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New Proposed Guidelines for Bankruptcy Fees in Large Cases

November 15, 2012 | Posted in : Bankruptcy Fees / Expenses, Billing / Fee Guidelines

A recent New York Law Journal story, “U.S. Trustee Program Narrows Proposal for Disclosure of Law Firm Bankruptcy Fees,” reports that the U.S. Trustee Program announced that its proposals extensive disclosure related to law firm fee requests would apply only to very large Chapter 11 bankruptcies.  In narrowing the scope of cases to which the proposals would apply—to those with $50 million or more in assets and $50 million or more in liabilities as opposed to cases with a combined $50 million in assets and liabilities—the agency was responding to intense criticism from firms calling “burdensome” and “ethically unacceptable” the agency’s new recommendations for attorneys’ fee applications.

The trustee program has modified proposed guidelines (pdf) for disclosure of rates in non-bankruptcy practices, and said it would continue to seek budgets and staffing plans, either by consent of the parties or court order.  Unchanged from the originally proposed guidelines, firms would still have to submit in their fee applications the number of rate increases since the inception of the case and disclose the effect of any rate increases on the total compensation a firm is seeking.

Some significant updates to the proposed rules are:

The increase in the asset and liability threshold.  The agency also said that single asset real estate cases should be excluded, an exception not specified in the original guidelines.

Elimination of the proposal that firms disclose high, average and low rates and rates billed by other practices within the firm.  That has been replaced by disclosure of group blended rates, and blended rates for non-bankruptcy matters, based on time billed or revenue collected.

Budget and staffing plans would be used only by consent of the parties or a court order and would not be mandatory.

The agency is encouraging the use of co-counsel for better staffing and fee efficiency.  “These arrangements include using less expensive co-counsel for certain routine, commoditized, or discrete matters to avoid duplication, overlap, and inefficiencies.” It said.