Ethics and Professional Compensation

Trustee Selection in Commercial Bankruptcy Cases: Who Wins the Battle to Control the Estate?

Disallowance of a Claim Under § 506 “Does Not” Foreclose Allowance Under § 502

On March 13, 2015, on remand from the Fifth Circuit, the U.S. Bankruptcy Court for the Western District of Texas allowed a trustee’s claim for a foreclosure commission under 11 U.S.C. § 502, but the court denied the mortgagee’s § 502 attorneys’ fees claim.[1] Both claims had previously been found unreasonable under § 506.

Reversal of Fortune: In re Premier Healthcare Services Inc. and Disgorgement of Fees

[1]Bankruptcy professionals work in an area that, by its very nature, makes the fee process lengthily transparent, subject to rigorous oversight and, in some cases, highly contentious. Even if fees are awarded, collecting them can be difficult. In a few (thankfully) rare cases, even after fees have been awarded and paid on an interim basis, the bankruptcy case becomes administratively insolvent and the professionals may have to disgorge their previously paid fees.[2]

Are Attorneys’ Fees Incurred in Defending Preference Action Recoverable Against the Estate? One Court Says “Yes”

In a recent decision,[1] the U.S. Bankruptcy Court for the Northern District of California granted an adversary proceeding for the defendant’s motion for allowance and payment of a secured claim for attorneys’ fees incurred defending the adversary proceeding. While this may be just an isolated case, the decision could mark the start of a new wave of defendants prophylactically crafting contracts with attorneys’ fees provisions related to adversary proceedings, and attempting to enforce them.