Supreme court rules in bankruptcy fee defense case
Supreme court rules in bankruptcy fee defense case

The US Supreme Court [official website] ruled [opinion, PDF] 6-3 on Monday in Baker Botts v. ASARCO [SCOTUSblog materials] that law firms representing those undergoing bankruptcy proceedings cannot recoup fees incurred when defending the fees they originally charged their client. Under Chapter 11 bankruptcy rules [11 USC §330(a)(1) text], lawyers and others providing services to bankruptcy debtors can receive fees for “actual, necessary services rendered.” Baker Botts had represented ASARCO in bankruptcy proceedings starting in 2005 and was awarded $113M for the representation. It also sought, and was originally awarded, $5.1M for fees incurred while defending the original fees after ASARCO challenged them. Writing for the majority, Justice Clarence Thomas held that defending these fees was not a service rendered to the debtor and was therefore not covered under the section

As we long ago observed, “The general practice of the United States is in opposition” to forcing one side to pay the other’s attorney’s fees, and “even if that practice [is] not strictly correct in principle, it is entitled to the respect of the court, till it is changed, or modified, by statute.” … (emphasis deleted). We follow that approach today. Because §330(a)(1) does not explicitly override the American Rule with respect to fee-defense litigation, it does not permit bankruptcy courts to award compensation for such litigation.

The ruling upheld an earlier opinion issued by the US Court of Appeals for the Fifth Circuit [official website].

Justice Sonia Sotomayor wrote a concurring opinion. Justice Stephen Breyer wrote the dissent, joined by Justices Ruth Bader Ginsburg and Elena Kagan. The court granted certiorari in the case last October and heard oral arguments [JURIST reports] in February.