Professional Compensation

Section 329: Bankruptcy Courts Have Exclusive Jurisdiction Over Attorneys’ Fees in Bankruptcy Proceedings

Submitted by mdiaz on Tue, 04/10/2012 - 16:18
Posted: 1 year 6 weeks ago


By: Samantha M. Tusa

St. John’s Law Student

American Bankruptcy Institute Law Review Staff

 

The Bankruptcy Court for the Eastern District of Michigan held, in In re Piccinini[1], that bankruptcy courts have exclusive jurisdiction over attorneys’ fees incurred in bankruptcy proceedings because of the “restrictive language” of section 329 of the Bankruptcy Code (the “Code”). [2]  The issue arose after the debtor terminated his original attorney who then filed a suit against the debtor in state court to collect his fees.[3]  The bankruptcy court stayed the state court collection action pending the bankruptcy court’s resolution of the fee dispute. [4]

Definition of “Partner” in Bankruptcy Reorganization Plan Controls Subordination of Claims, Not Definitions under State Law

Submitted by mdiaz on Thu, 12/02/2010 - 00:00
Posted: 2 years 24 weeks ago

By: Jason L. Gould
St. John's Law Student
American Bankruptcy Institute Law Review Staff

The Seventh Circuit, in In re Altheimer & Gray,[1] held that the meaning of “partner” in a bankruptcy proceeding would be determined in accordance with the terms of the plan of reorganization, not state partnership law.[2] Altheimer & Gray filed for bankruptcy in 2003.[3] According to his contract, Mark Berens was a “Non-Unit Partner,”[4] meaning he possessed no interest in the firm’s profit-share and held no voting power, unlike the “Unit Partners.”[5] Altheimer & Gray’s reorganization plan subordinated the claims of both “Non-Unit Partners” and “Unit Partners” to those of its other creditors.[6] Berens argued that he was not a partner under the statutory definition of Illinois’ Uniform Partnership Act, and therefore, should not have his $300,000 claim subordinated.[7] Without looking to state law, the court relied on 11 U.S.C. § 1141(a), which states, “the provisions of a confirmed plan bind the debtor [and any other such entity under the plan] . . . whether or not the claim . . . is impaired under the plan.”[8]

Objection! Use it or Lose it after Final Fee Order

Submitted by mdiaz on Wed, 12/01/2010 - 19:19
Posted: 2 years 24 weeks ago

By: David Wohlstadter
St. John's Law Student
American Bankruptcy Institute Law Review Staff

In AASI Creditor Liquidating Trust v. Raymond James & Associates, Inc. (In re All American Semiconductor, Inc.),[1] a bankruptcy court held that res judicata barred creditors from objecting to a final fee order because the creditors had notice of the prior hearing regarding the fee application and should have objected to the specific fees then.  The liquidating trustee challenged pre-petition fees paid to a financial advisor for his efforts to sell various assets owned by the debtor.[2]  The bankruptcy court overruled the trustee’s objection because the creditor’s committee and United States Trustee had already objected unsuccessfully during the final fee hearing.[3]

Chapter 13 Plan Must Pay Adequate Protection Payments Prior to Attorney’s Fees

Submitted by abi_admin on Mon, 03/30/2009 - 10:19
Posted: 4 years 7 weeks ago

By: Brian Lacoff
St. John's Law Student
American Bankruptcy Institute Law Review Staff
 
In a decision of importance to Chapter 13 debtors’ attorneys, the Bankruptcy Court for the District of New Jersey ruled that an undersecured creditor, Ford Motor Credit Co., was entitled not only to adequate protection payments, but that the section 507(b)[1] “super-priority” status of the inadequate adequate protection provided during the case meant that the Chapter 13 plan had to pay those amounts before paying any of the debtor’s attorneys fees.[2] Ford Motor Credit objected to the debtor’s Chapter 13 plan for failure to provide adequate protection payments, violating 11 U.S.C. §§ 361, 1325 and 1326.[3]  The debtor modified the plan to include adequate protection payments, but objected to the creditor’s contention that those payments had super-priority over debtor’s attorney fees.[4]  The court agreed with Ford Motor Credit, reasoning that the creditor, having a lien on the debtor’s property, must be afforded protection against the daily depreciation of its property.[5]

“Hedging” Anticipated Contingency Fees is Deemed Impermissible Fee Sharing

Submitted by abi_admin on Wed, 02/25/2009 - 12:55
Posted: 4 years 12 weeks ago

By: David Bloom
St. John’s Law Student
American Bankruptcy Institute Law Review Staff

Although a “hedging” arrangement between attorneys retained by a Chapter 7 Trustee and a lender did not appear to offend policy considerations underlying 11 U.S.C. §504, such an agreement could not be approved as a means to obtain downside protection against risks associated with an appeal.  In the case of In re Winstar Communications, Inc.,[1] the Trustee’s special litigation counsel and a consultant sought permission to assign part of their anticipated contingency fees to their lender.[2]  Under the proposed agreement, the lender agreed to pay an undisclosed fixed price to Trustee’s counsel and consultant.[3]  In exchange, the lender would receive the actual amount of contingency fees awarded, up to $10,000,000.00.[4]  If the contingency fees were to exceed $10,000,000.00, the counsel and consultant would share the fees in excess of that amount.[5]  Moreover, the lender agreed to waive any right to object to the Trustee’s settlement or other disposition of the adversary proceeding.[6]  The Court concluded that this arrangement constituted impermissible “sharing” of fees within the meaning of §504, and denied the motion to approve the transaction.[7]

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