December 11, 2018
A recent Law 360 story by Rose Krebs, “Denial of $30M Attorneys’ Fee Claim in Tribune Ch. 11 Tossed,” reports that a Delaware federal judge overturned a 2015 bankruptcy court order denying Wilmington Trust Co.’s $30 million unsecured claim for post-petition attorneys’ fees in the Tribune Media Co. Chapter 11 that was confirmed in 2012. In a memorandum order, Judge Richard G. Andrews remanded the matter back to the Delaware bankruptcy court for further consideration, ruling that post-petition attorneys’ fees can be an allowable unsecured claim.
“I agree with the position adopted by every court of appeals faced with this question; [the bankruptcy code] does not limit the allowability of unsecured claims for contractual post-petition attorneys' fees,” Judge Andrews wrote. Appeals courts have “have unanimously rejected [Tribune Media’s] position and have allowed unsecured claims for contractual attorneys' fees that accrued post-filing of the bankruptcy petition,” the decision said.
In November 2015, U.S. Bankruptcy Judge Kevin J. Carey allowed Tribune to reject Wilmington Trust’s claim, which Tribune had argued was unreasonable given how many of the activities were duplication of work other creditors performed. The issue stemmed from an unsecured claim Wilmington Trust, as indenture trustee for a group of unsecured bondholders, lodged in the Tribune case seeking $30.3 million in post-petition attorneys' fees and litigation costs.
Wilmington Trust maintained that its fees should be paid because the indenture agreement provided for payment of reasonable fees and expense reimbursement. “We think that the district court has made a decision that is consistent with the majority of courts that have addressed the issue,” Wilmington Trust’s attorney, James W. Stoll of Brown Rudnick LLP, told Law360.
In his order, Judge Andrews noted that there have been some cases in bankruptcy and district courts that have disallowed attorneys’ fees as unsecured claims, but that he had “nothing new to add to this debate.” “I merely note that I cannot conclude that [the bankruptcy code] ‘expressly’ disallows the claims at issue here,” the order said.
Tribune — owner of its namesake newspaper in Chicago, as well as the Los Angeles Times and a host of other newspapers and television stations — filed for Chapter 11 protection in 2008 following a disastrous leveraged buyout a year earlier that saddled the media conglomerate with roughly $13 billion in debt. Tribune's Chapter 11 plan was confirmed in July 2012 and the company exited bankruptcy in December of that year.
The appellate case is In re: Tribune Co. et al., case number 1:15-cv-01116, in the U.S. District Court for the District of Delaware. The bankruptcy case is In re: Tribune Co. et al., case number 1:08-bk-13141, in the U.S Bankruptcy Court for the District of Delaware.