Greg Werkheiser Quoted in BNA’s Bankruptcy Law Reporter on ASARCO Decision

Morris Nichols partner Greg Werkheiser provided commentary to Bloomberg BNA in its analysis of the U.S. Supreme Court’s decision on attorneys’ fee-defense litigation in Baker Botts LLP v. ASARCO LLC. In a 6-3 decision issued on June 15, 2015, the high court found that bankruptcy attorneys cannot be awarded attorneys’ fees for work in defending their own fee applications.

 “The majority’s conclusion that compensation is unavailable for time spent by a professional in defending its fee application largely rests on its strict textual analysis of the meaning of the term ‘services’ as used in Section 330(a)(1)(A),” Greg explained. “That the term ‘services’ ordinarily refers to labor performed for another is a proposition that neither I, nor, apparently, any of the Justices quibble with.”

 He continued, “Where I do differ respectfully with the majority is in their premise that the textual analysis was complete once they determined the meaning of ‘services.’ As Justice Breyer notes in his dissent, the Bankruptcy Code plainly contemplates that bankruptcy judges should have the ability to consider ‘all relevant factors’ in setting the level of compensation a professional may recover.”

 “Among the relevant factors at play in a bankruptcy setting,” Greg said, “is any adjustment to compensation necessary to ensure that, as Congress had directed, bankruptcy professionals are receiving an effective rate of compensation consistent with that charged by other comparably skilled practitioners. The majority was unfairly dismissive of the risk, frequently faced by estate professionals, of multiple objections being filed to their fee applications from parties that are not their clients and who may have incentives in objecting that are far removed from those that normally arise in a bilateral attorney-client relationship.”

“I fear that this decision will signal a green light to disgruntled and out of the money constituencies in bankruptcy cases to target estate professionals,” Greg concluded. “As long as they are savvy enough not to engage in behavior so egregious as to bring Rule 11 into play, going forward, they will have little reason to constrain themselves.”

The full article appeared in Bloomberg BNA’s Bankruptcy Law Reporter.