Just days after the collapse of MF Global, a healthcare plaintiffs' lawyer registered the domain mfglobal-lawsuit.com -- a sign of the legal business the brokerage's failure is expected to generate.

Timothy Butler of Darien, Connecticut, said he is hoping for a slew of new clients in the wake of the October 31 bankruptcy of the futures brokerage that was run by former New Jersey Governor Jon Corzine, and he has good reason to be optimistic.

There's going to be a tremendous amount of litigation spawned by this case, said Butler, a partner at Tibbetts, Keating & Butler, which has offices in New York and Connecticut. Since registering the domain name, he said, my email box is full and my phone is ringing off the hook.

The financial firm's bankruptcy is the eighth largest in U.S. history, and is already starting to generate serious work for lawyers. With $600 million still missing from customer accounts, it is not just bankruptcy lawyers who are mobilizing, but white-collar defense and securities class-action too.

Among the earliest entrants are several heavy hitters, including Dewey & LeBoeuf partner Martin Bienenstock, who on Wednesday won the contest involving at least three other top firms vying to represent the unsecured creditors committee.


The bankruptcy assignment will be the biggest golden egg in the litigation, said John Pottow, a professor at University of Michigan Law School and former attorney at Weil, Gotshal & Manges. Law firm Skadden, Arps, Slate, Meagher & Flom, which represented the brokerage Refco during its 2005 bankruptcy, billed about $42 million in two years on that case, Pottow said.

MF Global Holdings quickly chose Skadden partner Ken Ziman as its counsel in bankruptcy, meaning he should get a hefty chunk of Chapter 11 fees, though Pottow noted that the bankruptcy court must approve any fees paid by the MF Global estate to its attorneys and to the creditors committee.

Ziman did not respond immediately to a request for comment.

Bienenstock, at Dewey & LeBoeuf, will also take in plenty as the attorney for the unsecured creditors committee. For comparison, Milbank Tweed Hadley & McCloy, which served as counsel for the unsecured creditors committee in the Lehman Brothers bankruptcy, billed $2.5 million last July alone in that case.

But individual creditors -- including those on, and not on, the creditors committee -- will likely hire their own attorneys, as will the secured creditors. And if the trustee for MF Global seeks to claw back money previously paid to creditors, as is also likely, even more lawyers will climb on board.

When it is all over, legal bills related to the bankruptcy action alone could approach $120 million, according to a fee calculator developed by two law professors at the University of California Los Angeles School of Law. The LoPucki-Doherty Professional Fees Calculator estimates legal fees in bankruptcy cases based on the debtor's total assets, liabilities, location of court, date of filing and other factors -- but does not account for a rapid liquidation, for example, if MF Global is unable to obtain debtor-in-possession financing, also known as a DIP loan.

Experts have said the company may not get a DIP loan, a scenario which would increase the likelihood of a quick fire sale of the company's assets rather than a prolonged liquidation.


In a letter sent Thursday to commodities clients of the firm, the trustee, James Giddens of Hughes Hubbard & Reed, said that the Department of Justice, the Commodity Futures Trading Commission and the Securities and Exchange Commission were investigating complex cash movements at MF, after government regulators discovered in the wake of the bankruptcy that roughly $600 million in MF Global customer accounts was missing.

The longer an investigation drags out, said Jeffrey Reisner, a bankruptcy partner at Irell & Manella who is not involved in the case, the more likely that criminal charges against MF Global and its directors and officers will follow. A criminal dimension stemming from the bankruptcy could double the fees involved, Pottow said.

MF executives have begun hiring their own lawyers as a federal grand jury in New York recently started issuing subpoenas seeking information and records, people familiar with the inquiries told Reuters on Thursday.

Bradley Abelow, MF Global's president and chief operating officer, is being represented by New York lawyer Gary Naftalis, according to two people familiar with the situation. Naftalis is currently representing former Goldman Sachs Group board member Rajat Gupta in a major insider-trading investigation.

Abelow, who did not return a phone call seeking comment, joined MF Global a little over year ago, after being wooed by Corzine, who resigned from his position as the company's chairman on November 4. Corzine has also retained his own a high-powered defense attorney, Andrew Levander, a partner with Dechert LLP. Naftalis did not immediately return a request for comment. A spokesman for Levander declined to comment.

MF Global itself has hired Marc Kasowitz, a partner with Kasowitz, Benson, Torres & Friedman, to represent the brokerage's interest in regulatory and criminal investigations, a person familiar with the matter confirmed. Representatives for MF Global did not immediately return requests for comment.


In addition to the bankruptcy and regulatory actions, the anticipated class actions and shareholder-derivative suits could end up lasting for years and netting potentially millions of dollars in fees, say legal experts.

The securities class-action firms must be salivating, said Pottow, of the University of Michigan.

Already, plaintiffs seeking class-action status have filed suits against the company and its executives alleging that they deliberately misled shareholders about the brokerage's leverage and risk-management controls. For the most part, plaintiffs' attorneys will take those cases on contingency.

The company, as well as its directors and officers, may well hire yet more litigators to defend those cases, who would probably be paid by the hour. Top defense attorneys at New York firms have been known to charge more than $1,200 per hour. And the directors and officers insurers will want their own lawyers, too.

This could be long and painful, Pottow said.

(Additional reporting by Nick Brown, Matthew Goldstein and Jennifer Ablan; Editing by Tim Dobbyn)