainer to its

first interim fee application. K&A has a balance on its pre-petition retainer (which, in-



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cluding replenishments, totaled $200,000) of $7,062.50, and has agreed to apply that bal-

ance to its first interim fees that are awarded.

(iv) Disclosure of representation of party in interest

17. The UST Objection makes note of K&As disclosure that it has rep-resented and continues to represent an undisclosed party in interest in matters wholly

unrelated to the Debtors case, and asked that K&A disclose the identity of the party in

interest, the percent of revenue that such representation generates for K&A, and

whether K&A can be adverse to such client. The requested information is in the Ashner

Declaration.

(v) Application of Section 330 to K&As Fees and Expenses

18. The UST objects to the application of section 328(a) to the Courtsand the parties review of K&As fees, and takes the position that the reasonableness

standard of section 330 should be used instead. The Debtor has been advised that K&A

agrees.

C. The Proskauer Retention19. Proskauer has represented DL and its predecessor firms for the past

14 years on employee benefit matters. Based on its extensive expertise relating to the

Debtors employee and partner benefit issues, the Debtor seeks to have Proskauer per-

form certain discrete post-petition services under section 327(e) of the Bankruptcy Code.

20. Specifically, the Debtor has a 401k plan, with a profit-sharing com-ponent (PSP) for partners and staff, and a cash balance pension plan for partners. Inorder to satisfy discrimination testing (the test to ensure that a plan is not favoring the

highly compensated employees, in this case, for the most part, partners), the Firm

makes a 7.5 % contribution to the PSP on behalf of staff on an annual basis. The contri-

bution made by partners to the PSP came out of their paychecks (though a Firm con-



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tribution) by deductions starting in January of each year. The same was the case this

year, so partners (through the Firm contribution) had put in substantial amounts by

May. The contribution for the staff was traditionally made in September. Contributions

are no longer being made this year. Unless the Debtor can effectuate an appropriate

allocation of the contributions in respect of partners to the staff accounts, it is possible

that the Debtors plans could lose their tax-qualified status. This is not just a partner

issue but an employee issue as well.

21. Sometime in April or early May and prior to its seeking bankruptyprotection, DL asked Proskauer to (a) determine whether there was a problem and (b)

develop a solution. While Proskauer was looking at the issues, it, together with the

attorneys representing the fiduciaries now responsible for the various plans at issue,

advised DL to stop all further withdrawals by partners from the 401k plan (in which the

PSP contributions are deposited) to accomplish the repair more easily.

22. The suspension of rollovers should end shortly, but the Debtorneeds to reallocate some contributions in order to preserve the favorable tax treatment,

which will take a little time. Most of the work is being done by the plans fiduciaries.

However, the Debtor needs Proskauer to advise on occasional issues and to terminate

the 401k plan as soon as the tax concerns are resolved. This is not a major task but it

needs to be done correctly and without delay to preserve the Debtors former and pre-

sent employees savings.

23.

The Proskauer lawyers working on these issues, Lisa Herrnson andIra Bogner, have been walled off from the DL lawyers who found new opportunities at

Proskauer as the Firms operations began to unravel.

24. Proskauer was retained by the Debtor in connection with : (a) alitigation commenced by the PBGC that sought termination and PBGC trusteeship of



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the Debtor's three PBGC-covered pension plans, with a termination date of May 11,

2012, for each of the plans, and (b) a subpoena that was served by PBGC on the Debtor

independent of the litigation. Proskauer was asked to serve as lead litigation counsel in

these PBGC-related matters because, while the Keightley & Ashner firm is a specialist in

issues pertaining to PBGC and plan terminations, it does not ordinarily conduct active

litigation. Proskauer's work was largely necessitated by PBGC's insistence on proceed-

ing with an expedited schedule notwithstanding the parties on-going dialogue to reach

a resolution without resorting to litigation. In fact, PBGC refused to agree to a short ad-

journment of the Order to Show Cause hearing date, as well as the due date for re-

sponding to the subpoena. In light of PBGC's position, the Court presiding over the

PBGC litigation also denied the Debtor's request for a short extension. Proskauer thus

prepared and filed the brief in response to PBGC's Order to Show Cause and responded

to the subpoena. These activities supplemented, without duplicating, the efforts of

K&A. Even though PBGC creates the impression that the Debtor ultimately conceded

the arguments advanced by PBGC, the agreement was in fact contingent on substantive

concessions made by PBGC in connection with its status and rights in the bankruptcy

proceedings that were considered material to the Debtor and its creditors. This matter

has been concluded.

25. Proskauers proposed representation of the Debtor in WARN re-lated matters does not present a conflict of interest. Of the 53 former partners and em-

ployees employed by Proskauer only approximately 5 associates and 13 staff personsmay have WARN claims against the Debtor as the balance were either employed in for-

eign offices, were partners, summer associates, or voluntarily resigned from the Debtor

to join Proskauer and thus fall outside the protections of the WARN Act. (Proskauer

currently employs approximately 465 associates and 821 staff persons.) Proskauer is



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not representing these individuals and has established an ethical wall. Proskauer has

no stake in the outcome of the WARN action.

26. Additionally, Proskauer will be retained to provide day to day em-ployment advice. The work for which Proskauer is being retained is highly specific,

discrete and necessary to the administration of the Debtors estate and falls squarely

within the ambit of Bankruptcy Code section 327(e). As detailed in the supplemental

declaration of Lawrence Sandak (the Sandak Declaration) in support of this Reply, the

potential conflicts noted in the Objections are entirely unrelated to the work being per-

formed by Proskauer and the services it proposes to render going forward. In addition,

on the issue of the tax-qualified status of DLs plans, the interests of the estate and the

former DL partners and employees now at Proskauer are completely aligned. Moreo-

ver, it would be inefficient and costly for a new firm to address the limited work to be

completed by Proskauer. Accordingly, the Debtor submits that the Proskauer Applica-

tion be approved on the limited basis set forth in the Sandak Declaration.

D. The Sitrick Retention27. Contrary to the assertions of the UST and the Committees, Sitrick

provided several key communications functions for the Debtor immediately following

the commencement of the Chapter 11 Case, as described in the supplemental declara-

tion of Michael Sitrick in support of this Reply (the Sitrick Declaration). For example,

Sitrick was responsible for drafting and disseminating letters to all landlords of proper-

ties housing DL offices and storage facilities. Sitrick also worked with the wind-downteam on several employee memos surrounding payroll and benefits. Contested issues

relating to the approval of the use of cash collateral caused a delay in payroll immedi-

ately following the filing and needed explanation for the ongoing employees. Further

employee memos regarding developing incentive plans and duration of employment



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were also drafted by Sitrick. In addition to document preparation, Sitrick provided an

information hotline available to all constituencies with questions regarding the filing.

All hotline calls were logged and provided to the wind-down team daily for informa-

tional or follow-up purposes.

28. Additionally, the Chapter 11 Case garnered major media attentionglobally. Sitrick also served as a conduit for the media following the filing, which al-

lowed the wind-down team to focus on its assignment instead of fielding media calls.

Sitrick drafted media statements and talking points that were used with the media. Si-

trick also monitored media coverage to help ensure accuracy in the reporting.

29. Like K&A, Sitrick has agreed that it will not provide services to theDebtor after July 9, 2012 absent further authorization by the Court. However, Sitricks

post-petition services described above and in the Sitrick Declaration were necessary and

beneficial to the Debtors estate, and the Sitrick Application should be approved and a

retention order entered so that Sitrick may file an application with the Court seeking

allowance of its post-petition fees and expenses.

E. The On-Site Retention(i) Overview

30. Contrary to the USTs Objection, it is appropriate for the Court toapprove the retention of On-Site for the purpose of providing collection assistance for

certain of the Debtor's Accounts Receivable under the contingent fee agreement set

forth in that certain Receivables Liquidation Agreement between the Debtor and On-Site. Because the Receivables Liquidation Agreement calls for compensation on a con-

tingent basis, retention of On-Site should be pre-approved under section 328(a) of the

Bankruptcy Code and the principles set forth in In re Smart World Technologies, LLC, 553

F.3d 228 (2d Cir. 2009).



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31. The UST erroneously argues that a professional employed undersection 328(a) pursuant to a contingent fee agreement should not be pre-approved so

that professional can share the risk of an inequitable result with other professionals.

Despite Smart World and orders of this Court in the Thelen LLC case attached to the

Declaration of George Abodeely in support of this Reply (the Abodeely Declaration),

the UST still complains that it, and other parties in interest, will be denied a second bite

of the apple to reconsider the contingency fee due each month to On-Site out of its col-

lections, yet the Objection never explains what review of a fee based on a percentage of

collections it could undertake.

32. The UST asks this Court to turn down a good deal for the estateand for On-Site. The Debtors Chapter 11 estate will obtain the services of the nations

premier law firm accounts receivable consultants on a contingent fee basis, with only a

modest minimum guarantee and expense allowance. The quid pro quo is that payment

of the contingent fees earned are to be made monthly and that there is no need for any

further review of commissions earned by On-Site.

(ii) The On-Site Receivables Liquidation Agreement is a Contingent FeeContract that is Appropriate for Pre-Approval

33. Although the UST Objection notes in passing that the ReceivablesLiquidation Agreement is a contingent fee agreement (Objection, at 34), the UST seeks

to hold On-Site to standards that apply to professionals who are to be compensated on

an hourly fee basis. In Smart World, the Second Circuit affirmed the pre-approval of a

law firm contingent fee agreement under 11 U.S.C. 328(a), including that portion of

the order providing that no further review of fees was required. See In Smart World, 352

F.3d 228 at 234.



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34. Similar to the order in Smart World approving the attorneys con-tingency fee agreement, On-Site is to be employed as a collection agent to perform the

specific task of collecting the Debtors accounts receivable portfolio for the benefit of the

estate. There should be no doubt that pre-approval of a contingent fee agreement for

the type of services to be rendered by On-Site is appropriate.

35. As noted in Smart World, the essence of a contingent fee is to shiftthe cost of paying cash for services and the risk of loss from the estate to the profes-

sional. In return, the professional expects its contingent fee to be honored by the Court

and not to be penalized for success. Otherwise, it would not be possible nor prudent for

the professional to assess the risk it has undertaken to work for the estate. Thus, the

USTs concern that On-Site would not share in the risk of an insolvent estate misses the

point. On-Site already is risking the amount of its compensation by taking on a contin-

gent fee contract. Not only would it would be manifestly unfair to subject On-Site to a

second risk of administrative insolvency, it also would be contrary to the holding in

Smart World, a case upon which the UST expressly relies. This is especially true because

On-Site has agreed to pay out of its monthly payments a retention bonus to key em-

ployees of the Debtor.

36. On-Site is the nation's premier collection service specializing in lawfirm receivables. On-Site's experience is second to none in this field, having worked

upon the liquidation of most major law firms during the past several years, including

Thelen LLC, Heller Ehrman LLC, Brobeck LLC and Howrey LLC. In each of thesecases, bankruptcy courts have approved variations of the Receivables Liquidation

Agreement authorizing payment to On-Site, without further application for fees on a

strictly contingent basis. Most recently, this Court pre-approved On-Sites Receivables



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Liquidation Agreement in the Thelen LLC case. See Abodeely Declaration, 2-3, Ex.

1-2.

37. Finally, the UST complains that interested parties (except for theDebtor) would be denied the right to review the contingent fees paid to On-Site, but the

Objection never explains what review could be undertaken. Short of an arithmetical er-

ror in calculation of the commission, the essential purpose of a contingent fee agreement

is to base payment to the professional on a percentage of the amount collected. Under

Smart World, there are no factors other than collection to consider. No doubt the Debtor

will report collections and each commission payment in its monthly operating reports,

which should provide all parties in interest with ample opportunity to review the calcu-

lation of every disbursement.

(iii) On-Site's Services are Necessary and Do Not OverlapWith Any Other Professionals Services

38. The UST confuses the duties of On-Site with those of Zolfo Cooper.As described in the Abodeely Declaration, On-Site's tasks are narrowly tailored and

strictly limited. See Abodeely Decl., 4. These carefully described tasks are set forth in

both the On-Site Application and in the Receivables Liquidation Agreement. It should

be apparent from a close reading and comparison of each of the retention applications

of On-Site and Zolfo Cooper that there is a clear distinction in tasks, rather than an

overlap. On-Site is a consulting firm that deals specifically in managing the accounts

receivable portfolio of a law firm and in working through that portfolio to maximize

collections for the benefit of the estate. In undertaking its tasks, On-Site will do the leg

work, making certain that invoices are rendered, follow up with contacts at account

debtors that are the Debtors former clients and that collections are received by the

Debtor. On-Site has no independent decision-making power and will not be duplicat-



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22

ing any of the tasks of Zolfo Cooper. In contrast, Zolfo Cooper will be the decision

maker with respect to collecting accounts receivable on any terms other than those set

forth in the invoice. On-Site will take charge of the Debtor's accounts receivable system,

will operate it, and provide such reports as contemplated in the agreement and rea-

sonably necessary to Zolfo Cooper for its use in winding down the financial affairs of

the Debtor during this liquidation process. There will be no overlap of functions be-

tween On-Site and Zolfo Cooper, as Zolfo Cooper is not going to be handling the day-

to-day collection of receivables and On-Site is not going to be making decisions as to

terms for collection of any particular receivable other than in accordance with the pro-

cedures delineated in the Receivables Liquidation Agreement and the Final Cash Col-

lateral Order.

39. The UST also questioned the need for arbitration/litigation prepa-ration services relating to receivables. In the Receivables Liquidation Agreement, those

services are specifically identified as being separate and apart from normal collection

services. In the event it is necessary to refer a particular account receivable to an attor-

ney for collection, On-Site's percentage of recovery will be measured by a different con-

tingency, in such case 5% of the net amount collected per receivable because of the addi-

tional services that will be required to be performed by On-Site. It should be noted that

the Debtor may no longer have significant personnel to provide services such as prepar-

ing invoices, payment histories and materials for use by counsel in collection actions

and providing testimony if and when needed. It should also be noted that these serv-ices are used only upon specific request by the Debtor and, thus, Zolfo Cooper will no

doubt use discretion to determine whether or not to use On-Site to assist in the prepara-

tion of litigation to collect receivables in carrying out its tasks as CRO.



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(iv) On-Site's Retainer Is an Advance Payment and MinimumGuarantee of Compensation

40. Although On-Site's contact compensation is contingent, On-Siteand the Debtor negotiated a minimum compensation guaranty of $150,000. Due to an

arithmetical error, the Debtor paid only $122,947.26 of that advance before the case was

commenced. Therefore, the Debtor and On-Site reached agreement that upon approval

by this Court, the Debtor would fully fund the retainer to reach the contractually agreed

sum of $150,000.

41. This prepayment and minimum compensation are highly unlikelyto add one more cent to the amount earned by On-Site. In this matter, a minimum

amount is appropriate to cover On-Site's considerable expenses in setting up its staff to

master and control the Debtor's sophisticated accounts receivable and billing systems

and to address the early stages of this engagement for On-Site before collections are re-

ceived. On-Site is a very small company, and while it is willing to take a large risk in

committing its staff to this major project for an appropriate amount of time on a contin-

gent basis, the parties agreed that it was appropriate for On-Site to receive a minimum

compensation that almost certainly would be earned.

42. The Receivables Liquidation Agreement provides for the minimumcompensation to be earned at the end of the term of On-Sites contract, obviously, to en-

sure that the risk that On-Site takes is no greater than the risk of collecting the receiv-

ables. To paraphrase former Bankruptcy Judge Blackshear, the reasonableness of the

contingent fee is inherently addressed because the professional doesn't get paid if he

doesn't bring in anything. In re Smart World, 352 F.3d at 234.



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(v) The JPMorgan Chase Engagement Has Been Completed

43. The UST requested that On-Site confirm that the JPMorgan en-gagement with respect to this Debtor has been completed, and On-Site has done so. See

Abodeely Declaration, 5.

(vi) None of the Advance Goes to Pay Expenses

44. The UST misinterprets the nature of the advance paid to On-Site. Itis a retainer that is a minimum guaranteed compensation sum, applied against contin-

gent fees that are earned, but it does not apply to expenses. On-Site and the Debtor

agreed that the Debtor would pay up to $20,000 of On-Site's expenses in the first year

and that On-Site would bear the cost of all expenses above that amount. No portion of

the retainer is applied against expenses.

45. In the event that the Receivables Liquidation Agreement is not ap-proved, On-Site reserves the right to seek compensation for services rendered to date on

a quantum meruit basis or to renegotiate the terms of the Receivables Liquidation

Agreement to address any concerns that might be identified by the Court and any add-

ed risk that might be created.

F. The DSI Retention46. The USTs Objection relating to the DSI Application mistakenly as-

serts that DSIs services overlap with those of On-Site and Zolfo Cooper. In addition,

the UST inquires as to whether DSI will apply the remaining balance of its pre-petition

retainer to its first interim fee award.47. As detailed in the Declaration of William A. Brandt, Jr. in support

of this Reply (the Brandt Declaration), DSI has not and will not provide any services

related to the collection of the Debtors account receivables.



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48. Additionally, DSI has not and will not undertake assignmentswhich overlap with those of Zolfo Cooper and will coordinate with Zolfo Cooper and

other professionals solely for the purposes of delineating the scope of work, to report on

the status of DSIs activities and to avoid duplication or inefficiencies.

49. It bears noting that the Debtor anticipates that DSIs work on behalfof the Debtors estate will be completed by the end of July. Accordingly, it is expected

that DSIs first interim fee application will also be its final application.

50. DSI has agreed to apply the remaining balance of its retainer to sat-isfy whatever fees and costs it may be awarded by the Court.

G. Proposed Application of Togut Firms Pre-Petition RetainerIs Reasonable and Appropriate

51. As of the Petition Date, the Debtors professionals held retainerswith a balance of approximately $1.2 million.2 The UST and Committees demand that

these pre-petition retainers be applied against the first interim fees approved by the

Court. This demand should be overruled because: (i) retainers are an appropriate and

well-recognized form of compensation for a Debtors professionals in Chapter 11 cases

and have been approved in other cases in this jurisdiction and others on similar facts;

(ii) the Debtors pre-petition secured lenders agreed to the use of their cash collateral to

pay the Togut Firms approved post-petition fees and expenses pursuant to a budget

that was incremental to the retainer following extensive negotiations with respect to the

Final Cash Collateral Order that the Committees participated in; (iii) the Togut Firm

will be prejudiced if the retainer structure is altered after the budget negotiated in con-

_________________________

2The retainer balances as of the Petition Date are as follows: (i) Togut Firm, approximately $400,000;(ii) DSI, approximately $268,000; (iii) On-Site, $122,947.26; (iv) Zolfo Cooper, approximately $290,000;(v) Goldin, approximately $115,000; and (vi) K&A, approximately $7,000.



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nection with the Final Cash Collateral Order has already been finalized and approved

by the Court; (iv) the purpose of the Togut Firms retainer in this case will be under-

mined if the Togut Firm is required to apply the retainer at the outset of the Chapter 11

Case; and (v) to the extent applicable, the relevant factors that courts consider in ap-

proving evergreen retainers are satisfied in this case.

52. As noted, the Bankruptcy Court for the Southern District of NewYork has approved retainers similar to the one proposed here. Most significantly, in the

second Saint Vincents Catholic Medical Centers of New York Chapter 11 Case No. 10-11963

(CGM), the Court overruled a similar objection by the UST and upheld the Debtors

main bankruptcy counsel and financial advisors proposed retention of retainers until

the conclusion of the cases pursuant to the negotiated terms of the Courts order ap-

proving post-petition financing. A true and correct copy of the relevant portion of the

transcript reflecting Judge Morriss bench decision is annexed as Exhibit 1 to this Re-

ply. Numerous retention orders in this District provide for similar relief.3

_________________________3 In re CIT Group, Inc., No. 09-16565 (ALG) (Bankr. S.D.N.Y. Dec. 21, 2009) (retention order

authorizes counsel to hold a postpetition evergreen retainer to be applied against any amountsapproved by the Court in connection with any ... final fee application in these cases); In re Cabrini Med.Ctr., No. 09-14398 (AJG) (Bankr. S.D.N.Y. Mar. 29, 2010) (second interim fee application, 28) (indicatingthat [p]ursuant to its engagement letter and the Retention Order ... the balance of the retainer is beingheld in escrow until [counsel] is paid for all of its post-petition fees and expenses at the conclusion of thiscase); In re Our Lady of Mercy Med. Ctr., 07-10609 (REG) (Bankr. S.D.N.Y. Aug. 30, 2007) (first interim feeapplication, 45) (noting that [p]ursuant to its engagement letter and the Retention Order, the balance[of the retainer] is being held in escrow until [counsel] is paid for all of its post-petition fees and expensesat the conclusion of these cases); In re Mark IV Indus., Inc., No. 09-12795 (SMB) (Bankr. S.D.N.Y. May 28,2009) (retention order) (authorizing counsel to hold portion of retainer remaining after satisfaction ofprepetition charges and apply it against final fee application); In re BearingPoint, Inc., No. 09-10691 (REG)(Bankr. S.D.N.Y. Aug. 14, 2009 & Mar. 1, 2010) (first interim fee application, 12; final interim feeapplication 7, 15) (first interim fee application indicating that counsel would retain retainer andapply it towards any amounts owing as of the final fee applications considered by the Court, and finalfee application indicating that retainer had been so held); In re Lenox Sales, Inc., No. 08-14679 (ALG)(Bankr. S.D.N.Y. Sept. 15, 2009 & Feb. 16, 2010) (second interim fee application, 12; final interim feeapplication 7, 15) (second interim fee application indicating that counsel would hold retainer andapply it towards any amounts owing as of the final fee applications considered by the Court, and finalinterim fee application indicating that retainer had been so held).



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53. The Saint Vincents Court relied on a Delaware Bankruptcy Courtdecision that permitted a Chapter 11 debtors attorneys and financial advisors to hold

evergreen retainers negotiated with the debtor through arms-length bargaining. In re

Insilco Technologies, Inc., 291 B.R. 628, 633 (Bankr. D. Del. 2003). An evergreen retainer,

the Court explained, is similar to a security retainer, in that it is to secure payment of

fees for future services; however, an attorney holding an evergreen retainer does not

look to the retainer for payment of fees until the approval of the final fee application,

and will be paid his interim fees and expenses out of operating cash. Id. at 632. The

Court explained that payment of such retainers is a common practice in the marketplace

and approval of such retention arrangements enables debtors to maintain relationships

established prepetition with their professionals. Id. at 634. The Court held that retain-

ers provide a reasonable mechanism for minimizing risk in a Chapter 11 case filed by

debtors whose liabilities far exceed their assets. Id. at 634-35.

54. The factors considered in Saint Vincents and Insilco, included, butare not necessarily limited to (i) whether terms of an engagement agreement reflect

normal business terms in the marketplace; (ii) the relationship between the Debtor and

the professionals, i.e., whether the parties involved are sophisticated business entities

with equal bargaining power who engaged in an arms-length negotiation; (iii) whether

the retention, as proposed, is in the best interests of the estate; (iv) whether there is cred-

itor opposition to the retention and retainer provisions; and (v) whether, given the size,

circumstances and posture of the case, the amount of the retainer is itself reasonable,including whether the retainer provides the appropriate level of risk minimization,

especially in light of the existence of any other risk-minimizing devices, such as an

administrative order and/or a carve-out. Id. at 634.



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55. All of the above factors support the Togut Firms proposed retainer.As explained above, many of the Debtors professionals have nearly completed their

work in the Chapter 11 Case and anticipate that their first interim fee application will

also be a final application. However, as the Debtors main bankruptcy counsel, the

Togut Firm must see the Chapter 11 Case through to completion. With this in mind, the

Togut Firm negotiated a retainer, Final Cash Collateral Order and budget at arms

length with its Pre-Petition Lenders with terms that minimize some (but far from all) of

the significant risks associated with serving as main bankruptcy counsel to a liquidating

Chapter 11 Debtor.

56. Specifically, the Togut Firm negotiated a budget of $1.45 million tobe paid from cash collateral on account of its fees and expenses for the nine-week pe-

riod from May 29, 2012 through July 31, 2012. The approximately $400,000 remaining

under the Togut Firms pre-petition retainer is incremental to this budget. As in Saint

Vincents, Insilco and the litany of other Chapter 11 cases in this District cited above, it is

entirely reasonable and appropriate for the Togut Firm to have negotiated an evergreen

retainer as security for the payment of services rendered to the Debtor.

57. Additionally, it bears emphasizing that, as was the case in SaintVincents, under the Final Cash Collateral Order, if estate professionals are required to

resort to the Carve Out for the payment of fees and expenses, the Final Cash Collat-

eral Order contemplates that the Carve-Out will only apply to fees and expenses in-

curred after the Termination Declaration Date. See Final Cash Collateral Order 16(c). Thus, the pursuant to the terms of the Final Cash Collateral Order and Togut

Application, the Togut Firm will apply its retainer to satisfy approved fees and ex-

penses for services rendered prior to the Termination Declaration Date before sharing in

the Carve-Out reserved for estate professionals. The qualifying language for services



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rendered after the Termination Declaration Date in decretal paragraph 16(c) was

added to the Final Order specifically to clarify the Creditor Committees comment to the

Interim Order to delete the language in decretal paragraph 16(c) of Interim Order that

provided for exclusive of the application of any retainers by any of the Case Profes-

sionals.4

58. The cases cited by the UST for the proposition that retained profes-sionals in the Southern District of New York typically draw down on pre-petition re-

tainers upon the Courts approval of the professionals first interim fee application are

easily distinguishable. In AMR, Almatis, General Motors and Chemtura, the prospect of

an ultimate distribution to unsecured creditors was not in question. In Chrysler, the

United States Treasury funded the Chapter 11 case and did not impose a budget on pro-

fessional fees during the initial stages of the case. In contrast, here, the prospect of re-

coveries for unsecured creditors is in doubt.

59. The Togut Firms retainer, as currently structured in conjunctionwith the Final Cash Collateral Order, was a key component of the Debtors ability to re-

tain the Togut Firm in this Chapter 11 Case notwithstanding the potential for adminis-

trative insolvency. The Debtors counsel in AMR, Almatis, General Motors and Chemtura

faced no such concern. To disallow the Togut Firms retainer under the circumstances

of this particular case would be inequitable, and would have negative repercussions on

_________________________

4Decretal 16(c) of the Interim Order provides: From and after the Termination Declaration

Date, any payment or reimbursement made in respect of any Debtor Professional Fees or Committee Feesand Expenses (exclusive of the application of any retainers by any of the Case Professionals) for servicesrendered after the Termination Declaration Date and allowed by the Court shall permanently reduce theCarve Out Cap on a dollar-for-dollar basis. As noted, the Final Cash Collateral Order was revised toexclude the proviso making clear that retainers will be applied before the Carve Out.



32/32

a debtors ability to retain professionals in future cases where administrative solvency is

uncertain.

60. Based on the foregoing, the Debtor submits that the Togut Firm bepermitted hold and apply its retainer to unpaid post-Petition Date fees and expenses of

the as allowed by the Bankruptcy Court, as proposed by the Togut Application.

CONCLUSION

WHEREFORE the Debtor respectfully requests that the Court overrule the

Objections and grant the relief requested in the Retention Applications, as modified

herein and the various Declarations submitted in support hereof, and grant such other

and further relief as it deems just and proper.

Dated: New York, New YorkJuly 5, 2012

DEWEY & LEBOEUF LLPBy its Proposed CounselTOGUT, SEGAL & SEGAL LLPBy:

/s/ Albert TogutALBERT TOGUTSCOTT E. RATNERLARA R. SHEIKHOne Penn Plaza, Suite 3335New York, New York 10119(212) 594-5000


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Debtors Response to Objections Re Retention

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