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