A recent NLJ story, “Bankruptcy Court Can’t Weigh Lawyer’s Risk in Awarding Fee,” reports that a federal appellate court overturned a bankruptcy judge’s $350,000 fee award on an attorney and ruled that case law and the bankruptcy code didn’t allow the judge to weigh the lawyer’s risks in taking the case.  The U.S. Court of Appeals for the Tenth Circuit threw out the fee granted to Barak Lurie and his firm Lurie & Associates of Los Angeles.  The fee award covered about 44 hours of work.

The court in Market Center East Retail Property Inc. v. Lurie reversed a March 2012 ruling by Tenth Circuit’s bankruptcy appellate panel, which had affirmed District of New Mexico bankruptcy judge James Starzynski’s March 2011 fee award to Lurie.  The panel remanded for recalculation of the fees.

Market Center hired Lurie in February 2009 to sue Lowe’s Companies Inc. for reneging on a deal to buy an Albuquerque retail shopping center for $13.5 million.  Lurie and his client settled on a fee of $200 per hour, plus a contingency component.  In June, Market Center filed a bankruptcy court application to hire Lurie on the same terms to continue its case against Lowe’s.  That November, the bankruptcy court authorized Lowe’s purchase of the shopping center for $9.75 million.  After that sale, Market Center tried to withdraw its application to employ Lurie.

Lurie asked for $1.47 million in attorney fees, plus more than $9,000 to fight Market Center’s motion to withdraw its application to hire him.  Market Center claimed Lurie should get $17,500 for his efforts.  The bankruptcy court credited Lurie’s strategy of suing Lowe’s and seeking early discovery as a major factor in Market Center’s favorable sales price.

“Lurie did not take a “big risk” in representing Market Center.  Lurie spent only about forty hours working on the case, and Lurie did not face the risk that it would not be paid for its work,” Chief Judge Mary Beck Briscoe wrote.  Briscoe concluded that “a bankruptcy court has discretion in determining how much weight to assign each factor and in determining the reasonableness of a fee, but this discretion does not extend to disregarding factors prescribed by statute.”  She noted that bankruptcy code’s language on professional fees and Tenth Circuit case law does not permit a bankruptcy court to weigh any risk an attorney might assume.