White & Case loses bid for $430K fee in Terraform Labs bankruptcy

Reuters

09-04-2025

NEW YORK, April 9 (Reuters) - A U.S. bankruptcy judge on Wednesday rejected White & Case's $430,000 bill for less than two weeks' work in the bankruptcy of crypto company Terraform Labs, saying the law firm was never formally retained to represent Terraform's junior creditors.
U.S. Bankruptcy Judge Brendan Shannon, who is overseeing Terraform Labs' Chapter 11, said during a Wednesday court hearing in Wilmington, Delaware that U.S. bankruptcy law requires lawyers to be formally retained and submit fee applications if they want to be paid from funds provided by a bankrupt company.
Terraform, the company behind the stablecoin TerraUSD, which collapsed and roiled cryptocurrency markets in 2022, filed for bankruptcy in January 2024.
White & Case submitted a bill for its work representing Terraform's creditor committee early in the bankruptcy, at a time when the creditors committee decided to hire both White & Case; and McDermott Will & Emery to represent it. The committee later changed its mind and only worked with McDermott Will & Emery. The committee never filed an application to retain White & Case.
Shannon said that he was "not faulting anybody" and he had no reason to doubt the value of the work that White & Case had provided early in the case.
"I'm sympathetic to the position that they're in, looking to get paid for services that were provided when a client simply made a decision to go with different counsel," Shannon said. "In a non-bankruptcy situation, there would be remedies – they did the work."
In many Chapter 11 cases, including Terraform's case, bankrupt companies fund the work of official creditors' committees as a way to provide oversight and ensure that junior creditors' interests are adequately represented in a bankruptcy.
Terraform had reached settlements with the U.S. Securities & Exchange Commission and its creditors after a jury in Manhattan found the company liable for defrauding investors. As part of the bankruptcy settlement, the SEC had agreed to collect payment only after Terraform repays creditors who suffered losses after the collapse of Terraform's cryptocurrencies.
White & Case acknowledged that it was not formally retained by Terraform's creditors, but it argued that its fees could be paid due to its "substantial contribution" to the success of Terraform's bankruptcy.
The firm pointed out that the early days of Terraform's bankruptcy were unusually litigious, with Terraform challenging its creditors committee as "illegitimate" and pushing a "false" narrative that the company had no significant creditors, according to its court filings.
White & Case attorney Gregory Pesce told Shannon that denying the fees would provide an unfair "windfall" to Terraform, which benefited from his firm's work on a settlement strategy that ultimately brought the Chapter 11 case to a peaceful resolution with its creditors.
The U.S. Justice Department's bankruptcy watchdog, the Office of the U.S. Trustee, objected to the fees. The U.S. Trustee's attorney, Jane Leamy, told Shannon that White & Case's push for payment was an "improper runaround" to rules around attorney retentions in bankruptcy.
Shannon agreed that the fees could not be paid, but he did not fault White & Case for trying.
"The case law talks about 'end runs' and things like that, which is kind of a loaded term, and I don't see any of that," Shannon said.
White & Case had billed about $430,000 for 13 professionals who provided a total of 316.20 hours of work for Terraform's creditors committee between February 29 and March 12, including one partner who billed $2,300 per hour.
White & Case did not immediately respond to a request for comment on the ruling.
The case is In re Terraform Labs Pte Ltd, U.S. Bankruptcy Court for the District of Delaware, No. 24-10070
For White & Case: Gregory Pesce and Colin West of White & Case
For the U.S. Trustee: Jane Leamy and Linda Richenderfer of the Office of the U.S. Trustee