SCOTUS Denies "Fees on Fees" for Bankruptcy Estate Professionals

Today the U.S. Supreme Court decided that professionals employed by bankruptcy estates are not entitled to reimbursement for time spent defending their fee applications.

See related post: Supreme Court to Resolve Bankruptcy "Fees on Fees" Issue

Today's opinion, Baker Botts v Asarco, involved law firms hired by the estate of a bankrupt copper mining company to prosecute fraudulent transfer claims.

The law firms successfully sued various entities on behalf of the mining company and obtained several billion dollars for the estate.

The bankruptcy judge compensated the firms over $124 million for their time spent prosecuting the case, including over $5 million for time spent defending their fee applications over the mining company's objection.

The Supreme Court affirmed the Court of Appeals for the Fifth Circuit in holding that the sections 327(a) and 330 of the Bankruptcy Code do not permit compensation for time spent defending fee applications.

The Court recognized that the American Rule traditionally requires each party to pay their own attorney fees, absent specific Congressional intent to the contrary. The Court reasoned that Congress could have provided for "fees on fees" for bankruptcy professionals, as it did in section 110(i)(1)(C) for the U.S. trustee, but chose not to.

Written by Michael Fuller.

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Michael Fuller is a partner at OlsenDaines in Portland, Oregon and an adjunct consumer law professor at Lewis & Clark Law School.

Fuller's boutique banking law practice focuses on bankruptcy enforcement under the automatic stay and discharge injunction.