Now, McGrane’s getting a $300,000 New Year’s bonus from Northern District Bankruptcy Judge Marilyn Morgan, who ruled he is owed extra fees for his “substantial contribution” to the SonicBlue bankruptcy. (McGrane, his family and his law partners also happen to own a $12.5 million claim in the same case through an entity called SB Claims Holder.) He won the fees for his work on an evidentiary hearing in which he pressed O’Melveny & Myers partner Suzanne Uhland over her conduct in the case.
In her order (.pdf), Morgan showers praise on McGrane, but is brutal on the rest of the lot, beginning her scathing summary of the case with this ominous sentence: “The reorganization of SONICblue, Inc. has been tragically marred by the misdeeds of professionals.” (Translation: I’m going to rip you a new one.)
See the ripping and tearing, after the jump
If you never understood what all the fuss was about (at times we weren’t sure we did either) Morgan’s order is 14 pages of good fun reading, and wraps up the sordid saga with exacting detail. Yes, you might actually finish knowing what “senior indebtedness” is.
The order reaches a crescendo as Morgan summarizes what happened this year, when Uhland, special counsel to the estate, and Bruce Bennett, who represented a group of creditors, had to explain why they never disclosed a creditor’s waiver of its “senior indebtedness” in a key settlement.
“Still, much of the story remained mere conjecture until Uhland and Bennett testified under oath,” Morgan wrote. “SB Claims Holder’s participation cast a bright light on Uhland’s and Bennett’s roles, which had not previously been exposed to scrutiny. The court is now left with the firm impression that the most plausible explanations for Uhland’s conduct are expediency and the cultivation of relationships within the close-knit referral circle among bankruptcy practitioners. Bennett’s conduct, however, violated the trust and confidence of those around him and was detrimental to the effective operation of the bankruptcy system.”
Mike Hennigan, a partner at Bennett's firm speaking on his behalf, said "Bennett carefully, effectively and ethically represented his clients in the SonicBlue bankruptcy.”
Readers will recall that the SonicBlue bankruptcy has sullied the reputations of nearly all counsel who dared step near it, including lawyers at Pillsbury, Levine Neale and O’Melveny. Morgan even chastised the Chapter 11 trustee, Dennis J. Connolly of Alston & Bird, for not uncovering all the muck himself. Left unscathed is Ron Oliner at Duane Morris, who was hired after Pillsbury was kicked off the case.
And, of course, McGrane.
— Amanda Royal