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9 Bankruptcy Decisions Continued from Page 6 Bankruptcy Professionals Must Work Pro Bono Before Getting Paid 11 U.S.C. Sec- tion 330a Does Not Authorize Compensa- tion for Attorney Fees Incurred in Defend- ing Fee Applications On June 15 2015 contrary to the standing authority in the Ninth Circuit and a majority of lower courts the Supreme Court issued its opinion in Baker Botts L.L.P. v. ASARCO LLC 2015 U.S. LEXIS 3920 June 15 2015 in a 6-3 decision ruling that Bank- ruptcy Code Section 330a does not authorize com- pensation for attorney fees incurred in defending fee applications. Respondent an integrated copper mining smelting and refining company filed a voluntary Chapter 11 bankruptcy petition. Petitioner was counsel to re- spondents bankruptcy estate. Due to petitioners efforts respondents reorganization was a success resulting in full payment to creditors including in- terest and attorneys fees. A primary reason for the effective reorganization was petitioners successful prosecution of a fraudulent transfer cause of action against respondents parent corporation which re- sulted in a judgment for respondent valued between 7 and 10 billion. Once the reorganization took effect respondent ceased being a debtor and the par- ent corporation regained control. Thereafter re- spondent under the control of the parent corpora- tion attacked petitioners fee application and all previously approved fees. After extensive discovery and a 6-day trial on fees the Bankruptcy Court awarded petitioner 5 million reduced from 8 million for the fees it incurred in successfully defending its fee application. On ap- peal the District Court affirmed and the Fifth Cir- cuit Court of Appeals later reversed. The Fifth Cir- cuit reasoned that absent explicit statutory authority to the contrary the American Rule that each par- ty to litigation bears its own costs governs and the text of 11 U.S.C. 330a does not authorize com- pensation for the costs counsel or professionals bear to defend their fee applications. In re Asarco L.L.C. 751 F.3d 2915th Cir. Tex. 2014. The Su- preme Court granted petitioners writ for certiorari and affirmed the Fifth Circuits holding. In the opinion delivered by Justice Thomas the Courts reasoning begins with the American Rule as the basic point of reference for awards of attor- neys fees. Because the American Rule is deeply rooted in common law the Court refused to deviate from it absent explicit statutory authority. Accord- ing to the Court Congress did not depart from the American Rule in 11 U.S.C. 330a1 because Section 330a1 only authorizes reasonable com- pensation for actual necessary services rendered. The word services the Court reasoned ordinarily refers to labor performed for another and thus the phrase reasonable compensation for services rendered necessarily implies loyal and disinterested service in the interest of a client therefore time spent litigating a fee application against the bank- ruptcy estates administrator cannot be fairly de- scribed as labor performed forlet alone disinterested service tothat administrator. Moreover the Court found the policy arguments unpersuasive. The Court found that the language of Section 330a1 does not override the American Rule in a fee-defense context and explained that fee- defense litigation could not be considered a part of Section 330a1s reasonable compensation or services rendered language. Considering fee- defense litigation a part of Section 330a1s services rendered suffers from an unnatural inter- pretation of the term services rendered and would permit attorneys to be awarded fees for unsuccess- fully defending fee applications when most fee- shifting provisions permit awards only to a prevailing party. In addition the Court rejected the argument that fee-defense litigation must be un- derstood as a component of Section 330a1s reasonable compensation to ensure that compen- sation for the actual . . . services rendered will not be diluted by unpaid time spent litigating fees and that competent counsel will not be deterred from taking bankruptcy workultimately finding that Continued on Page 11