Chapter 11 Debtors Counsel Must Obtain Court Approval of Bid Procedures Before Auctioning Assets According to Latest ABI Quick Poll
Contact: John Hartgen
DEBTOR’S COUNSEL MUST OBTAIN COURT APPROVAL OF BID PROCEDURES
BEFORE AUCTIONING ASSETS, ACCORDING TO LATEST
March 28, 2008, Alexandria,
Va. — Chapter 11 debtor’s counsel must obtain
court approval of bid procedures prior to auctioning assets or risk
having fees related to the auction disallowed, according to a majority
of respondents in a recent
Forty-three percent of respondents, however, thought that chapter 11 debtor’s counsel should not have to obtain court approval of bid procedures before an asset auction. Twenty-seven percent “disagreed strongly” and 16 percent “somewhat disagreed” that chapter 11 debtor counsel must obtain court approval of bid procedures before an auction or risk having the fees related to the auction disallowed.
In the case of In re APW Enclosure Systems, Inc., a bankruptcy court disgorged the fees requested by the debtor’s counsel in connection with an asset auction because the counsel did not seek approval of the auction procedure until after the auction was completed. The court found that the counsel failed to meet its initial burden of showing that the services relating to the auction procedure had a reasonable likelihood of benefitting the estate at the time they were performed.