Sept. 16 (Bloomberg) -- While the hierarchy of Wall Street is in tatters, the bankruptcy filing yesterday by Lehman Brothers Holdings Inc. has re-established the historical pecking order within the world of New York corporate lawyers.

Weil Gotshal & Manges LLP, the No. 1 bankruptcy firm for decades representing almost every historic restructuring from Enron Corp. to WorldCom Inc., appeared about to be dethroned this year. It turned out to be merely a leader in search of the next big corporate blowup, and Lehman -- the biggest bankruptcy ever to be filed -- has now obliged.

Lehman succumbed to the subprime mortgage crisis and sought bankruptcy protection in New York. Weil Gotshal and lead bankruptcy lawyer Harvey Miller will preside over asset sales of about $639 billion -- as much as six times larger than any other Chapter 11 case. The next-biggest was WorldCom, the telecommunications company that filed in 2002 after an accounting scandal, with $104 billion in assets.

``They're the firm to go to in major cases because of their experience,'' said Andrew Rahl, co-head of bankruptcy in New York at law firm Reed Smith LLP and a specialist in financial companies.

The asset sales by Lehman, the fourth-largest U.S. investment bank, will probably leave creditors with tens of billions in losses, lawyers said.

The 77-year-old Weil Gotshal faced a challenge earlier this year after losing Martin J. Bienenstock, the lead counsel on Enron, to Dewey & LeBoeuf, in addition to several other defections of partners. Even though Weil lured back Miller, 75, from merger-advisory firm Greenhill & Co., Chicago-based Kirkland & Ellis was leading the bankruptcy rankings by June, handling six of the 12 largest cases, according to data compiled by Bloomberg.

Rapid Asset Sales

Lehman's bankruptcy will put pressure on Weil Gotshal and Miller to find buyers for the bank's investment management units, including Neuberger Berman, as quickly as possible to preserve value and retain money managers, according to Bienenstock, who said he has been retained by several Lehman creditors.

``They're in a race against the clock,'' said the 55-year-old Bienenstock, who was co-head of Weil's bankruptcy practice until 2007 and handled the Enron case. ``They have to sell valuable franchises before people bolt to other firms. Then it will be several years of figuring out who owes what to whom.''

No matter what, Weil Gotshal will be a winner -- at least in remuneration. Professional fees for lawyers, accountants and financial advisers in the Lehman case may reach $906 million, according to Lynn LoPucki, one of the top bankruptcy experts in the U.S., who has developed a professional fees calculator. He teaches bankruptcy law at Harvard University in Cambridge, Massachusetts, and at the University of California at Los Angeles.

Enron's Legal Fees

Enron in December 2004, three years into its bankruptcy case, asked a judge to approve more than $780 million in fees for advisers. Weil Gotshal alone requested almost $164 million, 2004 filings with the U.S. Bankruptcy Court in New York show, and was paid $149.4 million. About $7.6 million was billed for work by the firm's co-lead lawyers on the case, Bienenstock and Brian Rosen.

Houston-based Enron at the time estimated its bills for professional fees might top $1 billion. Most Enron creditors got paid about 25 cents on the dollar. Weil Gotshal also represented WorldCom and was paid $36.1 million for its work in that case, according to court papers.

Staffing Needs

The legal fees and staffing for the Lehman case won't necessarily rise in proportion to the bank's liabilities, Bienenstock said.

``The measurement of the assets and liabilities can be deceptive,'' he said. ``If you look at the numbers in the WorldCom case, it had higher liability, but the legal work in Enron was about four times as much.''

Weil Gotshal had more than 540 lawyers and 200 clerks, paralegals and other support staff work more than 391,000 hours on the case starting the week before Enron filed in December 2001. Weil should have no trouble hiring if it needs to do so for Lehman, given recent firings and cutbacks by other law firms.

More than 100,000 Lehman creditors listed in the bankruptcy filing must fend for themselves for a week or two, until a U.S. trustee appoints an official creditors' committee and the judge approves the hiring of its lawyer, attorneys said.

Lehman's largest unsecured creditor is Aozora Bank Ltd. in Tokyo, with a $463 million loan. Other leading creditors include Mizuho Corporate Bank Ltd., owed $382 million, and a Citigroup Inc. unit based in Hong Kong, due $275 million, according to the bankruptcy filing.

$155 Billion in Bonds

Among Lehman's obligations are at least $155 billion in unsecured bond debt, compared with about $24 billion owed WorldCom bondholders, court papers show. Lehman's bond and stockholders, along with employees, are likely to be among the hardest hit from the investment firm's collapse, lawyers said.

New York-based Lehman's shareholders may get nothing back because U.S. bankruptcy law mandates such claims be paid after almost all other creditors.

Some Lehman bondholders may get as much as 50 cents on the dollar if the investment bank is forced into liquidation, analysts at CreditSights Inc. said today. That would compare favorably with investor recoveries in bankruptcy cases involving other financial firms, according to data compiled by Bloomberg.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Linda Sandler in New York at lsandler@bloomberg.netThom Weidlich in New York at tweidlich@bloomberg.net

Last Updated: September 16, 2008 00:00 EDT