Isle bankruptcy lawyers
enjoy boom in business

Local representation for
Aloha Airlines improves efficiency

Is there an available Chapter 11 attorney in the courtroom?

The side-by-side reorganizations of Hawaiian and Aloha airlines might not be good for their employees and creditors, but the cases are providing a steady flow of income to the firms of the approximately 50 attorneys in town who specialize in business bankruptcies.

"Airline bankruptcy is a growth area. It's certainly not a bad time to be a bankruptcy lawyer," said Rich Turbin, the newly elected president of the Hawaii State Bar Association.

Gelber, Gelber, Ingersoll & Klevansky, one of the few firms in Hawaii with the resources to serve as the lead counsel in a commercial bankruptcy, was chosen to represent Aloha yesterday in a ruling that will make the bankruptcy less expensive and more efficient for the airline than if it had been forced to look for representation on the mainland.

But the selection of the Gelber firm did not come without a fight. The Office of the U.S. Trustee objected to the firm's hiring in federal Bankruptcy Court because the firm also represents the majority shareholders of Hawaiian Airlines' parent company and an investor group that is part of the leading reorganization plan for Hawaiian.

U.S. Trustee attorney Curtis Ching said the Gelber firm should remove itself from the Hawaiian Airlines case if it wants to represent Aloha, because not doing so would create conflicts since the two airlines are competitors in the interisland flight market. Ching said the Gelber firm would have access to confidential information of Aloha and that Hawaiian and Aloha have competing interests.

But Bankruptcy Judge Robert Faris sided with the Gelber firm while noting that the Hawaiian Airlines case appears to be coming to an end. Faris indicated it could be difficult for parent company Hawaiian Holdings Inc. and investor group RC Aviation LLC to find new local representation this late in the bankruptcy.

"About a week ago, one party (involved with Hawaiian Airlines) said he was finding it impossible to find local counsel who wasn't already involved in the (Hawaiian) case," Faris said.

Hawaiian Airlines attorneys typically charge about half of what is demanded by their mainland counterparts. For example, Los Angeles attorney Bruce Bennett, who represents Hawaiian Airlines trustee Joshua Gotbaum, bills at $645 an hour, while the trustee's local attorney, Tom Roesser, bills at $285 an hour. Brett Miller, the New York-based attorney who heads the Hawaiian Airlines unsecured creditors' committee, bills at $575 an hour, while Jim Wagner, the unsecured creditors group's top-charging local attorney, bills at $350 an hour.

Even when mainland counsel is necessary or desired, Hawaii attorneys still get their share of the money. Hawaii state bar rules of the U.S. District Court require that attorneys who are not members of the Hawaii state bar must have local counsel sponsor them. Therefore, if a Hawaii company needs representation locally and from the mainland, bankruptcy expenses will quickly escalate. Although the state has about 130 members in the bankruptcy law section of the Hawaii State Bar Association, most of them handle consumer debtors in chapters 7 and 13 cases.

Still, attorney Don Gelber does not think the two simultaneous local airline bankruptcy cases are straining the availability of Hawaii attorneys, despite how it might appear on the surface.

"I don't think it has a significant difference," he said. "Each case alone requires so many professionals that those roles will be filled by both mainland and local counsel, consultants and other experts. I think the fact that both carriers are in Chapter 11 proceedings may have some effect on the ability of counsel to serve in each case, but it all depends on the facts and circumstances."

As it stands, most of the local attorneys who have Chapter 11 experience will end up representing both airlines. Unless an attorney is representing a bankrupt company, its creditors' committee or a trustee, the attorney is considered to be free of conflict and can get permission from other clients to participate in both cases.

Jerrold Guben, a bankruptcy attorney with Honolulu-based Reinwald O'Connor & Playdon, said mainland counsel who need a local sponsor do not have to rely on those who specialize in Chapter 11 cases.

"I'm sure all the Chapter 11 specialists have been spoken for in the Hawaiian case," Guben said. "But you could always use somebody else who's just a member of the bar."