Arlington Capital LLC v. Bainton McCarthy LLC

(N.D. Ind. June 26, 2015)

The district court affirms the bankruptcy court’s approval of the attorney fee application. The law firm was retained by the trustee to pursue a 11 U.S.C. § 363(n) claim against the purchaser of the chapter 11 debtor’s assets for colluding with bidders to set the sale price. The defendant argued the award of attorney fees was inappropriate because they were not incurred for services “reasonably likely to benefit the debtor’s estate,” as a secured creditor had a lien on the property sold and thus should have recovered any difference between the sale price and the actual value of the property sold. The court holds that the recovery would be “after acquired property” under § 552(a) and thus property of the estate. As such, the attorney fees were incurred to benefit the debtor’s estate. Opinion below.

2015-06-26 – arlington capital llc v bainton mccarthy llc

Author: Matt Lindblom

Baker Botts L.L.P. v. ASARCO LLC

(U.S. Sup. Ct. June 15, 2015)

The Supreme Court holds that professionals employed by trustees may not be compensated for time spent defending their fee applications in court. Because 11 U.S.C. § 330(a)(1) provides that professionals may be compensated for “actual, necessary services rendered,” the Court concludes that compensation for work defending a fee application is not authorized. The Court reasons that such work is not an actual and necessary service for the estate, and thus the “American Rule”—that each litigant pays his or her own attorney’s fees unless a statute or contract provides otherwise—should not be altered. Opinion below.

2015-06-15 – baker botts v asarco

Author: Matt Lindblom

Carrington at Stonebridge Condominium Association v. Galanos

(N.D. Ind. Jan. 26, 2015)

The district court affirms the bankruptcy court’s order denying the creditor’s request for an award of attorney fees to be paid by the Chapter 13 debtor. The bankruptcy court had ordered the creditor to submit detailed invoices for the fees to be reviewed for reasonableness. The creditor failed to do so before the deadline. The court holds that the creditor failed to meet its burden of showing the fees were reasonable. Opinion below.

2015-01-26 – carrington at stonebridge v galanos

Author: Matt Lindblom

In re Sweports, Ltd.

(7th Cir. Jan. 9, 2015)

The Seventh Circuit reverses the bankruptcy court’s decision declining to award fees to the attorney for the unsecured creditors committee. The bankruptcy court dismissed the chapter 11 prior to reorganization. The attorney then sought an order from the bankruptcy court holding the debtor liable for the attorney fees. The bankruptcy court declined to enter the order, reasoning that it could no longer grant the relief because the case had been dismissed and there were no assets in the bankruptcy estate. The Seventh Circuit holds that the bankruptcy court does have jurisdiction to resolve this issue and that it should have entered the order holding the debtor liable for the fees. The attorney could then enforce the order through other legal proceedings. Opinion below.

2015-01-09 – in re sweports

Sager v. Bennett (In re Bennett)

(Bankr. E.D. Ky. Jan. 7, 2015)

The bankruptcy court had found the debtor liable to her landlord for damage done to the leased property and held that liability nondischargeable under 11 U.S.C § 523(a)(6), because the debtor willfully and maliciously caused the damage. The court had also avoided a preferential transfer to the landlord, granting the debtor’s requested relief in her counterclaim. Here, the court holds that the landlord is entitled to recover its attorney fees as part of the nondischargeable debt. The Kentucky statute permits recovery of reasonable attorney fees when a tenant willfully breaches a lease. The court also holds that the landlord is entitled to set-off the preference liability against the nondischargeability judgment. Because the nondischargeability judgment and the preference judgment were both post-petition mutual obligations, set-off is permitted. Opinion below.

2015-01-07 – sager v bennett

McKinstry v. Genser (In re Black Diamond Mining Company, LLC)

(E.D. Ky. Aug. 6, 2014)

The district court holds the bankruptcy court incorrectly used the federal “lodestar” method to determine whether attorney fees were reasonable for purposes of a fee-shifting provision of a settlement agreement between the trustee of the unsecured creditors trust and the former restructuring specialists. The trustee argued the Philadephia-based billing rates were unreasonable, and should have been adjusted to be in line with the Kentucky market. The court holds the bankruptcy court should have used Kentucky state law when determining the reasonableness of the fee, as state law controls the interpretation of contracts. The court nevertheless adopts the bankruptcy court’s proposed findings of fact and conclusions of law, because the result was the same under either analysis. The fees were reasonable under the circumstances, even though the rates were higher than those in the local market. Opinion below.

2014-08-06 – in re black diamond mining company