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Section 330 of the Bankruptcy Code permits a court to authorize reasonable compensation for actual and necessary services. Courts within the Fifth Circuit are bound by In re Pro-Snax Distributors Inc., which held that services are compensable under § 330, but only if the applicant proves that the services resulted in a benefit to the bankruptcy estate.[1] A recent decision by a panel of the Fifth Circuit demonstrates that Pro-Snax continues to be binding precedent, but the panel took the extraordinary step of unanimously recommending that the Fifth Circuit revisit Pro-Snax en banc.[2]

Editor's Note: Maria Michelle Nisce is a 2014 J.D./M.B.A. candidate at the University of Nevada at Las Vegas William S. Boyd School of Law and Lee Business School.

In an issue of first impression in the MF Global Inc. liquidation proceedings under the Securities Investor Protection Act of 1970 (SIPA), Judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of New York held that payments to non-attorney professionals hired by a SIPA trustee need only be approved by the Securities Investor Protection Corp. (SIPC)[1] and are not required to be approved by a bankruptcy court.

On Feb. 11, 2014, the U.S. Bankruptcy Court for the Middle District of Alabama awarded a debtor actual damages, punitive damages (five times the amount of actual damages) and attorneys’ fees for a creditor’s willful violation of the automatic stay.[1] As directed, the debtor filed his application for attorneys’ fees, and the offending creditor objected to the application. The court analyzed the propriety of an attorneys’ fee award where there was a willful violation of the automatic stay.

In the recently decided case of In re Residential Capital (ResCap), Judge Glenn approved a $2 million success fee to the court-approved chief restructuring officer (CRO or Kruger).[1] In doing so, the court overruled the sole objection, which had been filed by the U.S. Trustee, and found that the debtors appropriately exercised their business judgment and met the reasonableness standard for use of estate assets found in §§ 330 and 363.

In Ruffini v. Norton Law Group PLLC,[1] the bankruptcy court permitted the debtors’ estate to recover pre-petition legal fees under § 548 of the Bankruptcy Code and §§ 271-273 of New York Debtor Creditor Law as fraudulent conveyances. In its decision, the court was careful to state that there is no bright-line test for determining whether pre-petition legal fees are avoidable as constructively fraudulent transfers in bankruptcy.

As members of this committee all know, the extent of disclosures required under Rule 2014 of the Federal Rules of Bankruptcy Procedure is somewhat vague, as its key term “connections” is very broad.[1] Recently, three new cases have provided fresh insight into this issue.

In re Miners Oil Company Inc.: You May Know Who Your Real Client Is, but Does Your Client’s Owner Know That?[2]

Under Bankruptcy Code § 329(a) and Federal Rule of Bankruptcy Procedure 2016(b), debtor’s counsel must file a compensation disclosure (a Rule 2016(b) Statement) that details legal fees charged and unpaid balances due. The local rules of the Bankruptcy Court for the Northern District of California also prescribe a “Rights and Responsibilities Statement of Chapter 13 Debtors and Their Attorneys” (the Rights and Responsibilities Statement) that details the fee arrangements between debtor and counsel.

Two recent ethics opinions issued by the New York State Bar Association’s Committee on Professional Ethics,1Anchor as well as a recent decision from the Virginia Supreme Court,2Anchor are spotlighting some of the issues surrounding the ethical standards regarding the propriety of attorney blogs and the contents thereof.

In the context of five firms’ fee applications exceeding $5.7 million, the U.S. Bankruptcy Court for the Northern District of Texas in Amarillo thoughtfully reviewed the cases applying the Fifth Circuit’s Pro-Snax[1] decision that fees may be awarded under Bankruptcy Code § 330(a)[2] when the services “resulted in an identifiable, tangible, and material benefit” to the estate. The court rejected the idea that success must be proven as a condition of a fee award.