By: Christopher Atlee F. Arcitio
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
In general, a debtor may, subject to court approval, retain and pay professionals, including attorneys, under section 327 of the chapter 11 Bankruptcy Code. It is unclear, however, who is responsible for paying a professional retained by a debtor’s professional. The United States Bankruptcy Court for the District of Idaho held in a chapter 11 bankruptcy case that a court-approved accountant can be statutorily barred from recovering legal fees from the debtor. Debtor, Walker Land & Cattle, L.L.C., filed for chapter 11 bankruptcy and requested permission to use cash collateral. Upon the request of Creditor, Wells Fargo Bank, the court required the debtor to provide audited financial statements. The court approved the employment of accountant Judith K. Bower (“Bower”) to conduct the audit. Bower conducted the audit within five months. After the audit, the creditor issued a notice to depose Bower. The creditor subsequently issued a subpoena for Bower to testify at the debtor’s confirmation hearing. Bower retained counsel for both the deposition and hearing. Bower subsequently sought $7,735 for reimbursement of her attorney’s fees from the debtor. The court denied the request, finding that Bower did not prove the legal fees were necessary expenses under section 330 of the Bankruptcy Code. Therefore, Bower could not recover such fees as reimbursement expenses.