Law firms can't collect fees for defending bankruptcy fee applications, Supreme Court rules
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Law firms are not entitled to fee awards for the time spent defending fee applications in U.S. bankruptcy court, the U.S. Supreme Court ruled on Monday.
Justice Clarence Thomas wrote the majority opinion (PDF), joined in full by four justices and in part by Justice Sonia Sotomayor.
The opinion is a defeat for two law firms that sought to retain fees of more than $5 million for defending fee applications. The firms–Baker Botts and Jordan, Hyden, Womble, Culbreth & Holzer—represented copper mining company Asarco in a Chapter 11 reorganization.
The law firms had sued Asarco’s parent company for fraudulent transfer claims, obtaining a judgment worth up to $10 billion that allowed Asarco to reorganize while paying creditors in full. The firms were awarded $120 million for their work in the bankruptcy case, plus a $4.1 million enhancement for exceptional performance, plus the $5 million for time spent defending the fee applications.
At issue was a phrase in the bankruptcy code authorizing fees for lawyers and other professionals as “reasonable compensation for actual, necessary services rendered.” The phrase permits attorney fees to assist the administrator of the estate, but does not shift the cost of adversarial litigation from lawyers seeking fees to the administrator of the estate, Thomas said.
The case is Baker Botts v. Asarco.
