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Delaware to Rule on "Work-Around" to SCOTUS Fee Ruling

August 7, 2015 | Posted in : Bankruptcy Fees / Expenses, Fee Agreement, Fee Clause, Fee Doctrine / Fee Theory, Fee Entitlement, Fee Issues on Appeal, Fee Jurisprudence, Fee Request, Fees for Fees / Fees on Fees

A recent Bloomberg News story, “Delaware Judge to Rule on Evading High Court Legal Fee Decision,” reports that after the U.S. Supreme Court decided in June that bankruptcy lawyers can’t be paid for successfully defending their fee requests, the open question was whether there was any work-around to the new rule in Baker Botts LLP v. Asarco LLC.

At issue are contractual provisions adopted at the outset of a bankruptcy that permit professionals to receive compensation for defending their fee requests.  The majority opinion written by Justice Clarence Thomas seemed to indicate that a contractual provision, in addition to legislation, could override the traditional American Rule, under which each side pays for counsel.

At a hearing on Aug. 11, U.S. Bankruptcy Judge Mary F. Walrath is slated to decide that question in the reorganization of Boomerang Tube LLC, a maker of drill pipe, casing and tubing for oil and gas drillers.  The professionals representing Boomerang’s creditors, when retained, had asked to be paid for time spent successfully defending their fees.  The U.S. Trustee—the Justice Department’s bankruptcy watchdog—objected to the request and argued in a filing that a firm can’t “circumvent” the Supreme Court ruling.

Although her ruling won’t be binding on other bankruptcy judges outside of Delaware, Walrath’s decision will be important because the state is home to more important bankruptcies than any other district.  The Boomerang case is In re Boomerang Tube LLC, 15-11247, U.S. Bankruptcy Court, District of Delaware.