Study Claims Bankruptcy Lawyers Are Billing Illegally
A new study claims bankruptcy lawyers are billing their clients illegally by failing to get court approval before collecting fees.
The study found that the lawyers bill bankrupt companies for about 80 percent of their fees without first submitting the charges to a judge as required by the U.S. Bankruptcy Code, Bloomberg reports. The study says the fees are instead reviewed later, but the payments “are harder to reverse than to prevent,” according to accounts in the American Lawyer and the Wall Street Journal Law Blog.
The conclusion was based on a study of fee payments in 102 of the largest bankruptcies of public companies from 1998 to 2007. The authors of the study were Joseph Doherty, director of the law-research group at the University of California at Los Angeles, and UCLA law professor Lynn LoPucki.
Bankruptcy lawyers have a “cavalier attitude toward the laws that regulate them,” LoPucki told Bloomberg. “They don’t seem to think the illegality of their practices is important.”
Nancy Rapoport, a law professor at the University of Nevada, Las Vegas, told Bloomberg she thinks judges approve the fees after payment because they are overwhelmed, especially in big cases. “I agree that the foxes are guarding the henhouse, because lawyers don’t want to challenge other lawyers’ fees,” she said.
