Vinson & Elkins’ Latest Enviva Bankruptcy Bid Gets DOJ Rebuke

The Justice Department is challenging Vinson & Elkins LLP’s latest attempt to represent Enviva Inc. in its bankruptcy, saying the firm is seeking to improperly skirt a judge’s prior rejection.

Vinson & Elkins last month asked the US Bankruptcy Court for the Eastern District of Virginia for permission to represent wood pellet maker Enviva as special counsel—a reduced role compared to the lead counsel position it previously sought. The proposal is an effort to circumvent the court’s decision rejecting Vinson & Elkins’ prior bid, the US Trustee, the Justice Department’s bankruptcy watchdog, said in an objection Tuesday.

Judge Brian F. Kenney in May ruled that Vinson & Elkins couldn’t represent Enviva under section 327(a) of the bankruptcy code because it has a longstanding relationship with Riverstone Investment Group LLC, a private equity firm that held 43% of Enviva’s publicly-traded shares. Kenney then declined Enviva’s request for reconsideration in July.

Vinson & Elkins subsequently sought employment as special counsel under 327(e), which has a lower conflict of interest standard. Paul Weiss Rifkind Wharton & Garrison LLP is now seeking the lead counsel role.

“Use of section 327(e) in what this Court has already described as an ‘end-run’ around the requirements of section 327(a) evidences V&E’s disregard for this Court and its rulings,” the US Trustee said.

The firm said that as special counsel, it would work on some bankruptcy financing, discovery issues, and certain negotiations. But those functions fall under the scope of 327(a) debtor representation, which Vinson & Elkins is ineligible for, the US Trustee said.

Vinson & Elkins’ revamped request is an improper attempt to obtain compensation for work it already performed for Enviva, the US Trustee said.

“This Court must shut all doors on V&E’s efforts to be paid for work it was not authorized to do,” the US Trustee said.

The court will consider the issue at a hearing Thursday.

The case is Enviva Inc., Bankr. E.D. Va., No. 24-10453-, 8/13/24.