Like many readers, we have watched with great interest the story of Washington rancher Cody Easterday’s fleecing of Tyson Fresh Meats and the subsequent bankruptcy of Easterday Farms, one of his family’s companies.
Easterday has admitted to defrauding Tyson and another company out of $244 million, billing the companies for buying and feeding cattle that didn’t exist. He spent much of the proceeds to cover losses he racked up on commodity futures contracts, according to court records.
He has pleaded guilty to one count of wire fraud, and is scheduled to be sentenced Oct. 5.
As part of the plea, Easterday has promised federal prosecutors he will make restitution.
As the scandal unfolded, Easterday Farms, one of several family companies, filed for Chapter 11 bankruptcy protection. Its assets are being sold to settle creditor claims. Several individual farms, for example, were sold for $209 million to Farmland Reserve Inc.
The bankruptcy proceedings are interesting on a number of levels, revealing disputes over asset sales and other corporate intrigues. But what has really caught our eye is the squabble over the mounting legal fees associated with the bankruptcy.
It costs a lot of money to go broke.
The fees of the attorneys representing major parties in the bankruptcy are paid from the proceeds from the sale of the company’s assets. After the lawyers get their cut, what remains goes to satisfy creditors.
People who are owed money have a vested interest in how much the lawyers make. The lawyers are arguing among themselves over the definitions of “excessive” and “reasonable” fees.
The Justice Department has objected to Easterday’s Los Angeles law firm — Pachulski, Stang, Ziehl and Jones — billing $3.8 million, an average hourly rate of $1,053 per hour. The bankruptcy trustee argues that the rates far exceed what local lawyers involved in the case are seeking and are substantially higher than fees attorneys recently collected in a more complicated bankruptcy case in Eastern Washington.
Pachulski, Stang, Ziehl and Jones, in turn, has objected to $752,042 in legal fees sought by a law firm representing the Prudential Insurance Co., a major creditor.
U.S. Bankruptcy Judge Whitman Holt in Yakima urged lawyers to talk and try to settle remaining legal issues to keep fees to a minimum.
“Sometimes litigating everything all the way to the mat is the worst possible outcome for everyone, and that’s particularly true in bankruptcy cases, where there’s just not enough pie to go around, which appears to be where we’re ending up in this case,” Holt said.
We are reminded of Charles Dickens’ “Bleak House,” where the inheritance case central to the plot, Jarndyce and Jarndyce, has already been litigated for “generations” when the story begins. Eventually, “the whole estate is found to have been absorbed in costs,” leaving heirs with nothing.
We have no position on the legitimacy of the fees requested. But maybe Shakespeare sums up our feelings best: “Ill blows the wind that profits nobody.”