Caraustar Industries, Inc., which filed for Chapter 11 bankruptcy protection in U.S. Bankruptcy Court for the Northern District of Georgia on May 31, already has racked up substantial legal fees.

The Austell, Ga.-based recycled paperboard and packaging company has hired King & Spalding as debtors counsel. The firm’s disclosure of compensation, filed by partner James A. Pardo Jr., discloses that between Jan. 1 and May 31, Caraustar paid King & Spalding more than $1 million for services rendered, about $40,500 for expenses and a $250,000 general retainer.

As for the price of legal work going forward, Pardo’s declaration says that the current standard hourly rate for attorneys in the firm’s Atlanta office ranges from $255 to $900 per hour; paralegals and legal professionals are billed out at $115 to $275 per hour.

The rates for lawyers and paraprofessionals expected to be most active in the case include Pardo, at $815 per hour; partner Mark M. Maloney at $640; associates Michelle L. Carter and Jessica S. Jackson at $440 and $310, respectively, and senior paralegal Missy Heinz, at $245.

Bankruptcy court is the “court of broken promises,” and that’s especially true, it seems, when intellectual property is among the assets that go up for grabs as a company founders.

That’s according to U.S. Bankruptcy Judge C. Ray Mullins of the Northern District of Georgia, who spoke at a continuing legal education seminar at the Four Seasons Hotel in
Atlanta on Wednesday.

Mullins, along with King & Spalding intellectual property partner Katrina M. Quicker and certified public accountants Brian Lee Blonder and Keith F. Cooper from FTI Consulting, dissected what happens to a company’s copyrights, patents and trademarks during a reorganization.

The valuation and disposition of intellectual property and other intangible assets such as customer lists and goodwill is an increasingly relevant issue for attorneys and their clients as the nation’s weak economy pushes more and more companies into bankruptcy.

In the past, Mullins said, companies “had to really justify to a court … that [they] had to do a [Section] 363 sale [of assets], because Chapter 11 was supposed to be a reorganization.”

Now, he said, in a bad economy where the debtor-in-possession financing need to keep a company afloat is almost impossible to get, companies are going out of existence and selling off their assets very quickly.

He cited Circuit City, which sold its e-commerce business and ceased to exist in a matter of weeks, as an example.

Cooper, the FTI consultant moderating the discussion, cited companies such as The Sharper Image, London Fog, Mervyns and The Bombay Company, all of which chose to sell their assets rather than reorganize them. The purchasers of those assets then relaunched the brands online or now market them—without a brand-specific brick-and-mortar presence—through retailers such as Wal-Mart.

But when reorganizing companies sell their intellectual property—which may include not just what they own but also what they have licensed—a number of thorny legal issues arise.

As King & Spalding’s Quicker said, “There’s a definite tension between bankruptcy law … and intellectual property law.

“What happens in bankruptcy law is free assignability and that’s contrary to intellectual property law … because the innovator loses control over who has access to technology,” she said.

As an example, FTI’s Cooper asked, what happens when a debtor has a license to manufacture and sell a product and, during bankruptcy, wants to assign the rights to that intellectual property to one of the licensor’s competitors?

The answer, the panelists all agreed, is complex because under the bankruptcy code, the ability to assign or assume such rights is subject to non-bankruptcy law. Also, the answer differs depending on the type of intellectual property—copyright, trademark, patent—involved, and on whether the license is exclusive or not.

Depending upon which test the court applies, Cooper said, a company’s license could effectively end if the licensor—regardless of the original agreement—refuses to allow the bankrupt company to continue to use or assign the license.

“In technical terms,” Mullins said, “you’re hosed.”

And that, he went on, is part of what makes bankruptcy court the court of broken promises. “So,” he said, “look at whether there’s anything you can do ahead of time to protect your client in anticipation of bankruptcy.”

Who says commercial real estate lawyers don’t have any work to do? Morris, Manning & Martin partner Vanessa Morris [photo, right] has a billing invoice to prove otherwise. Morris has been involved with the sale of two large Atlanta-area residential complexes in the past month. Morris advised the lender on both deals, which have a combined value of about $73 million.

On the first sale, Morris’s client was Primary Capital Advisors of Atlanta, which acted as the lender on the $25.8 million sale of the Block Lofts condo building [photo, below] on Ralph McGill Boulevard. The Connor Group, of Dayton, Ohio, acquired the property from Principal Real Estate Investors, a unit of Principal Financial Group Inc. Thompson Hine partner Darrel Davison in Columbus, Ohio, advised Principal.

In the second transaction, Morris was adviser to CBRE Capital Markets Inc., a unit of CB Richard Ellis Inc., the lender on the $47.4 million sale of Post Properties Inc.’s Post Dunwoody development. Post Dunwoody is a 530-unit complex on Peachtree-Dunwoody Road that was completed over several phases in the 1980s and 1990s.

The Post Dunwoody property was assessed at $33,252,900 in 2008, according to the Fulton County Tax Assessor’s office.

King & Spalding associate Amber Murray took the lead advising Post Properties, with supervision from partners Clay Howell and Dan Heller and with participation from Post in-house counsel Joe Bartlett. McClure & Kornheiser partner Michael Kornheiser represented the buyer, Dunwoody Station Apartments LLLP.

A story in last week’s Wall Street Journal was the talk of Atlanta’s commercial real estate community. The article points out that four trophy office towers nearing completion in Buckhead are, to put it lightly, struggling to find tenants.

Three buildings—3630 Peachtree, Two Alliance Center and Phipps Tower—are zero percent leased. Another, Terminus 200 [photo, right], is 9 percent leased.

These highly attractive properties are coming on line at a time when the market is flooded with vacant space. The metro Atlanta office market reported 300,000 square feet of net occupancy losses in 2008, according to a recent report by Jones Lang LaSalle. Developers will deliver another 3.2 million square feet of Class A office space to the Buckhead and Midtown markets over the next 18 months.

Deal Watch blog decided to track down the names of the attorneys who advised the developers and lenders on the four towers named in the Wall Street Journal piece.

We’ve already identified the law firms for two of the office towers in previous blog posts or in the print edition of the Daily Report. Arnall Golden Gregory partner Scott Fisher is counsel to Crescent Resources LLC, co-developer of Phipps Tower. Goulston & Storrs is counsel to the other development partner, Manulife Financial. The lead lender, Regions Bank, is taking advice from Hartman, Simons, Spielman & Wood partner Charlie Brake.

The 3630 Peachtree building, which includes the Ritz-Carlton Residences condo development, involved multiple developers, including Duke Realty, Pope & Land Enterprises, Novare Group and Post Properties. Among the lawyers working on that building are King & Spalding partners Clay Howell and Dan Heller, Atlanta solo practitioner Thomas Burch, Alston & Bird partners Gigi Bugg and Glenn Thomson and Seyfarth Shaw partner Carl Westmoreland.

So, who’s working on the other two?

Troutman Sanders partner Leslie Secrest is counsel to Cousins Properties Inc. on the Terminus 200 building, according to legal documents. Secrest did not return calls and emails seeking comment. Firm spokesman Mark Braykovich declined to comment.

Tishman Speyer Properties, developer of Two Alliance Center, is leaning on Atlanta-based in-house counsel Robert Stubbs and on Schulte Roth & Zabel partner Andrew Dady in New York, according to documents. Neither Stubbs nor Dady could be reached for comment.

The economy may be slumping, but teenagers and 20-year-olds keep attending college.

That’s helped Smith, Gambrell & Russell partner Mac Young maintain a steady stream of work for his client, Place Properties LP, which develops, finances and builds housing for college students.

One recent transaction Young handled was for a new on-campus housing facility at Georgia Gwinnett College in Lawrenceville. Place Enterprises Development, an affiliate of Place Properties, arranged for the sale of $100 million in tax-exempt bonds to finance the dorms. The bonds were sold by the Georgia Gwinnett College Foundation and also involved the state Board of Regents. The bond sale closed on March 23. The new dorms are expected to open in the fall of 2010, Young said.

Smith Gambrell associate Jonathan Gallant worked with Young on the transaction. Young’s liaison at Place Properties is their general counsel, Jennifer Hill. King & Spalding partner Bill Holby was bond counsel and McKenna Long & Aldridge partner Tom Lauth was underwriters counsel to Citigroup Inc.

Also last month, Young advised Place Properties on arranging a $154.6 million financing deal for the construction of off-campus housing projects across the U.S. The financing involves eight separate lenders, Young said. The facilities will be built at off-campus sites near eight different colleges, including Texas A&M University, the University of Texas-San Antonio and the University of Central Oklahoma. In addition to arranging the financing, Place is also the developer of these housing projects, Young said.

An all-night auction produced the $82 million sale of a bankrupt Chattanooga carpet-industry supplier to a Minnesota investment firm, according to court filings.

Wayzata Investment Partners LLC will pay $82 million to acquire the assets of Propex Inc. Chattanooga-based Propex filed for Chapter 11 in January 2008. Propex, formerly known as Amoco Fabrics and Fibers, manufactures polypropylene fabrics used in carpet backings. Propex sells its products to the large number of carpet makers based in nearby Dalton, Ga.

Wayzata, headquartered near Minneapolis, outbid two other parties, Black Diamond Capital Management Inc. and Renco Group Inc. Wayzata’s purchase is subject to the approval of U.S. Bankruptcy Court Judge John C. Cook in the Eastern District of Tennessee.

Propex relied on two law firms for counsel on the sale, King & Spalding and Miller & Martin. King & Spalding partners Henry Kaim and Mark Wege in Houston, and partner Sarah Borders and counsel John Isbell in Atlanta worked on the matter. For Miller & Martin, partners Shelley Rucker and Nick Whittenburg, both of Chattanooga, were counsel to Propex.

Kirkland & Ellis partner David Agay in Chicago and Husch Blackwell Sanders partner Jeff Norwood in Chattanooga advised Wayzata.

Private companies may still be having a difficult time obtaining credit, but the market for municipal bonds has improved considerably in the past six months, according to Smith, Gambrell & Russell partner Ben Brooks.

Brooks and another public finance partner at Smith Gambrell, James Monacell, are working on two pending sales of muni bonds by Georgia government entities. Brooks is bond counsel to the Whitfield County School District on a $68.3 million general-obligation bond sale. Monacell is bond counsel to Henry County on a $66.2 million sale.

The rates that Whitfield County obtained for its bond sale range between 3 percent and 5 percent, Brooks said. That’s a decrease from earlier this year when the rates would have ranged between 5 percent and 6 percent, he said.

“As a very general matter, the market for traditional tax-exempt debt has stabilized quite a bit,” Brooks said. “So you see these two deals pricing with fairly good rates.”

The average yield was 2.1 percent for the Henry County issue and 2.7 percent for Whitfield County, Monacell said.

The Henry County bond sale priced this week and will close later this month. The Whitfield County bonds are also scheduled to close later this month. Henry County will use the bond proceeds to repay debt, acquire property and fund other projects. Whitfield County plans to use its proceeds to build new schools [photo, above], including a new high school to open in August 2010, and to renovate current schools.

King & Spalding partner Woody Vaughan and associate Allison Dyer are counsel to Morgan Keegan & Co., the underwriter of the Whitfield County schools issue. Harben, Hartley & Hawkins partner Cory Kirby in Gainesville is general counsel to the Whitfield County School District.

Sutherland partner Matt Nichols is counsel to Morgan Keegan, which is also underwriting the Henry County issue. LaTonya Nix Wiley in McDonough is the Henry County Attorney.

Lawyers from King & Spalding’s Dubai office advised the private equity arm of the National Commercial Bank of Saudi Arabia on an Egyptian pharmaceutical deal.

Partner Benjamin Newland and associate Taman Barhoush were counsel to Eastgate Capital Group on its $40 million investment in Sigma Pharmaceutical Industries. Sigma, the 10^th-largest pharmaceutical company in Egypt, is a maker of generic drugs. The companies said Eastgate’s investment will allow Sigma to expand into Saudi Arabia, Algeria and the Republic of Sudan.

Arab Legal Consultants of Cairo [photo, right] advised Sigma, according to the news service Al Bawaba.

K&S opened its Dubai office in January 2007. Newland moved there from Atlanta when the Dubai office opened.

In January 1990, a business unit of Seaboard Corp. installed the first barge-mounted power plant in the Dominican Republic. Seaboard brought online another power barge in the Dominican a decade later.

Now, those two floating power plants are being sold in a $70 million deal. King & Spalding partners Russ Richards in Atlanta and Juan Crespo in Houston are advising Seaboard, one of the firm’s longtime clients.

The floating power plants [photo, left] are the operating assets of a Seaboard business unit, Transcontinental Capital Corp. The plants consist of two barges, on which are installed a system of diesel engines that generate electric power. The barges are named the Estrella del Norte and the Estrella del Mar and are floating on the Ozama River.

Pueblo Viejo Dominicana Corp., which operates a gold-mining project in the Dominican, is acquiring the barges. Pueblo Viejo Dominicana is a joint venture between Barrick Gold Corp. and Goldcorp Inc. The Dominican law firm Pellerano & Herrera advised Pueblo Viejo Dominicana on the purchase of the barges.

King & Spalding’s Richards has handled corporate work for Shawnee Mission, Kan.-based Seaboard on other occasions, including the $375 million sale of its poultry division to ConAgra in 2000, and the formation of a joint venture with Triumph Foods in 2004 to sell pork products.

Gevity HR Inc., a human resources company that specializes in co-employment arrangements, on Thursday agreed to be acquired by TriNet Group Inc. for $99 million in cash. TriNet’s offer isn’t subject to outside financing.

The deal is backed by two key shareholders—General Atlantic LLC, the largest shareholder in TriNet Group, which also owns about 9.5 percent of Gevity; and ValueAct Capital Management LP, which is Gevity’s largest shareholder.

Gevity turned to King & Spalding for legal advice on the deal. King & Spalding partner Jack Capers was lead counsel on the deal. Seven other partners were also involved, including corporate partners Bill Baxley in Atlanta and Tracy Kimmel in New York; employee benefits partner Susan Reisner in Atlanta; intellectual property partner Scott Petty in Atlanta; tax partner Don Hensel in Atlanta; finance partner Chip Conrad in Atlanta, and antitrust partner Jeff Spigel in Washington. Six associates were also assigned to the transaction.

Edwin E. Hightower Jr., the chief legal officer of Bradenton, Fla. based Gevity, was previously litigation counsel for Carnival Cruise Lines.

Cooley Godward Kronish partner Craig Jacoby in San Francisco advised TriNet Group. Paul, Weiss, Rifkind, Wharton & Garrison partner Matthew Abbott in New York advised General Atlantic.

In a co-employment arrangement, a company like Gevity assumes responsibilities like payroll processing, access to health and welfare benefits and workers’ compensation coverage.