FairPoint may pay state’s bankruptcy legal fees

By Mal Leary, Capitol News Service
Posted May 30, 2010, at 11:59 p.m.

AUGUSTA, Maine — The Public Utilities Commission and the public advocate have run up more than $600,000 in outside legal fees in representing Maine consumers in the FairPoint bankruptcy case, and the bills are still coming in. But Public Advocate Richard Davies said there is no opposition in bankruptcy court to FairPoint paying the bills.

“None of the parties have objected to the agreement,” he said. “There is a process now that we must go through in the court and in the regulatory agencies.”

Davies said the Maine PUC must agree, as well as other state regulators, before the issue is decided. He said his attorneys at Arent Fox LLP, a Washington, D.C.-based law firm, have told him there is no controversy and the payment arrangement is similar to other bankruptcy proceedings.

“We have told the [Utilities and Energy] committee that we are not using the authority the Legislature gave us to levy a special assessment for the legal fees,” Davies said.

He said the advocate’s law firm has agreed to wait for the rest of their fees until the bankruptcy process has been concluded and FairPoint has paid his office for the legal fees and the office costs to participate in the bankruptcy proceedings.

In a memo to the co-chairmen of the Legislature’s utilities committee, he thanked lawmakers for their support for the special assessment authority and said it gave his office leverage in negotiations.

“It was important to have the special assessment available to us,” Davies wrote. “It enabled us to negotiate the Regulatory Agreement without having to be concerned that, should we determine that FairPoint’s financial plan post-bankruptcy was not viable and we felt it necessary to with-draw our support for the Agreement, that there was an alternative means to pay for our involvement in the bankruptcy case.”

Davies said his office shopped around a number of law firms and believes it got a good deal. He said one firm told him their lowered rate for government was $980 an hour. The highest hourly fee Arent Fox has charged is $525 an hour plus expenses.

The PUC hired the Bernstein Shur law firm in Portland, which had a dozen lawyers working on the case, according to PUC documents, with lawyers being paid up to $465 an hour. Under the negotiated agreement between the parties, the PUC’s costs of the case also will be paid by Fair-Point.

Rep. Jon Hinck, D-Portland, said the panel supported the assessment because customers needed to be represented during the bankruptcy proceeding and because the public safety of Mainers needed to be protected. FairPoint holds the contract for the telecommunications infrastructure that supports the 911 emergency dispatch services.

“It is extraordinarily expensive having attorneys protect our interests, but we had to do it,” he said. “This is good news.”

Hinck said the cost of the bankruptcy could have been considerably less if FairPoint had filed in Maine instead of New York. He said the logical place to file for the case was Maine, which has the most miles of FairPoint lines and the most customers of the company.

Rep. Stacey Fitts, R-Pittsfield, a member of the committee, said while there is a direct benefit to ratepayers by having the costs of litigation put on the company, he is concerned about the long-term economic health of FairPoint and its ability to deliver on service promises, including rural broadband.

“What effect that has on FairPoint going forward I think is probably another overarching concern,” he said. “We have got to keep a close eye on it. I definitely think that Maine ratepayers under that plan will come out ahead.”

He agreed with Hinck that it would have cost less for all concerned if the case had been in Maine instead of New York. He said lawmakers are watching the proceedings because of concerns about the long-term impact of the bankruptcy and FairPoint’s reorganization plan.

“We are not in session so we have to rely on the advocate and the regulators to keep track of what is going on and make sure ratepayers are protected,” he said.

Sen. Barry Hobbins, D-Saco, co-chairman of the committee, said the panel has held several meetings with FairPoint officials to be updated on the case. He said whether the committee holds another meeting with FairPoint officials is up to legislative leaders because the session has ad-journed. But he said he believes leaders understand the need for the committee and the public to have an open and public discussion about FairPoint as it emerges from bankruptcy.

http://bangordailynews.com/2010/05/30/business/fairpoint-may-pay-statersquos-bankruptcy-legal-fees/ printed on July 28, 2014