Baker Botts v. ASARCO
Issues
Can bankruptcy lawyers recover compensation for fees incurred through defending a fee application against a bankruptcy client’s objections?
This case presents the Supreme Court with the opportunity to decide whether courts have the authority to grant defense-fee awards when a law firm defends itself against its bankruptcy client’s objections to legal fees. Brief for Petitioner Baker Botts at (i). ASARCO argues that § 330 of the Bankruptcy Code (“the Code”) does not permit awards for compensation to bankruptcy practitioners for successfully defending fee applications. Brief for Respondent at 16. In opposition, Baker Botts contends that § 330 gives courts broad discretion to award compensation for services that are necessary to the administration of bankruptcy cases, including successfully defending fee applications. Brief for Petitioners at 23. The Supreme Court’s decision in this case will impact the compensation of bankruptcy lawyers and the rights of bankruptcy clients. See Brief of Amicus Curiae the Committee On Bankruptcy and Corporate Reorganization of the Association of the Bar of the City of New York, The Business Law Section of the Florida Bar, et al. (“New York City and Florida Bar Associations”), in Support of Petitioners at 9; Brief of Amicus Curiae Bankruptcy Law Scholars, in Support of Petitioners at 25; Brief for Petitioners at 23 (quoting § 330(a)(C)).
Questions as Framed for the Court by the Parties
Section 330(a) of the Bankruptcy Code grants discretion to bankruptcy judges to award "reasonable compensation for actual, necessary services rendered by" an attorney or other professional employed by the estate. 11 U.S.C. §330(a)(1). Before any compensation may be awarded, the Code requires professionals to complete a detailed fee application, to which any party in interest may object. It is undisputed that the preparation of such a fee application is compensable. But the circuits have now divided over whether defending it is likewise compensable. The Ninth Circuit, like the vast majority of lower courts, has held that bankruptcy judges may award compensation for the defense of a fee application, at least when the defense is meritorious and successful. It so held in part because categorically denying compensation would undermine the statutory requirement that bankruptcy professionals' compensation not be diluted compared to that of non-bankruptcy practitioners. But the Fifth Circuit, in the judgment below, held that such compensation is never authorized by §330(a).
The question presented is whether Section 330(a) of the Bankruptcy Code grants bankruptcy judges discretion to award compensation for the defense of a fee application.
In 2005, Respondent ASARCO, a copper mining company, filed for bankruptcy protection under Chapter 11 of the federal Bankruptcy Code (the “Code”) due to mounting cash-flow and litigation problems. In re ASARCO, 751 F.3d 291, 293 (5th Cir. 2014).
Edited by
Additional Resources
- Joel Milliman: Baker Botts Fees Upheld in ASARCO Case, Wall Street Journal (Aug. 22 2011).
- Ama Sarfo: Baker Botts Wins $5.2M In Asarco Bankruptcy Fee Fight, Law 360 (Mar. 28, 2013).