In California, bringing litigation with a marginal possibility of success could be a bad bet whenever a contract permits one side to recover attorneys’ fees.
Judge Rodriquez of the U.S. Bankruptcy Court for the Southern District of Texas issued an opinion in December 2024 which reinforced the axiom that actions have consequences.[1]In re Garcia Grain Trading Corp. v. Plascencia.[2] Specifically, Judge Rodriquez determined that the bad faith of a defendant movant justified fee-shifting and directed the plaintiff’s counsel to submit a fee application for their related work, which remains under advisement.
Professionals seeking to be retained in bankruptcy cases understand the importance of disclosing and avoiding conflicts as a retention condition.[1] A recent unpublished decision by the United States Bankruptcy Court for the Northern District of Texas[2] highlights that even after a professional is retained in a bankruptcy case, professionals must closely monitor and disclose potential conflicts, as post-petition conflicts can result in a reduction or denial of fees.[
Although lower courts have disagreed, the Second Circuit joined three other circuits in holding that a standing trustee may not retain the percentage fee when chapter 13 cases are dismissed before confirmation. Consequently, ‘13’ debtors with confirmed plans pay standing trustees’ fees.
