A bankruptcy court in Florida narrowly interpreted Baker Botts v. ASARCO by allowing compensation for supplying more detail after an objection to a fee application that was initially in compliance with local rules.
In chapter 7, the trustee’s counsel recovered $6.5 million in settlement of a fraudulent transfer suit. In compensation for the litigation and general services to the trustee, the lawyer filed a fee application for about $750,000.
In his opinion on Oct. 26, Chief Bankruptcy Judge Michael G. Williamson in Tampa, Fla., said that the fee application, as originally filed, complied with the local rules for chapter 7 cases. Nonetheless, the U.S. Trustee objected to the application, asking for additional detail akin to that which would be required under local rules were the case in chapter 11.
The lawyer decided to comply with the U.S. Trustee’s request. Once additional information was provided, the U.S. Trustee in substance withdrew the objection, and the fee application was allowed in full.
On a second fee application, the lawyer sought almost $34,000 for preparation of the first fee application, including some $27,500 spent in responding to the U.S. Trustee’s request for more information.
The U.S. Trustee objected to allowance of the $27,500, contending the money spent in defense of the fee application did not benefit the estate, and thus was not allowable under the Supreme Court’s 2015 decision in Baker Botts.
Judge Williamson disagreed and allowed the entire $34,000 for fee application preparation, latching onto an analogy that Justice Thomas included in his Baker Botts opinion.
Justice Thomas said that preparation of an itemized bill by an auto mechanic would be “part of his ‘services’ to the customer.” Therefore, Judge Williamson said, the “touchstone” is not whether the services were performed before or after objection.
Judge Williamson said that supplying additional information “was akin to the mechanic’s preparation of an itemized bill as part of his ‘services’ to the customer.” Here, he said, “the parties were not fighting over the amount of the bill but whether it was detailed enough.”
The result might have been different, Judge Williamson said, had the U.S. Trustee’s objection complained about duplication of services.
It is not entirely clear from the opinion, but services for providing additional detail might also have been allowed were the case in chapter 11. Because incurring the expense after an objection is not pivotal, response to an objection requesting more detail might also be allowable in chapter 11, since providing detail would be compensable where the expense is incurred in the initial preparation of the application.
Judge Williamson in substance wanted a rule of law that would not prompt counsel to overdo their fee applications routinely, since providing detail is compensable.