COMMENTARY: SUPREME COURT DENIES LAW FIRM PAYMENT FOR DEFENDING RIGHT TO BE PAID
by Prof. Charles Tabb
Mildred Van Voorhis Jones Chair in Law, University of Illinois, and Of Counsel, Foley & Lardner LLP
In Baker Botts, LLP v. ASARCO, LLC, the Supreme Court had to decide "whether § 330(a)(1) permits a bankruptcy court to award attorneys' fees for work performed in defending a fee application.” By a vote of 6-3, with Justice Thomas writing for the majority, the Court held that § 330(a) does not give bankruptcy courts the discretion to award fee-defense fees under any circumstances. The Court reasoned that the plain text of the statute, which only permits "reasonable compensation for actual, necessary services rendered by" a professional retained by the estate, does not suffice in the context of fee-defense awards to override the "American Rule" that each party bears its own attorneys' fees. While fees may be awarded for work done in preparing a fee application (as § 330(a)(6) obviously infers), the Court found no comparable basis for authorizing compensation for fees incurred in defending an application. Although Baker Botts superintended a challenging reorganization and then successfully defended its fees against all challenges, it took a $5 million hit. According to Prof. Tabb, the law firm should have been allowed to recover compensation for that defense. Not allowing that compensation is unfair to estate professionals, according to Prof. Tabb, and weakens the incentives for the best and brightest professionals to work in the bankruptcy arena. Read the full commentary.
ABI will be holding a media teleconference on Thursday at 3 p.m. ET featuring experts discussing the Supreme Court's decision in Baker Botts, LLP v. ASARCO, LLC. A limited number of lines have been reserved for ABI members to listen to the discussion. If you would like to listen to the teleconference, please reply to ABI Public Affairs Manager John Hartgen at [email protected]
MORTGAGE BOND SALES SOAR IN SIGN U.S. CRISIS WOUNDS ARE HEALING
Almost seven years after the financial crisis, bond investors are rediscovering their appetite for new debt tied to the U.S. housing market, Bloomberg News reported today. Issuance of home-loan securities that don’t have government backing has accelerated this year to more than $32 billion from $18 billion a year ago, according to data compiled by Bloomberg and Bank of America Corp. The recovery in housing is luring investors back to a market that unraveled amid soaring defaults and tumbling home prices. The revival is helping to reduce taxpayers' risks and boost the profits of private-equity firms, real estate investment trusts and hedge funds -- and is poised to do more to aid home buyers. "The market's healing," said Chris Hentemann, managing partner of 400 Capital Management, a hedge fund that oversees more than $1.6 billion. "You've got all the different cylinders starting to fire again." While bonds are being sold at the fastest pace since 2007, issuance remains a fraction of the more than $1 trillion that had been sold annually before the crisis. Read more.
COMMENTARY: IN AIG CASE, SURPRISE RULING THAT COULD END ALL BAILOUTS
The ruling yesterday by Judge Thomas C. Wheeler of the U.S. Court of Federal Claims that the Federal Reserve's terms for rescuing AIG in 2008 were too "draconian" could have far-reaching consequences should another financial crisis occur, according to a New York Times DealBook commentary today. Legal experts say that the ruling, coupled with certain provisions of the Dodd-Frank financial overhaul law enacted after the crisis, makes it unlikely that the government would ever rescue a failing institution, even if an intervention was warranted. Should that happen, and the government decides it is handcuffed by the law from any intervention, according to the commentary, taxpayers can thank Maurice Greenberg, AIG's former chief executive and one of its largest shareholders. He sued the government on behalf of shareholders, contending that its takeover amidst the financial crisis was illegal and unfair to investors. The judge largely sided with Greenberg, confounding many legal experts who considered the case a long shot. Still, the judge did not award any monetary damages to Greenberg, making it a moral victory, but not an economic one, according to the commentary. Greenberg had sought $40 billion and has spent millions bringing his case. Read the full commentary.
LATEST ABI PODCAST FOCUSES ON NEW CHAPTER 15 BOOK AND CASE LAW ISSUES
ABI's latest podcast features DLA Piper partner Craig Martin discussing the intricacies of chapter 15 case law with ABI Deputy Executive Director Amy Quackenboss. Martin, a co-author of ABI's new Chapter 15 for Foreign Debtors, provides an overview of the book, as well as tips for bankruptcy professionals working on cross-border cases. Click here to listen to the podcast.
To purchase Chapter 15 for Foreign Debtors from the ABI Bookstore, please click here.
REGISTER FOR FREE: NEXT THURSDAY'S ABI LIVE WEBINAR EXAMINES PRACTICAL IMPACT OF CHAPTER 11 COMMISSION RECOMMENDATIONS ON PREFERENCE REFORMS
The ABI Young and New Members and Bankruptcy Litigation Committees will present a free abiLIVE webinar on June 25 to explore the ABI Chapter 11 Reform Commission Report's recommendations regarding the preferential transfer statute in Sect. 547. This webinar will examine the rationale behind the recommendations, such as the good faith belief for filing a demand letter or preference complaint, the increase in the statutory minimum to bring a preference action, venue reform for small-dollar cases and more. Most importantly, the panel will assess the practical effects and foreseeable impact of implementing these recommendations. This webinar is a must-attend for attorneys who regularly represent creditors, liquidating trustees, and panel trustees in preference actions. Click here for more information and to register for free!
NEXT ABI WORKSHOP TO FEATURE BANKRUPTCY JUDGES EXAMINING COMMISSION RECOMMENDATIONS ON RESOLVING COURT SPLITS
The next ABI Workshop, the 2015 Bankruptcy Judges Roundtable, will take place at ABI headquarters on Aug. 4 to examine the Chapter 11 Reform Commission's recommendations on resolving court splits. The Commission identified more than 30 splits in case law on important bankruptcy issues. Attend the program from 3:00-4:30 p.m. ET in person or via live webstream to hear five bankruptcy judges discuss the recommendations and issues surrounding the court splits. Speakers on the program are Bankruptcy Judges Dennis R. Dow (D. Mo.), Bruce A. Harwood (D. N.H.), Barbara J. Houser (N.D. Texas), C. Ray Mullins (N.D. Ga.) and Eugene R. Wedoff (N.D. Ill.). ABI will seek 1.5 hours of general CLE credit in 60-minute-hour states and 1.5 hours of credit in 50-minute-hour states for the program. Networking reception to follow from 5-7 p.m. ET for in-person attendees, and registration for just the reception is also available. Click here to register.
NEW CASE SUMMARY ON VOLO: WILLIAMS V. LYNCH (IN RE LEWIS, JR.; 4TH CIR.)
Summarized by John Bollinger of Boleman Law Firm, PC
In an unpublished opinion, the Fourth Circuit found no reversible error and affirmed the district court's order affirming the bankruptcy court's order suspending an attorney from practicing in the bankruptcy court, the disgorgement of attorney's fees and the imposition of a $2,500.00 monetary sanction. The Fourth Circuit held that the bankruptcy court statutorily and inherently has jurisdiction and authority to sanction attorneys that present themselves as an attorney and officer of the court.
There are more than 1,700 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI's Volo website.
NEW ON ABI'S BANKRUPTCY BLOG EXCHANGE: SCOTUS RULES THAT COMPLETELY UNDERWATER LIENS RIDE THROUGH, AT LEAST IN A CHAPTER 7 CASE
A recent blog post examined the Supreme Court's recent decision in Bank of America, N.A. v. Caulkett in which the Court reversed the Eleventh Circuit's decision allowing individual chapter 7 debtors to "strip" junior liens on their homes when the first priority liens are underwater.
For further analysis of this and other Supreme Court decisions from the October 2014 term, be sure to visit ABI's Supreme Court page. The page features each case, including a media teleconference with experts presenting their perspectives of the decision.
To read more on this blog and all others on the ABI Blog Exchange, please click here.
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