(Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2564; Pub. L. 98–353, title III, §§ 433,
434,July 10, 1984, 98 Stat. 370; Pub. L. 99–554, title II, §§ 211,
257(f),Oct. 27, 1986, 100 Stat. 3099, 3114; Pub. L. 103–394, title I, § 117, title II, § 224(b),Oct. 22, 1994, 108 Stat. 4119, 4130; Pub. L. 109–8, title II, § 232(b), title IV, §§ 407,
415, title XI, § 1104(b),Apr. 20, 2005, 119 Stat. 74, 106, 107, 192.)
Historical and Revision Notes
contains the standard of compensation adopted in H.R. 8200
as passed by the House rather than the contrary standard contained in the Senate amendment. Attorneys’ fees in bankruptcy cases can be quite large and should be closely examined by the court. However bankruptcy legal services are entitled to command the same competency of counsel as other cases. In that light, the policy of this section is to compensate attorneys and other professionals serving in a case under title 11 at the same rate as the attorney or other professional would be compensated for performing comparable services other than in a case under title 11. Contrary language in the Senate report accompanying S. 2266 is rejected, and Massachusetts Mutual Life Insurance Company v. Brock, 405 F.2d 429, 432 (5th Cir. 1968) is overruled. Notions of economy of the estate in fixing fees are outdated and have no place in a bankruptcy code.
Section 330(a)(2) of the Senate amendment is deleted although the Securities and Exchange Commission retains a right to file an advisory report under section
Section 330(b) of the Senate amendment is deleted as unnecessary, as the limitations contained therein are covered by 328(c)
of H.R. 8200
as passed by the House and contained in the House amendment.
Section 330(c) of the Senate amendment providing for a trustee to receive a fee of $20 for each estate from the filing fee paid to the clerk is retained as section 330(b) of the House amendment. The section will encourage private trustees to serve in cases under title 11 and in pilot districts will place less of a burden on the U.S. trustee to serve in no-asset cases.
of H.R. 8200
as passed by the House is retained by the House amendment as section
senate report no. 95–989
authorizes the court to award compensation for services and reimbursement of expenses of officers of the estate, and other professionals. The compensation is to be reasonable, for economy in administration is the basic objective. Compensation is to be for actual necessary services, based on the time spent, the nature, the extent and the value of the services rendered, and the cost of comparable services in nonbankruptcy cases. There are the criteria that have been applied by the courts as analytic aids in defining “reasonable” compensation.
The reference to “the cost of comparable services” in a nonbankruptcy case is not intended as a change of existing law. In a bankruptcy case fees are not a matter for private agreement. There is inherent a “public interest” that “must be considered in awarding fees,” Massachusetts Mutual Life Insurance Co. v. Brock, 405 F.2d 429, 432 (C.A.5, 1968), cert. denied, 395 U.S. 906 (1969). An allowance is the result of a balance struck between moderation in the interest of the estate and its security holders and the need to be “generous enough to encourage” lawyers and others to render the necessary and exacting services that bankruptcy cases often require. In re Yale Express System, Inc., 366 F.Supp. 1376, 1381 (S.D.N.Y. 1973). The rates for similar kinds of services in private employment is one element, among others, in that balance. Compensation in private employment noted in subsection (a) is a point of reference, not a controlling determinant of what shall be allowed in bankruptcy cases.
One of the major reforms in 1938, especially for reorganization cases, was centralized control over fees in the bankruptcy courts. See Brown v. Gerdes, 321 U.S. 178, 182–184 (1944); Leiman v. Guttman, 336 U.S. 1, 4–9 (1949). It was intended to guard against a recurrence of “the many sordid chapters” in “the history of fees in corporate reorganizations.” Dickinson Industrial Site, Inc. v. Cowan, 309 U.S. 382, 388 (1940). In the years since then the bankruptcy bar has flourished and prospered, and persons of merit and quality have not eschewed public service in bankruptcy cases merely because bankruptcy courts, in the interest of economy in administration, have not allowed them compensation that may be earned in the private economy of business or the professions. There is no reason to believe that, in generations to come, their successors will be less persuaded by the need to serve in the public interest because of stronger allures of private gain elsewhere.
Subsection (a) provides for compensation of paraprofessionals in order to reduce the cost of administering bankruptcy cases. Paraprofessionals can be employed to perform duties which do not require the full range of skills of a qualified professional. Some courts have not hesitated to recognize paraprofessional services as compensable under existing law. An explicit provision to that effect is useful and constructive.
The last sentence of subsection (a) provides that in the case of a public company—defined in section
—the court shall refer, after a hearing, all applications to the Securities and Exchange Commission for a report, which shall be advisory only. In Chapter X cases in which the Commission has appeared, it generally filed reports on fee applications. Usually, courts have accorded the SEC’s views substantial weight, as representing the opinion of a disinterested agency skilled and experienced in reorganization affairs. The last sentence intends for the advisory assistance of the Commission to be sought only in case of a public company in reorganization under chapter 11.
Subsection (b) reenacts section 249 of Chapter X of the Bankruptcy Act ([former] 11
U.S.C. 649). It is a codification of equitable principles designed to prevent fiduciaries in the case from engaging in the specified transactions since they are in a position to gain inside information or to shape or influence the course of the reorganization. Wolf v. Weinstein, 372 U.S. 633 (1963). The statutory bar of compensation and reimbursement is based on the principle that such transactions involve conflicts of interest. Private gain undoubtedly prompts the purchase or sale of claims or stock interests, while the fiduciary’s obligation is to render loyal and disinterested service which his position of trust has imposed upon him. Subsection (b) extends to a trustee, his attorney, committees and their attorneys, or any other persons “acting in the case in a representative or fiduciary capacity.” It bars compensation to any of the foregoing, who after assuming to act in such capacity has purchased or sold, directly or indirectly, claims against, or stock in the debtor. The bar is absolute. It makes no difference whether the transaction brought a gain or loss, or neither, and the court is not authorized to approve a purchase or sale, before or after the transaction. The exception is for an acquisition or transfer “otherwise” than by a voluntary purchase or sale, such as an acquisition by bequest. See Otis & Co. v. Insurance Bldg. Corp., 110 F.2d 333, 335 (C.A.1, 1940).
Subsection (c) [enacted as (b)] is intended for no asset liquidation cases where minimal compensation for trustees is needed. The sum of $20 will be allowed in each case, which is double the amount provided under current law.
house report no. 95–595
authorizes compensation for services and reimbursement of expenses of officers of the estate. It also prescribes the standards on which the amount of compensation is to be determined. As noted above, the compensation allowable under this section is subject to the maxima set out in sections
. The compensation is to be reasonable, for actual necessary services rendered, based on the time, the nature, the extent, and the value of the services rendered, and on the cost of comparable services other than in a case under the bankruptcy code. The effect of the last provision is to overrule In re Beverly Crest Convalescent Hospital, Inc., 548 F.2d 817 (9th Cir. 1976, as amended 1977), which set an arbitrary limit on fees payable based on the amount of a district judge’s salary, and other, similar cases that require fees to be determined based on notions of conservation of the estate and economy of administration. If that case were allowed to stand, attorneys that could earn much higher incomes in other fields would leave the bankruptcy arena. Bankruptcy specialists, who enable the system to operate smoothly, efficiently, and expeditiously, would be driven elsewhere, and the bankruptcy field would be occupied by those who could not find other work and those who practice bankruptcy law only occasionally almost as a public service. Bankruptcy fees that are lower than fees in other areas of the legal profession may operate properly when the attorneys appearing in bankruptcy cases do so intermittently, because a low fee in a small segment of a practice can be absorbed by other work. Bankruptcy specialists, however, if required to accept fees in all of their cases that are consistently lower than fees they could receive elsewhere, will not remain in the bankruptcy field.
This subsection provides for reimbursement of actual, necessary expenses. It further provides for compensation of paraprofessionals employed by professional persons employed by the estate of the debtor. The provision is included to reduce the cost of administering bankruptcy cases. In nonbankruptcy areas, attorneys are able to charge for a paraprofessional’s time on an hourly basis, and not include it in overhead. If a similar practice does not pertain in bankruptcy cases then the attorney will be less inclined to use paraprofessionals even where the work involved could easily be handled by an attorney’s assistant, at much lower cost to the estate. This provision is designed to encourage attorneys to use paraprofessional assistance where possible, and to insure that the estate, not the attorney, will bear the cost, to the benefit of both the estate and the attorneys involved.
References in Text
The date of the enactment of the Bankruptcy Reform Act of 1994, referred to in subsec. (b)(2), is the date of enactment of Pub. L. 103–394
, which was approved Oct. 22, 1994.
2005—Subsec. (a)(1). Pub. L. 109–8
, § 1104(b)(1), inserted “an ombudsman appointed under section
, or” before “a professional person” in introductory provisions.
Pub. L. 109–8
, § 232(b), inserted “a consumer privacy ombudsman appointed under section
,” before “an examiner” in introductory provisions.
Subsec. (a)(1)(A). Pub. L. 109–8
, § 1104(b)(2), inserted “ombudsman,” before “professional person”.
Subsec. (a)(3). Pub. L. 109–8
, § 407(1), in introductory provisions, substituted “In” for “(A) In” and inserted “to an examiner, trustee under chapter 11, or professional person” after “awarded”.
Subsec. (a)(3)(E), (F). Pub. L. 109–8
, § 415, added subpar. (E) and redesignated former subpar. (E) as (F).
Subsec. (a)(7). Pub. L. 109–8
, § 407(2), added par. (7).
1994—Subsec. (a). Pub. L. 103–394
, § 224(b), amended subsec. (a) generally. Prior to amendment, subsec. (a) read as follows: “After notice to any parties in interest and to the United States trustee and a hearing, and subject to sections
of this title, the court may award to a trustee, to an examiner, to a professional person employed under section
of this title, or to the debtor’s attorney—
“(1) reasonable compensation for actual, necessary services rendered by such trustee, examiner, professional person, or attorney, as the case may be, and by any paraprofessional persons employed by such trustee, professional person, or attorney, as the case may be, based on the nature, the extent, and the value of such services, the time spent on such services, and the cost of comparable services other than in a case under this title; and
“(2) reimbursement for actual, necessary expenses.”
Subsec. (b). Pub. L. 103–394
, § 117, designated existing provisions as par. (1) and added par. (2).
1986—Subsec. (a). Pub. L. 99–554
, § 211(1), inserted “to any parties in interest and to the United States trustee” after “notice”.
Subsec. (c). Pub. L. 99–554
, § 257(f), inserted reference to chapter 12.
Subsec. (d). Pub. L. 99–554
, § 211(2), added subsec. (d).
1984—Subsec. (a). Pub. L. 98–353
, § 433(1), struck out “to any parties in interest and to the United States trustee” after “After notice”.
Subsec. (a)(1). Pub. L. 98–353
, § 433(2), substituted “nature, the extent, and the value of such services, the time spent on such services” for “time, the nature, the extent, and the value of such services”.
Subsec. (b). Pub. L. 98–353
, § 434(a), substituted “$45” for “$20”.
Subsec. (c). Pub. L. 98–353
, § 434(b), added subsec. (c).
Effective Date of 2005 Amendment
Amendment by Pub. L. 109–8
effective 180 days after Apr. 20, 2005, and not applicable with respect to cases commenced under this title before such effective date, except as otherwise provided, see section 1501 ofPub. L. 109–8
, set out as a note under section
of this title.
Effective Date of 1994 Amendment
Amendment by section 117 ofPub. L. 103–394
effective Oct. 22, 1994, and applicable with respect to cases commenced under this title before, on, and after Oct. 22, 1994, and amendment by section 224(b) ofPub. L. 103–394
effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 ofPub. L. 103–394
, set out as a note under section
of this title.
Effective Date of 1986 Amendment
Effective date and applicability of amendment by section 211 ofPub. L. 99–554
dependent upon the judicial district involved, see section 302(d), (e) ofPub. L. 99–554
, set out as a note under section
, Judiciary and Judicial Procedure.
Amendment by section 257 ofPub. L. 99–554
effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) ofPub. L. 99–554
Effective Date of 1984 Amendment
Amendment by Pub. L. 98–353
effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) ofPub. L. 98–353
, set out as a note under section
of this title.