US Supreme Court has granted certiorari, to hear appeal on Baker Botts LLP v. ASARCO LLC
On Oct. 2, 2014, the U.S. Supreme Court granted certiorari in Baker Botts LLP v. ASARCO LLC, No. 14-103. Baker Botts, which represented debtor-in-possession ASARCO LLC in one of the largest and most complex chapter 11 bankruptcy cases ever, obtained a fee award from the bankruptcy court of $113 million for fees and costs, $4.1 million as an enhancement, and $5 million for defending its fee application. On appeal, the Fifth Circuit Court of Appeals reversed the $5 million award for defense of the fee application. Citing In re Pro-Snax Distributors Inc., 157 F.3d 414 (5th Cir. 1998), and Bankruptcy Code § 330(a)(3), (4) and (6), the Fifth Circuit held that compensation for defending fee applications was not allowable where the services provided were not likely to benefit the debtor’s estate or necessary to the administration of the estate. The ruling deviates from prior Ninth Circuit rulings. Would a ruling barring professionals from being compensated for successfully defending against challenges to their fees give too much leverage to the fee examiners and other parties willing to use the adversary process?