October 2, 2020
A recent Law 360 article by Robert M. Fishman, “3 Tips For Working With Bankruptcy Fee Examiners” provides practice tips for working with outside bankruptcy fee examiners. This article was posted with permission. The article reads:
The appointment of a fee examiner and the fee examination process in any given bankruptcy case seem to generate a variety of questions.
Will a fee examiner process be better for the case — read: me — than having the judge address the reasonableness and appropriateness of fees? Will there now be three parties — the fee examiner, the court and the U.S. Trustee — scrutinizing my fees as well as criticizing my staffing, timing and approach to the case? What will the nature and approach of the fee examiner be in my particular case? Will the appointment of a fee examiner speed up the review and payment process?
Fee examiners are most often appointed in larger cases. In such cases, the ability of the court to make the time to review, analyze and rule on fee applications may be a concern. This is especially true if that court is one in which a large number of substantial cases are currently pending.
The number of parties that will be submitting fee applications to the court also plays a role in the consideration of whether a fee examiner is appropriate in a particular case. Multiple law firms, financial advisers and other professionals for the debtor and one or more committees, creates a substantial burden on the court in terms of reviewing and ruling on fee applications.
A request for the appointment of a fee examiner can either come from the parties in the case or directly from the court. Some courts routinely appoint a fee examiner in large, complex cases, while others do so only upon the request of one or more parties in interest.
The selection of the particular fee examiner can originate from any of three places. Once a court decides to appoint a fee examiner, the court may: (1) select its own fee examiner; (2) appoint one that has been suggested, or agreed to, by the principle parties in the case; or (3) defer to the Office of the U.S. Trustee for the selection. Courts are often happy to utilize a qualified fee examiner that has been agreed to by the main parties in the case.
In light of the current number of pending large cases, particularly in a few, specific jurisdictions, the burden of the fee review and allowance process is going to be substantial. Further, I anticipate that the upcoming months may see an even greater number of small, medium and large cases filed, which will place an even greater strain on the system's ability to efficiently and timely process fee applications for numerous professional firms.
As a result, I believe that both courts and the affected parties will look to the appointment of fee examiners to ease that burden and provide a more timely and efficient practice for processing fee applications. In evaluating candidates for fee examiner appointments, the following questions may be pertinent.
Is the candidate:
An experienced practitioner with actual bankruptcy case experience or an analyst who identifies typical problematic situations and focuses on them;
A reasonable, big picture type of examiner or a more granular, item-by-item examiner;
One that believes that he has been appointed to:
Cut fees (to a specific or general degree), or
Determine if the applicable rules have been followed and the services and expenses are actual, reasonable and necessary in the context of the particular case; or
One who generally gives deference to the billing partner involved or is more apt to substitute his/her own judgment for that of the billing partner as to how to staff cases or how much time it should take to write a brief? As an attorney discussing fee application issues with fee examiners, I have discovered that examiners have a wide range of approaches and attitudes.
In my role as a fee examiner discussing fee application issues with countless professionals, I have found that they also exhibit a broad range of approaches and attitudes. My experience both as an attorney submitting numerous fee applications subject to review by fee examiners, and as an appointed fee examiner in both large and medium-sized cases has led me to a view on the preferred type of fee examiner and how best to work with them.
Understanding where your fee examiner fits into the above criteria is essential to both having a realistic expectation of how you will be dealt with and knowing how best to interact with the fee examiner. So, what lessons have I learned? Here are what I have found to be the three most important guidelines for a successful relationship with a fee examiner.
Every Case has Ground Rules
They include the Bankruptcy Code, the applicable local rules and the cases interpreting the same. Importantly, the ground rules also include the process that the fee examiner intends to utilize — and most likely have the court bless — to govern the timing, organization and review of the fee applications.
One of the best pieces of advice I can give an applicant is to present the fee application in the way requested by the fee examiner. Independent creativity is often not rewarded. Most fee examiners have a method to their madness.
Choose the Right Person to Prepare the Fee Application.
The fee application or invoice must be prepared — or at least thoroughly reviewed — by someone who understands the case and is able to explain the issues handled by the firm and the staffing decisions that were made in support of providing the necessary services. Many issues that fee examiners raise come from an inability to truly understand what has taken place and why things were handled in the manner in which they occurred.
Most fee examiners are willing to be at least somewhat deferential to the billing partner when presented with a cogent and rational explanation of what happened and why. This approach tends to be even more effective when the explanation is part of the original application rather than offered only in response to concerns raised by the fee examiner.
It Doesn't Pay to Fight with a Fee Examiner
First of all, most fee examiners aren't out to get anyone. They are merely trying to apply the rules in an even-handed way to provide for the allowance of reasonable compensation for actual and necessary services. Every fee application or invoice has potential issues, such as too many professionals working on a project, too much time spent working on an issue or overqualified professionals providing basic services.
Also, a firm cannot be compensated for fighting fee objections in court, where raised by a fee examiner of a party in interest. Be rational and open minded. Fee examiners want to reach agreements and resolve differences of opinions by consent. They will almost always compromise on the amount of reductions necessary to address any point they are raising.
The right fee examiner can be a valuable asset in a case. They are likely to allow for a more timely resolution of interim fees. A fee examiner who is also an experienced practitioner will likely speak the same language as the applicant and have a good feel for what it takes to perform the services for which the applicant seeks payment. In short, a good and experienced fee examiner should really be your ally in making the process move quickly and efficiently, and in obtaining a fair and reasonable outcome for everyone.
Robert M. Fishman is a NALFA member and a member at Cozen O’Connor in Chicago. He served as the fee examiner in the city of Detroit Chapter 9 case.