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.
Ethics And Professional Compensation Committee
Committees
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.
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.
In re Kimberly Nifong Mitchell, Case No. 11-08880-8-ATS (Bankr. E.D.N.C. Sept. 20, 2013), is a chapter 11 case involving the law firm of Oliver, Friesen, Cheek PLLC (OFC) and Bankruptcy Code §§ 503(b)(1)(A) and 507(a)(2). OFC was disqualified due to an undisclosed potential conflict of interest between two of its clients.
In In re Rowe,[1] the court considered the propriety of deviating from the percentage compensation set forth in Bankruptcy Code § 326(a) based on the chapter 7 trustee’s failure to perform as required. This case illustrates the effort needed to reconcile the tension between recognizing the trustee’s fee as a “commission” calculated by the formula set forth in § 326(a) and the court’s directive to award “reasonable” compensation to trustees and other professionals.
Co-Chair
LSU Paul M. Hebert Law Center
Baton Rouge, LA
(404) 307-2754
Communications Manager
Reed Smith LLP
Houston, TX
(713) 469-3622
Education Director
Nelson Mullins Riley & Scarborough, LLP
Atlanta, GA
(404) 322-6143
Membership Relations Director
Pierson Ferdinand LLP
Jacksonville, FL
(904) 479-6612
Newsletter Editor
Stewart Robbins Brown & Altazan
Baton Rouge, LA
(225) 571-8414