Amicus Curiae Brief — Baker Botts, L.L.P. v. Asarco, L.L.C., 135 S. Ct. 697 (2014) (No. 14-103)

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™ FILED

DEC 10 2014

OFFICE OF THE CLERK |

No. 14-103

In the Supreme Court of the United States

_ oe

BAKER Botts, L.L.P., ET AL., PETITIONERS

Vv.

ASARCO, L.L.C.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING REVERSAL

DONALD B. VERRILLI, JR.

Solicitor General

Counsel of Record

JOYCE R. BRANDA

Acting Assistant Attorney

General

MALCOLM L. STEWART

Deputy Solicitor General

BRIAN H. FLETCHER

Assistant to the Solicitor

General

MICHAEL S. RAAB

RAMONA D. ELLIOTT

Deputy Director/General

ounsel

P. MATTHEW SUTKO

Associate General Counsel

ROBERT J. SCHNEIDER, JR.

Attorney

Executive Office for United

States Trustees

Washington, D.C. 20530

SYDNEY FOSTER

Attorneys

Department of Justice

Washington, D.C. 20530-0001

SupremeCtBriefs@usdoj.gov

(202) 514-2217

QUESTION PRESENTED

Section 327 of the Bankruptcy Code provides that

bankruptcy trustees and Chapter 11 debtors in pos-

session may, with a bankruptcy court’s approval, em-

ploy attorneys or other professionals “to represent or

assist [them] in carrying out (their) duties” under the

Code. 11 U.S.C. 327(a); see 11 U.S.C. 1107(a). Under

11 U.S.C. 330(a), the court may award an attorney or

other professional employed under Section 327 “rea-

sonable compensation for actual, necessary services

rendered.” 11 U.S.C. 330(a)(1)(A). Compensation

awarded under Section 330(a) is treated as an admin-

istrative expense and is paid out of the assets of the

bankruptcy estate before the claims of most unse-

cured creditors. 11 U.S.C. 503(b), 507(a). The ques-

tion presented is as follows:

Whether Section 330(a) authorizes a bankruptcy

court to award additional compensation to an attorney

for work performed in litigating the attorney’s appli-

cation for compensation under that provision.

(I)

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TABLE OF CONTENTS

Page

EE eS 1

asic cineca be elena pbeipilibiieparitiigiassoaabianbinineialiada 2

ee CII is ieissntrninsnieiionsasienaniibvinttinaiticiniiasibiiasiapiinieliaiiianses 11

I iciiccncsiaidnsintsinictnisiirssinnesiianiintaeannanintiiinttaninainiiniogsinuciieanen 14

I. Section 330(a) authorizes an award of fees for

the defense of a fee application to the extent

A. The categorical denial of defense fees

would contravene Section 330(a) by

diluting compensation for core services ................ 16

B. The arguments advanced in favor of a

complete ban on compensation for fee-

defense work lack Merit ................sccccsssssesssesereeeenes 24

C. In many cases, compensation for fee-defense

work will not be necessary to preserve the

reasonableness of a professional’s compensation

er ID iticersitcinnctecttceninatitanennasieniatinsacnaninniinenes 26

II. Work performed defending a fee application

does not constitute independently compensable

“services rendered” under Section 330(a).................... 31

| ERE LO eee nena a eR Pe REDD eT 34

TABLE OF AUTHORITIES

Cases:

American Fed’n of Gov't Emps., AFL-CIO, Local

3882 v. FLRA, 994 F.2d 20 (D.C. Cir. 1998)................... 20

American Petroleum Inst. v. EPA, 72 F.3d 907

EE I Re ne ee ae ee 20

American United Mut. Life Ins. Co. v. City of Avon

oe ER SR 32

Ames Dep't Stores, Inc., In re, 76 F.3d 66 (2d Cir.

Cases—Continued: Page

Anderson v. Director, Office of Workers Comp.

Programs, 91 F.3d 1322 (9th Cir. 1996) ...........ccccceeeee 20

Big Rivers Elec. Corp., In re, 252 B.R. 670

a A MED seiciceliiiiepinhceliadeieabaiaikiigilinbteencndnecnstienitianniiiann 28

Blanchard v. Bergeron, 489 U.S. 87 (1989) .......cccseeesseeeneeee 17

Blum v. Stenson, 465 U.S. 886 (1984)..............-. viasiaabeataidl 21, 23

Buckridge, In re, 367 B.R. 191 (Bankr. C.D. Cal.

Sra siccinsetesiaabehishiaeiincaioiinitaesuieeaiguaihceibilitaenininninsinaniacete 18

Busy Beaver Bldg. Ctrs., Inc., In re, 19 F.3d 833

SE: TUITE asccsealinieiahsinipencitcniapdbinhsbeiiadaiteiinalaiiicwkenian 4,5,17

Camacho v. Bridgeport Fin., Inc., 523 ¥ .3d 973

STE STITT siersiecetciaiaaadetetiniliahnetabaieialittaiataiiadiiniaiaiiaia 19, 20

Chambers v. NASCO, Inc., 501 U.S. 32 (1991).............. 11, 30

City of Burlington v. Dague, 505 U.S. 557 (1992)............... 21

Commissioner, INS v. Jean, 496 U.S. 154

ITT saseiecthesstahaeiedihteininesetaenendacaiaiepencbtinbiseiient 19, 20, 23, 28, 29

Commodity Futures Trading Comm’n v. Weintraub,

Se a UTE ineistteitisienseatncisiniabiindeibpneitteicatslethiesheinibaicistaideds 2

Computer Learning Ctrs., Inc., In re, 285 B.R. 191

Sn: SERA SUR I cre stcettesisntesneeniseniinneptineinianieminiasied 17, 30

Cruz v. Hauck, 762 F.2d 1230 (5th Cir. 1985)... 20

Eliapo, In re, 468 F.3d 592 (9th Cir. 2006) ..........cccccccceccesees 16

First Colonial Corp. of Am., In re, 544 F.2d 1291

(5th Cir.), cert. denied, 431 U.S. 904 (1977)... 5

Gagne v. Maher, 594 F.2d 336 (2d Cir. 1979),

es a Re Ce CD viicittinictstanncicnicciteninceminninenis 20, 29

Hensley v. Eckerhart, 461 U.S. 424 (1983) ..0...0...0cccccccccseeeees 17

Hernandez v. Kalinowski, 146 F.3d 196 (3d Cir.

SSUPTUTED ssisschichiaiiithilssicsaiaielhinhniieniiaieiegpimmipionstnenivenenenetion 19

Kinney v. International Bhd. of Elec. Workers,

| Ee 23

Lamie v. United States Tr., 540 U.S. 526 (2004)........00000.00... 3

Cases—Continued: Page

Law v. Siegel, 134 S. Ct. 1188 (2014)... .eeccecseeeeeeeeseeeenees 4

Lund v. Affleck, 587 F.2d 75 (1st Cir. 1978)..........ccccseseerees 20

Manoa Fin. Co., In re, 853 F.2d 687 (9th Cir. 1988) ....22, 27

Market Ctr. E. Retail Prop., Inc., In re,

, | x f je + E.R nC N 16

Martin v. Franklin Capital Corp., 546 U.S. 132

SITET ciadsctesnleinaplashenpbniionnasinideniiiiaiiiaiaitiniagidiniasmneduetineremarenensees 28

Missouri v. Jenkins, 491 U.S. 274 (1989)........ccccccceseceeeeeeees 21

Nucorp Energy, Inc., In re, 764 F.2d 655 (9th Cir.

a en a 18, 22, 26

Olson, In re, 884 F.2d 1415 (D.C. Cir. 1989)... eee 25

Pennsylvania v. Delaware Valley Citizens’ Council

for Clean Air, 478 U.S. 546 (1986) ..........cccccesseseeeceeseeeeees 19

Perdue v. Kenny A., 559 U.S. 542 (2010) ................. 21, 22, 23

Quigley Co., In re, 500 B.R. 347 (Bankr. S.D.N_Y.

ST ctisietecinaiessinmaanitaianiaielsintiatemseainsenduniameimnion setileenetnitail 28, 29

Setser v. United States, 132 S. Ct. 1463 (2012)...........0000..... 24

Smith, In re, 317 F.3d 918 (9th Cir. 2002),

cert. denied, 538 U.S. 1032 (2003) .................. 18, 19, 27, 33

Sullivan, In re, 674 F.3d 65 (1st Cir. 2012).......0000000. eee. 16

Taxman Clothing Co., In re, 49 F.3d 310 (7th Cir.

RRR SPP Ieee Cea ee oe a nO 22

Thompson v. Gomez, 45 F.3d 1365 (9th Cir. 1995) ............. 29

Top Grade Sausage, Inc., In re, 227 F.3d 123

ELEY CS es ess Se ee ED 33

UNR Indus., Inc., In re, 986 F.2d 207 (7th Cir. 1993)....... 21

Wind N’ Wave, Jn re, 509 F.3d 938 (9th Cir. 2007)............. 29

Woerner, In re, 758 F.3d 693 (5th Cir. 2014),

reh’g en banc granted, No. 13-50075,

2014 WL 5786536 (Nov. 5, 2014) 200.00... ececeeesceeeeeeeeeeseeees 33

Woods v. City Nat'l Bank & Trust Co., 312 U.S. 262

SER ESA eer ee 32

VI

Statutes, regulation and rules: Page

Back Pay Act of 1966, 5 U.S.C. 5696..............ccsssssorsosceeseeese 20

Bankruptcy Abuse Prevention and Consumer

Protection Act of 2005, Pub. L. No. 109-8, § 415,

BD BE. WF ccccccccaccecesscoscnssnucieniemsssioniasimeniiaaaann 6

Bankruptcy Act, ch. 541, 30 Stat. 544 oe cceeeeeeneenen 32

Bankruptcy Code, 11 U.S.C. 101 et seq.:

BE USEC. FRG) cnconccvessconsorsetonesicssinniniemieninmeaa 2

12 UB. FF nccoceccescscossnssnninienvensensissiiiinismeniaaa 1

1D USE, GBT ccnscccscscessssssansesoremnsenssisnndeinmaiamaane 3

ERIF fot | | ENN re 3

BD UBC. SED caccecceccscscsersassosnssesentnisetnmminiiniiiiaae 3

BE UTE. SBD cccecscosccsccsresccsantenesinssaintanamigiieiaane 22

Rte Coe | ee passim

BE UTE... SERRE A) ccccesssensusessssnsesiststntinamiieaiiaaaa passim

Re Fe 0 | passim

1D UBC. SGD cccccsesscsesststinsiistisstemiindian 4, 26

11 USEC. SGI ccccccscesscssscitiitsisiitintaninnsaiiniiaaamaaan 5, 6, 16

11 UD.C. SRR cccseccciinintistitnimabiee 5

12 UB.C. SRG acccccrcescsersscststintienins 5

11 U2.C., SRD mccnccnssnssensssnsnisnisshiitiniamaaan 6

12 UBC. SRE) cncccccccevncsesisscisnssstsisitinidiiaaiemma 6

11 U2, SERGI ) nncccnecscccecsseniecennisiisininia 5, 6, 19, 22, 25

22 UBC, SED cccrcescncasersorseicnsssierstitittiimmae 10

11 U.S.C. SGI accccciscenssscstsstttsissiiiimma 6

11 U.S.C. 330(a)(4)(A) Hi)... ceceeeeeeeeeeneeeenenee 6, 10, 25, 33

11 U.S.C. 330(a)(4 (ADD «0.00200. eceeecseeseeeesesseeserseseneoeees 33

12 USEC. SERGE) acececsvceetsnseesseisisittisesintimniaal 3, 24

2D USEC, FI ceccccscensisistensicnioniisitimuaian passim

PRES Fo | ee 20

vil

Statutes, regulation and rules—Continued: Page

EE 4

ine cer arencennesienineienneensenennnenes 4

EE ee 2

II, SEETIID. I csiccteesosrensstenanensommematnenneenennancasins 2

SEL Ee ae EE 2

11 U.S.C. 1101 et seq. (Ch. 11) cccccescccsesccssseesssseeeeen 2, 3,7, 17

i acereneecannetnemnnmemnennamnannennstenaetanes 2

ET 3

ee 2,3

EE ee 2, 3, 24

11 U.S.C. 1301 et seg. (Cir. 13)...............cccccesceceseecesees 2, 3, 24

Clean Air Act, 42 U.S.C. T607(£) ...........c--ccssesesersesesenssenseenens 20

Equal Access to Justice Act, 28 U.S.C.

EE a 19, 23

Fair Debt Collection Practices Act, 15 U.S.C.

Sissi dedeniciniricreretensiniemenentesbnnneneesinnemnenennncsasenscassenencansens 19

Independent Counsel Act, 28 U.S.C. 593(f).........cccccccceceees 25

Longshore and Harbor Workers’ Compensation Act,

eee 20

Prison Litigation Reform Act of 1995, 42 U.S.C.

en 19

Te 1

Ec 1,4, 17

ce 10, 20

EE ee 1,17

Fed. R. Bankr. P.:

Ee 4, 17, 26, 29

Ee 30, 31

Vill

Miscellaneous: Page

Collier on Bankruptcy (Alan N. Resnick & Henry J.

Sommer eds., 16th ed. 2014):

WS Si cesssteceseieenteiniprincinceepsieaiiaatcestananaeniapalaamanthiaie iii aiesesiaiaal 2

Wali So icrennnsentginentanttinnnsinahietiintnenitinintaits 3, 4, 5, 6, 29, 33

Alba Conte, Attorney Fee Awards (3d ed. 2004)......0.......... 19

78 Fed. Reg. (June 17, 2013):

0 TN ei iesntit sisensssinncticnnietinnstpnnnandeniniiniiininiteiaiganialinhit l

ie Ee cinstyvarsunentdnninnianennnmnemninieasutieatnimaenieatiidinilididaiiaiiidal 6

Pa. Fe creccrensnavrenmsssssnernemmnssnsssersemenennemennnunnemmanesnsses 15, 23

a eT wiiceticineiaiteeiiainninieniiaeasceiiteiiainiiniieitaiaih iat tales 17

1, SR ea hcerserensccnnecensscessnsnannicnnenssunstnseniiciiinciaialiaeiaiiitniaiie 15

Hs, SE ee nicenrercaessiipennpnieiennciateemnecintibaneripianicinintanieniaiagiscuntalianiiiieniediiamaie 15

H.R. Rep. No. 595, 95th Cong., Ist Sess. (1977)...............0000 5

Stephen J. Lubben, Chapter 11 Professional Fee

Study (Am. Bankr. Inst. 2007) .0.0.........cccccccccecseeeeseeeeeee 3,17

2 Hon. William L. Norton, Jr. & William L. Norton

III, Norton Bankruptcy Law and Practice

8 EERE RS eee 16

1 Robert L. Rossi, Attorneys’ Fees (3d ed. 2014)................ 19

U.S. Dep’t of Justice, United States Trustee Pro-

gram Annual Report, FY 2013, http://www.

justice.gov/ust/eo/public_affairs/annualreport/

docs/ar2013.pdf (last visited Dec. 9, 2014)... 2

Webster’s New International Dictionary of the Eng-

lish Language (2d €d. 1934).................ssse-ssersereereeseneeneess 32

In the Supreme Court of the United States

No. 14-108

BAKER Botts, L.L.P., ET AL., PETITIONERS

Vv.

ASARCO, L.L.C.

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING REVERSAL

INTEREST OF THE UNITED STATES

The compensation of attorneys and other profes-

sionals under 11 U.S.C. 330(a) is an issue of substan-

tial importance to the United States. The Attorney

General appoints United States Trustees to supervise

the administration of bankruptcy cases and trustees

throughout the country. 28 U.S.C. 581-589a. United

States Trustees “may raise and may appear and be

heard on any issue in any case or proceeding under”

the Bankruptcy Code. 11 U.S.C. 307. United States

Trustees are also authorized to review, comment on,

and object to applications for compensation under

Section 330(a) in accordance with guidelines promul-

gated by the Executive Office for United States Trus-

tees. 28 U.S.C. 586(a)(3)(A); see 28 C.F.R. Pt. 58,

App. A; 78 Fed. Reg. 36,248-36,276 (June 17, 2013). In

(1)

2

fiscal year 2013, United States Trustees filed near-

ly 700 objections to Section 330(a) fee applica-

tions.’ The United States thus has a substantial in-

terest in the proper interpretation and application of

Section 330(a).

STATEMENT

1. This case concerns the interpretation os Section

330(a) of the Bankruptcy Code, which authorizes a

bankruptcy court to award certain attorneys and oth-

er professionals reasonable compensation to be paid

from the assets of the bankruptcy estate.

a. A debtor commences a voluntary bankruptcy

ease by filing a petition in bankruptcy court.

11 U.S.C. 301(a). The filing of the petition creates a

bankruptcy estate generally comprising “all legal or

equitable interests of the debtor in property as of the

commencement of the case.” 11 U.S.C. 541(a)(1). Ina

Chapter 7 liquidation, the estate is placed under the

control of a trustee appointed by the United States

Trustee or elected by creditors. 11 U.S.C. 701-703. In

most Chapter 11 reorganizations, no trustee is

appointed and the debtor—known as the “debtor in

possession”—administers the estate as a fiduciary for

the estate’s creditors. 11 U.S.C. 1101, 1107(a); see

Commodity Futures Trading Comm’n v. Weintraub,

471 U.S. 343, 355-356 (1985). In debt-adjustment

cases filed under Chapters 12 and 13, the debtor re-

tains possession of the estate assets, but the bank-

ruptcy process is overseen by an appointed trustee. 1

Collier on Bankruptcy 1 1.07[4}-{[5], at 1-42 to 1-43

' U.S. Dep't of Justice, United States Trustee Program An-

nual Report, FY 2013, at 27, http://www .justice.gov/ust/eo/public_

affairs/ annualreport/docs/ar2013.pdf (last visited Dec. 9, 2014).

3

(Alan N. Resnick & Henry J. Sommer eds., 16th ed.

2014) (Collter).

With the bankruptcy court’s approval, a trustee

may employ attorneys or other professionals to “rep-

resent or assist the trustee in carrying out the trus-

tee’s duties” under the Code. 11 U.S.C. 327(a); see

Lamie v. United States Tr., 540 U.S. 526, 531 (2004).

A Chapter 11 debtor in possession has the same au-

thority to retain professionals to assist in the reorgan-

ization process. 11 U.S.C. 1107(a). In addition to at-

torneys, the professionals employed under Section 327

include accountants, auditors, investment bankers,

and management consultants. See Stephen J. Lub-

ben, Chapter 11 Professional Fee Study 32 (Am.

Bankr. Inst. 2007) (Professional Fee Study).

b. Unless the bankruptcy court approves the

terms and conditions of employment in advance, the

compensation of a professional employed under Sec-

tion 327 is governed by 11 U.S.C. 330(a).* Section

330(a) also governs compensation for certain other

persons, including professionals employed by Chapter

11 creditor committees and attorneys representing

individual debtors in Chapter 12 and 13 cases. See 11

U.S.C. 330(a)(1) and (4)(B), 1103; Lamie, 540 U.S. at

540-541.

® Under 11 U.S.C. 328(a), a court may approve in advance “rea-

sonable terms and conditicns of employment” for a professional. A

compensation arrangement approved under Section 328(a) cannot

be altered after the employment is concluded unless it proves “im-

provident in light of developments not capable of being anticipat-

ed.” 11 U.S.C. 328(a). Section 328(a) thus “provides a mechanism

to cement definite compensation terms at the beginning of a pro-

fessional’s engagement.” 3 Collier 4 328.02, at 328-7.

4

Under Section 330(a), “the court may award

* * * reasonable compensation for actual, neces-

sary services rendered” by a professional, as well as

“reimbursement for actual, necessary expenses.”

11 U.S.C. 330(a)(1). Compensation awarded under

Section 330(a) is treated as an administrative expense

and is paid out of the assets of the bankruptcy estate

before the claims of most unsecured creditors.

11 U.S.C. 503(b), 507(a); see Law v. Siegel, 134 S. Ct.

1188, 1195 (2014). When, as is typical, the estate’s as-

sets are insufficient to fund a complete repayment for

creditors, “every dollar paid” in Section 330(a) profes-

sional fees “detracts from the unsecured creditors’ re-

covery.” Pet. App. 16a-17a.

An attorney or other professional seeking compen-

sation under Section 330(a) must submit a detailed fee

application to the bankruptcy court. Fed. R. Bankr.

P. 2016(a). Creditors and other parties in interest, as

well as the United States Trustee, must be notified of

the application and may file objections. 11 U.S.C.

330(a)(1) and (2); 28 U.S.C. 586(a)(3)(A). In addition,

“bankruptcy courts have an independent duty to re-

view fee applications even absent objections,” Jn re

Busy Beaver Bldg. Ctrs., Inc., 19 F.3d 833, 843 (3d

Cir. 1994), and may sua sponte deny an application or

award reduced compensation, 11 U.S.C. 330(a)(2); see

3 Collier % 330.08[2][b][vi], at 330-69. Those safe-

guards are necessary in part because debtors and oth-

er parties in interest often will lack adequate financial

incentives to monitor the reasonableness of fees that

will be paid from the estate. See Busy Beaver Bldg.

Ctrs., 19 F.3d at 842-843.

ce. Section 330(a)’s provisions governing the de-

termination of reasonable compensation seek to au-

5

thorize fees sufficient to attract the services of talent-

ed professionals, while also protecting creditors from

excessive or unreasonable fee requests.

Before the Bankruptcy Code was enacted in 1978,

courts awarded bankruptcy professionals fees that

were “at the lower end of the spectrum of reasonable-

ness,” on the theory that the professionals were acting

“as officers of the court” and therefore “should not

expect to be compensated as generously for their ser-

vices as they might be were they privately employed.”

In re First Colonial Corp. of Am., 544 F.2d 1291, 1299

(5th Cir.) (citation omitted), cert. denied, 431 U.S. 904

(1977). Section 330(a) reflects a deliberate departure

from that approach. Congress determined that “the

gain to the estate of employing able, experienced, ex-

pert counsel would outweigh the expense to the estate

of doing so,” and that “unless the estate paid competi-

tive sums it could not retain such counsel on a regular

basis.” Busy Beaver Bldg. Ctrs., 19 F.3d at 850; see

H.R. Rep. No. 595, 95th Cong., Ist Sess. 329-330

(1977); 3 Collier 1 330.03[3], at 330-29.

Under the current version of the Bankruptcy Code,

“the amount of reasonable compensation” awarded for

services rendered by an attorney or other professional

must be determined based on “the nature, the extent,

and the value of such services, taking into account all

relevant factors.” 11 U.S.C. 330(a)(3). The statute

identifies six non-exclusive considerations, including

“the time spent on such services,” “the rates charged

for such services,” and “whether the compensation is

reasonable based on the customary compensation

charged by comparably skilled practitioners in cases

other than cases under this title.” 11 U.S.C.

6

330(a)(3)(A), (B) and (F).* That inquiry seeks to en-

sure that the compensation available to a professional

employed by a bankruptcy trustee or debtor in pos-

session is reasonable in comparison “to the market

measured both by the [professional’s} own billing

practices * * * and by those of other comparable

professionals.” 78 Fed. Reg. at 36,249; see 3 Collier

¥ 330.03[3], at 330-29.

Congress also sought to protect creditors from ex-

cessive or unreasonable fee requests by limiting the

services for which compensation may be sought. Sec-

tion 330(a) permits compensation only for “actual,

necessary services rendered.” 11 U.S.C. 330(a)(1)(A).

It further provides that, to be compensable, services

must have been either “reasonably likely to benefit

the debtor’s estate” or “necessary to the administra-

tion of the case.” 11 U.S.C. 330(a)(4)(A)(ii). And it

prohibits compensation for any “unnecessary duplica-

tion of services.” 11 U.S.C. 330(a)(4)(A)(i).

Finally, a court determining the amount of com-

pensation available for particular work must consider

“whether the services were performed within a rea-

sonable amount of time commensurate with the com-

plexity, importance, and nature of the problem, issue,

or task addressed.” 11 U.S.C. 330(a)(3)(D). Congress

specifically addressed the rates to be paid for the

preparation of a fee application, directing that “[a]ny

* In 2005, Congress amended Section 330(a)(3) by adding an ad-

ditional factor and redesignating paragraph (E) as paragraph (F).

Bankruptcy Abuse Prevention and Consumer Protection Act of

2005, Pub. L. No. 109-8, § 415, 119 Stat. 107. Although this case is

governed by the prior version of the statute, see Pet. App. 87a

n.24, this brief will cite the current version because the amend-

ment is not relevant to the question presented.

7

compensation awarded” for that task must be “based

on the level and skill reasonably required to prepare

the application,” rather than on the level of skill re-

quired for the professional’s underlying services.

11 U.S.C. 330(a)(6).

2. Respondent is a copper mining, smelting, and

refining company. Pet. App. 2a. In 2005, facing “cash

flow deficiencies, various environmental liabilities, and

tax and labor problems,” it filed a Chapter 11 reorgan-

ization petition. Jbid. At the outset of the process,

respondent’s prospects for a successful reorganization

appeared dim, and its creditors “were expected to re-

ceive cents on the dollar.” Jd. at 63a; see id. at 62a.

Respondent sought and obtained the bankruptcy

court’s approval to employ petitioners to provide legal

representation during the reorganization. Pet. App.

26a-27a, 153a. Inter alia, petitioners successfully

prosecuted fraudulent-transfer claims against re-

spondent’s parent company, ultimately securing for

the estate a judgment “valued at between $7 and $10

billion.” Jd. at 3a. That award was apparently “the

largest fraudulent transfer judgment in Chapter 11

history.” Jbid.

In combination with other factors, the fraudulent-

transfer recovery contributed significantly to a suc-

cessful reorganization in which all of respondent’s

creditors were paid in full. Pet. App. 3a, 24a. In 2009,

respondent emerged from Chapter 11 as a healthy

company “with little debt, $1.4 billion in cash, and the

successful resolution of its environmental” and other

liabilities. /d. at 3a. Respondent’s parent then reas-

sumed control over the company. /bid.

3. Petitioners sought compensation under Section

330(a). After extensive proceedings in the bankruptcy

8

and district courts, petitioners were awarded approx-

imately $129 million in fees. Pet. App. 3a-4a.*

a. Petitioners requested approximately $120 mil-

lion in compensation for their “core” work on the

bankruptcy case, a 20% enhancement of those core

fees, and compensation for time spent preparing their

fee applications and litigating fee issues. Pet. App. 3a.

Respondent raised numerous objections to petitioners’

fee applications and sought extensive discovery. /bid.

The United States Trustee objected to petitioners’ re-

quested fee enhancement, but did not object to the

other aspects of their fee applications. /d. at 58a-59a.

After a six-day trial, the bankruptcy court rejected

respondent’s challenges to petitioners’ core fee re-

quests and awarded approximately $120 million in

core fees. Pet. App. 3a; see id. at 86a-130a. The court

also determined that petitioners were entitled to

a 20% enhancement of their fees for work on the

fraudulent-transfer action (but not, as petitioners had

originally sought, for all of their work in the case). /d.

at 3a, 130a-135a. That enhancement yielded an addi-

tional award of roughly $4.2 million. /d. at 135a.

The bankruptcy court granted in part petitioners’

requesis for compensation for time spent preparing

their fee applications and litigating fee issues. Peti-

tioners had sought more than $8 million in compensa-

tion for fee-related work. Pet. App. 57a. Although the

‘ Petitioners filed separate fee applications, and the lower

courts’ treatment of those applications differed in certain respects

not relevant to the question presented. For simplicity, this brief

refers to petitioners’ applications collectively and cites the bank-

ruptey and district court opinions addressing the application filed

by petitioner Baker Botts L.L.P., which sought and received the

vast majority of the total fee award.

9

court held that Section 330(a) permits the award of

compensation for the preparation and successful de-

fense of a fee application, it concluded that the fees

petitioners sought for that work were “higher than

were reasonable or necessary” under the circum-

stances. /d. at 142a; see id. at 135a-143a. The court

therefore reduced the fee-related portion of petition-

ers’ award to approximately $5 million. Jd. at 4a,

142a.

b. The district court affirmed in part, reversed in

part, and remanded. Pet. App. 22a-54a. As relevant

here, respondent dropped its challenges to petitioners’

core fees and disputed only the enhancement and the

award for petitioners’ preparation and defense of their

fee applications. Jd. at 4a, 28a-29a.

The district court affirmed the enhancement. Pet.

App. 35a-45a. The court further held that Section

330(a) generally permits compensation for the suc-

cessful defense of a fee application. Jd. at 45a-46a.

The court agreed with the United States Trustee,

however, that a professional is not entitled to compen-

sation for time spent seeking an enhancement to its

core fees. /d. at 28a-29a, 48a-49a. The court also held

that petitioners should not be compensated for any

work done to correct deficiencies in their original fee

applications. /d. at 49a. Because the court could not

ascertain whether the bankruptcy court’s award in-

cluded compensation for those non-compensable tasks,

it remanded for further proceedings. /d. at 50a.

ce. On remand, the bankruptcy court reinstated its

original award of $5 million, explaining that no part of

that sum was attributable to time spent seeking a fee

enhancement or correcting deficiencies in petitioners’

10

original fee applications. Pet. App. 147a-15la. The

district court affirmed. /d. at 157a-166a.

4. The court of appeals affirmed the fee enhance-

ment but reversed the award for petitioners’ fee de-

fense, holding that “Section 330(a) does not authorize

compensation for the costs counsel or professionals

bear to defend their fee applications.” Pet. App. 14a;

see id. at la-2la.° The court relied on 11 U.S.C.

330(a)(4)(A)(Gii), which states that professional services

are compensable only if they are either “reasonably

likely to benefit the debtor’s estate” or “necessary to

the administration of the case.” See Pet. App. 15a.

The court held that the defense of a fee application

does not satisfy either criterion because “[t]he prima-

ry beneficiary of a professional fee application

* * * is the professional” rather than the estate.

Ibid. The court also relied on Section 330(a)(6), which

contemplates an award of compensation for “the prep-

aration of a fee application,” 11 U.S.C. 330(a)(6) (em-

phasis added), but does not address the defense of a

fee application. Pet. App. 15a-16a.°

The court of appeals acknowledged that, under fed-

eral fee-shifting statutes such as 42 U.S.C. 1988, “time

spent to prepare, litigate and appeal a fee award is of-

ten compensable.” Pet. App. 17a. The court ex-

plained, however, that fee-shifting statutes reflect a

congressional determination that “the losing party

should bear the full costs of counsel for the winner.”

* Petitioners did not appeal the portion of the district court’s de-

cision denying compensation for time spent seeking an enhance-

ment of their core fees. Pet. App. 4a-5a.

* In an apparent typographical error, two sentences in the court

of appeals’ opinion refer to this provision as Section 330(a)(4) ra-

ther than Section 330(a)(6). See Pet. App. 16a.

11

Ibid. The court believed that “the equities are quite

different” in the context of Section 330(a), where there

is a “limited pool of assets” and “[nJo side wears the

black hat.” Jbid.

Finally, the court of appeals rejected petitioners’

arguments that refusing to award defense fees under

Section 330(a) would (1) dilute a professional’s effec-

tive compensation to a level below what a comparably

skilled practitioner would earn outside of bankruptcy

and (2) invite meritless objections to fee applications.

Pet. App. 18a-21a. The court described its approach

as preserving “rough comparability” between bank-

ruptcy and nonbankruptcy cases, and it suggested

that bankruptcy professionals could recoup the antici-

pated costs of defending their fee applications by in-

creasing their rates for core services. Jd. at 18a; see

id. at 18a n.7. The court also observed that bankrupt-

cy courts should respond to frivolous objections to fee

applications by applying “the exception to the Ameri-

can Rule that allows fee shifting where an adverse

party has acted in bad faith, vexatiously, wantonly, or

for oppressive reasons.” /d. at 21a (citing Chambers

v. NASCO, Inc., 501 U.S. 32, 45-46 (1991)).

SUMMARY OF ARGUMENT

I. Section 330(a) permits an award of compensa-

tion for the defense of a fee application when such an

award is necessary and appropriate to ensure that a

professional receives reasonable compensation for its

services in the underlying bankruptcy case.

A. Bankruptcy courts determine awards of com-

pensation under Section 330(a) using the lodestar

method, which multiplies the number of hours reason-

ably expended by a reasonable hourly rate. The re-

sult, subject to any appropriate adjustments, by defi-

12

nition constitutes “reasonable compensation” for a

professional’s services. To obtain that compensation,

however, the professional must file an application with

the court and may be required to litigate objections.

If a professional reasonably devotes additional time to

the successful defense of its fee application but re-

ceives no additional compensation for that time, its

compensation for services rendered in the underlying

bankruptcy case may be effectively diluted to some-

thing less than the “reasonable compensation” re-

quired by Section 330(a).

Decisions interpreting federal fee-shifting statutes

confirm that Section 330(a) permits compensation for

the defense of a fee application in appropriate cases.

Like Section 330(a), fee-shifting statutes typically do

not expressly address fee defense. Nonetheless,

courts have held with near unanimity that those stat-

utes permit compensation for time reasonably spent

successfully defending a fee application because the

denial of such compensation would effectively dilute

the fees awarded for work done on the merits of the

case. Like Section 330(a), fee-shifting statutes pro-

vide for awards of “reasonable” compensation and

seek to ensure remuneration comparable to what a

professional would receive for performing equivalent

work for a paying client. The fee-shifting precedents

thus provide highly instructive guidance on the proper

interpretation of Section 330(a).

Section 330(a)(6) further confirms that fee defense

is compensable in appropriate cases by specifically

addressing the amount of compensation available for

the preparation of a fee application. Because Section

330(a)(6) does not itself authorize compensation for

that task, it indicates that such authorization: is in-

13

cluded in Section 330(a)(1)’s general provision for an

award of “reasonable compensation.” And if Section

330(a)(1) permits compensation for time spent prepar-

ing a fee application, there is no apparent reason to

conclude that it categorically bars compensation for

time spent defending the same application.

B. The contrary arguments advanced by respond-

ent and the court of appeals lack merit. The court of

appeals correctly held that the defense of a fee appli-

cation is not itself a compensable service within the

meaning of Section 330(a). It does not follow, howev-

er, that a professional should never be paid for the de-

fense of its fee application. Instead, compensation for

such work is properly viewed as part of the compensa-

tion for the underlying services in the bankruptcy

case. Respondent is likewise wrong in contending that

fee defense is not compensable because professionals

are generally required to bear their own costs when

litigating fee disputes with clients outside of bank-

ruptcy. Unlike their nonbankruptcy counterparts,

professionals seeking compensation under Section

330(a) must obtain court approval before they can be

paid, and they potentially face objections to their fee

applications from parties other than their clients.

C. Although the court of appeals erred in holding

that the defense of a fee application is never compen-

sable, fee-defense work should be compensated only to

the extent necessary to preserve the reasonableness

of a professional’s compensation for core services.

Accordingly, as under fee-shifting statutes, compensa-

tion should be awarded only if, and to the extent that,

the underlying application is approved. Moreover,

fees should be awarded only for time reasonably spent

on fee defense—unnecessary or unreasonable work

14

and time devoted to curing deficiencies in an original

application are not compensable. Finally, because the

burden of an award under Section 330(a) ordinarily

falls on innocent creditors rather than on the party

that instigated the fee dispute, courts should respond

to frivolous or abusive fee objections by imposing

sanctions on the objecting party rather than by

awarding additional compensation under Section

330(a).

Il. Although much of petitioners’ analysis is con-

sistent with the approach set forth in this brief, peti-

tioners rely on a different interpretation of Section

330(a)’s text. In petitioners’ view, work performed in

defending a fee application itself constitutes “services

rendered” under Section 330(a)(1)(A) for which a pro-

fessional should receive “reasonable compensation.”

That interpretation is contrary to the most natural

reading of the statutory text because the phrase “ser-

vices rendered” connotes work performed on behalf of

a client and does not encompass a professional’s effort

to secure compensation for itself. Moreover, although

petitioners appear to agree that the defense of a fee

application is compensable only to the extent it is suc-

cessful, it is not readily apparent how that limitation

could be grounded in the statute if fee defense were

itself a compensable service under Section 330(a).

ARGUMENT

The court of appeals erred in holding that Section

330(a) categorically prohibits an award of fees for the

defense of a bankruptcy professional’s fee application.

When a law firm successfully responds to objections

asserted against its Section 330(a) fee application, the

additional time spent on the fee defense dilutes the

firm’s compensation and effectively reduces the hour-

15

ly rate it receives for services rendered in the under-

lying bankruptcy. In such circumstances, Section

330(a) may authorize an award of fees for work per-

formed in defending the firm’s fee application. The

most persuasive textual basis for that conclusion is not

(as petitioners contend) that the hours spent defend-

ing a fee application qualify as independently compen-

sable “services rendered” within the meaning of

11 U.S.C. 330(a)(1)(A). Rather, compensation for fee

defense is sometimes necessary and appropriate to

ensure that a professional receives “reasonable com-

pensation” for core services rendered in the underly-

ing bankruptcy case. 11 U.S.C. 330(a)(1)(A).’

” In the district court, the United States Trustee filed briefs con-

tending, inter alia, that Section 330(a) does not authorize an award

of fees for time spent pursuing a fee enhancement. See 2:11-cv-290

Docket entry No. (Docket entry No.) 12, at 22-30 (Nov. 23, 2011);

Docket entry No. 19, at 14-16 (Jan. 13, 2012). Although the United

States Trustee did not challenge the award of fees for petitioners’

successful defense of their core fee awards, its briefs stated that

Section 330(a) bars compensation for fee defense in all circum-

stances. Jbid. Those statements are inconsistent with guidelines

subsequently issued by the Executive Office for United States

Trustees, which provide that compensation for fee defense is “gen-

erally” inappropriate but recognize a “judicia] exception” for time

spent “litigating an objection to the application where the appli-

cant substantially prevails.” 78 Fed. Reg. at 36,250; see id. at

36,269, 36,271. This brief adopts a similar position and reflects the

government's considered views on the issue.

16

I. SECTION 330(a) AUTHORIZES AN AWARD OF FEES

FOR THE DEFENSE OF A FEE APPLICATION TO

THE EXTENT NECESSARY TO PROVIDE REASONA-

BLE COMPENSATION FOR CORE SERVICES

A. The Categorical Denial Of Defense Fees Would Con-

travene Section 330(a) By Diluting Compensation For

Core Services

1. Section 330(a) provides for the award of “rea-

sonable compensation for actual, necessary services

rendered” by attorneys and other professionals.

11 U.S.C. 330(a)(1)(A). In determining the amount of

compensation that is “reasonable,” courts must “con-

sider the nature, the extent, and the value” of the ser-

vices, “taking into account all relevant factors,” in-

cluding the time spent, the rates charged, and “wheth-

er the compensation is reasonable based on the cus-

tomary compensation charged by comparably skilled

practitioners” in nonbankruptcy cases. 11 U.S.C.

330(a)(3).

Bankruptcy courts performing that task typically

apply the lodestar approach, under which “the number

of hours reasonably expended by a professional is

multiplied by a reasonable hourly rate to arrive at a

reasonable fee,” which may in some cases be adjusted

further based on additional factors. 2 Hon. William L.

Norton, Jr. & William L. Norton III, Norton Bank-

ruptcy Law and Practice § 31:5, at 31-12 (3d ed.

2014); see, e.g., In re Market Ctr. E. Retail Prop.,

Inc., T30 F.3d 1239, 1246-1247 (10th Cir. 2013); Jn re

Sullivan, 674 F.3d 65, 68-69 (1st Cir. 2012); Jn re

Eliapo, 468 F.3d 592, 598-599 (9th Cir. 2006); Pet.

App. 6a-7a. The lodestar approach was developed in

the context of fee-shifting statutes. It reflects this

Court’s judgment that “[t]he most useful starting

17

point for determining the amount of a reasonable fee

is the number of hours reasonably expended * * *

multiplied by a reasonable hourly rate.” Hensley v.

Eckerhart, 461 U.S. 424, 433 (1983). When the lode-

star method is applied to a bankruptcy professional’s

core services, subject to any appropriate adjustments,

the result “by definition will represent the reasonable

worth of the services rendered.” Blanchard v. Ber-

geron, 489 U.S. 87, 96 (1989).

To obtain that compensation, however, an attorney

or other bankruptcy professional must submit to the

bankruptcy court a detailed fee application. See Fed.

R. Bankr. P. 2016(a); see also 28 C.F.R. Pt. 58, App. A

(guidelines for Section 330(a) fee applications promul-

gated by the Executive Office for United States Trus-

tees); 78 Fed. Reg. at 36,251-36,254 (guidelines for ap-

plications by attorneys seeking compensation in large

Chapter 11 cases). Before fees may be awarded, the

parties in interest and the United States Trustee must

have an opportunity to review and object to the

fee application. See 11 U.S.C. 330(a)(1); 28 U.S.C.

586(a)(3)(A).

Most fee applications are approved without objec-

tion. See Jn re Busy Beaver Bldg. Ctrs., Inc., 19 F.3d

833, 842 (3d Cir. 1994); Professional Fee Study 35. In

other cases, questions or objections are raised by the

parties in interest, the United States Trustee, or the

bankruptcy court, but are resolved through the clari-

fication or supplementation of the application or the

withdrawal of an unjustified request for payment. See

In re Computer Learning Ctrs., Inc., 285 B.R. 191,

223-224 (Bankr. E.D. Va. 2002). Sometimes, however,

fee disputes give rise to extensive litigation. See id. at

223. An objection to a fee application triggers a “con-

18

tested matter” under the Federal Rules of Bankrupt-

cy Procedure, which can involve discovery, written

briefing, and a hearing or trial. See Fed. R. Bankr. P.

9014; see also Pet. App. 3a (describing extensive dis-

covery and a six-day fee trial).

If a professional reasonably devotes significant

time to the successful defense of its fee application but

receives no additional compensation, the inevitable

result is to “dilute its compensation for ‘actual and

necessary services’” rendered in the underlying bank-

ruptcy case. Jn re Smith, 317 F.3d 918, 929 (9th Cir.

2002), cert. denied, 538 U.S. 1032 (2003). In the pro-

ceedings below, for example, the bankruptcy court de-

termined that petitioners reasonably devoted time

worth approximately $5 million to the defense of their

fee applications. Pet. App. 4a. The court of appeals

acknowledged that, by denying compensation for that

time, it was diluting the core fee received by petition-

er Baker Botts L.L.P. by roughly 4.4%. /d. at 18a-

19a. In smaller cases, the costs of a fee defense can be

considerably larger in relation to the professional’s

total fees. See, e.g., Smith, 317 F.3d at 922 (defense

fees and costs were more than 25% of core fees); Jn re

Buckridge, 367 B.R. 191, 206-207 & n.26 (Bankr. C.D.

Cal. 2007) (defense fees were approximately 8% of

core fees).

The denial of compensation for a successful fee de-

fense thus effectively results in a “reduction of the

rate paid for all the attorneys’ services” in the under-

lying proceeding. Jn re Nucorp Energy, Inc., 764

F.2d 655, 662 (9th Cir. 1985) (Nucorp). That dilution

of a core fee award contravenes Section 330(a)’s provi-

sion for “reasonable compensation” for core services.

It also undermines the policies underlying Section

19

330(a)—and the statute’s express direction to consider

“the customary compensation charged by comparably

skilled [nonbankruptcy] practitioners,” 11 U.S.C.

330(a)(3)(F)—by “reducling] the effective compensa-

tion of bankruptcy attorneys to levels below the com-

pensation available to attorneys generally.” Smith,

317 F.3d at 928.

2. Decisions interpreting federal fee-shifting stat-

utes confirm that, in appropriate circumstances, an

award of “reasonable” professional fees may include

compensation for the successful defense of a fee appli-

cation. Many federal statutes require the payment of

“reasonable” attorney’s fees under specified circum-

stances. See Pennsylvania v. Delaware Valley Citi-

zens’ Council for Clean Air, 478 U.S. 546, 562 (1986).

Like Section 330(a), those statutes do not expressly

provide for an award of fees for work performed de-

fending a fee application. Nonetheless, courts have

held with near-unanimity that “[rjeasonable time ex-

pended in applying for statutory fees and litigating

statutory fee issues is compensable.” Alba Conte, At-

torney Fee Awards § 4:21, at 528 (3d ed. 2004); accord

1 Robert L. Rossi, Attorneys’ Fees § 6:15, at 6-60 to 6-

62 & n.1 (3d ed. 2014) (Rossi).

In Commissioner, INS v. Jean, 496 U.S. 154 (1990),

for example, this Court concluded that fee-defense

work is compensable under the Equal Access to Jus-

tice Act, 28 U.S.C. 2412(d)(1)(A). See 496 U.S. at 158,

161-166. Courts of appeals have reached the same re-

sult in applying numerous other fee-shifting statutes.

See, e.g., Camacho v. Bridgeport Fin., Inc., 523 F.3d

973, 981 (9th Cir. 2008) (Fair Debt Collection Practic-

es Act, 15 U.S.C. 1692k(a)(3)); Hernandez v. Kalinow-

ski, 146 F.3d 196, 200 (3d Cir. 1998) (Prison Litigation

20

Reform Act of 1995, 42 U.S.C. 1997e(d)(1)(A)); Ander-

son v. Director, Office of Workers Comp. Programs,

91 F.3d 1322, 1325 (9th Cir. 1996) (Longshore and

Harbor Workers’ Compensation Act, 33 U.S.C.

928(a)); American Petroleum Inst. v. EPA, 72 F.3d

907, 918 (D.C. Cir. 1996) (Clean Air Act, 42 U.S.C.

7607(f)); American Fed’n of Gov't Emps., AFL-CIO,

Local 3882 v. FLRA, 994 F.2d 20, 21-23 (D.C. Cir.

1993) (Back Pay Act of 1966, 5 U.S.C. 5596); Cruz v.

Hauck, 762 F.2d 1230, 1233-1234 (5th Cir. 1985) (42

U.S.C. 1988); Gagne v. Maher, 594 F.2d 336, 344 (2d

Cir. 1979) (same), aff’d, 448 U.S. 122 (1980); Lund v.

Affleck, 587 F.2d 75, 77 (1st Cir. 1978) (same).

Although these decisions have sometimes relied on

features specific to the particular fee-shifting statutes

at issue, they have principally applied the anti-dilution

rationale described above. In Jean, for example, this

Court quoted with approval the Second Circuit’s ob-

servation that “denying attorneys’ fees for time spent

in obtaining them would dilute the value of a fees

award by forcing attorneys into extensive, uncompen-

sated litigation.” 496 U.S. at 162 (quoting Gagne, 594

F.2d at 344) (internal quotation marks omitted). Oth-

er courts have likewise reasoned that “if an attorney is

not compensated for the time expended on the fee re-

quest, the net effect would be to reduce the attorney’s

hourly rate for all the hours worked on the case,”

thereby rendering the underlying award unreasonably

low. Rossi § 6:15, at 6-60 to 6-61; see, e.g., Camacho,

523 F.3d at 981; Cruz, 762 F.2d at 1234; Lund, 587

F.2d at 77."

* This Court applied analogous reasoning in holding that fee-

shifting statutes permit “an appropriate adjustment” to an attor-

21

This Court has held that its “case law construing

what is a ‘reasonable’ fee applies uniformly” to all fed-

eral fee-shifting statutes using that formulation. City

of Burlington v. Dague, 505 U.S. 557, 562 (1992). And

courts of appeals have further concluded that “the

general principles applicable under fee-shifting stat-

utes” provide guidance when analogous issues arise

under Section 330(a), which likewise calls for an award

of “reasonable” compensation. /n re UNR Indus.,

Inc., 986 F.2d 207, 210 (7th Cir. 1993); accord Jn re

Manoa Fin. Co., 853 F.2d 687, 690-691 (9th Cir. 1988).

Accordingly, the decisions holding that fees for the

successful defense of a fee request are an integral

component of “reasonable” compensation under fed-

eral fee-shifting statutes confirm that such defense

fees should also be available under Section 330(a).

3. Although considerations unique to bankruptcy

may provide reason to depart from fee-shifting prece-

dents in resolving other questions arising under Sec-

tion 330(a), no such considerations apply here. To the

contrary, Section 330{a) shares the features of fee-

shifting statutes that make awards of defense fees ap-

propriate. In the fee-shifting context, “a reasonable

attorney’s fee is one that is adequate to attract compe-

tent counsel, but that does not produce windfalls to

attorneys.” Blum v. Stenson, 465 U.S. 886, 897 (1984)

(citation, brackets, ellipsis, and internal quotation

marks omitted). The court’s task is thus to determine

ney’s hourly rates to account for the fact that payme”* is delayed

until the conclusion of the litigation. Missouri v. Jenkins, 491 U.S.

274, 284 (1989); see Perdue v. Kenny A., 559 U.S. 542, 556 (2010).

(The same issue does not arise in bankruptcy cases because pro-

fessionals may seek periodic interim awards of compensation. See

11 U.S.C. 331.)

22

an award that “roughly approximates the fee that the

* * * attorney would have received if he or she had

been representing a paying client who was billed by

the hour in a comparable case.” Perdue v. Kenny A.,

559 U.S. 542, 551 (2010).

Section 330 “is similar to fee-shifting statutes in

the important respect that it is intended to attract

competent counsel by awarding reasonable compensa-

tion for services rendered.” Manoa Fin. Co., 853 F.2d

at 691. Like fee-shifting provisions, Section 330(a)

seeks to ensure that professionals receive “compensa-

tion comparable to what they would receive” from

paying clients. /n re Taxman Clothing Co., 49 F.3d

310, 313 (7th Cir. 1995); see 11 U.S.C. 330(a)(3)(F).

And also like fee-shifting statutes, Section 330(a) re-

flects an “express directive” that attorneys should re-

ceive “reasonable” compensation. Nucorp, 764 F.2d at

662. The anti-dilution rationale that courts have ap-

plied to fee-shifting statutes thus applies with equal

force in the context of Section 320(a).

The court of appeals in this case observed that, un-

like awards under fee-shifting statutes, the costs of an

award under Section 330(a) are ordinarily borne by

unsecured creditors rather than by the losing party in

litigation. Pet. App. 17a-18a. The court also empha-

sized that, in this context, “[n]o side wears the black

hat.” Jd. at 17a. But the purpose of fee-shifting stat-

utes is not to punish the losing party in litigation.’ In-

stead, it is to provide compensation “sufficient to in-

duce a capable attorney to undertake [a] representa-

* Indeed, this Court has observed that fee awards in civil rights

cases are often paid by “state and local taxpayers” rather than “by

the individuals responsible for the constitutional or statutory viola-

tions on which the judgment is based.” Perdue, 559 U.S. at 559.

23

tion.” Perdue, 559 U.S. at 552; see Blum, 465 U.S. at.

897. Section 330(a) serves substantially the same

function and should be given a similar interpretation.

4. Section 330(a)(6) reinforces the conclusion that

compensation for the defense of a fee application is

available in appropriate cases. That provision speci-

fies that “[alny compensation awarded for the prepa-

ration of a fee application shall be based on the level

and skill reasonably required to prepare the applica-

tion.” 11 U.S.C. 330(a)(6). That directive necessarily

presupposes that compensation for the preparation of

a fee application is authorized by Section 330(a)(1)’s

provision for an award of “reasonable compensation”

for services rendered. Section 330(a)(1) permits such

compensation “because the preparation of a fee appli-

cation is not required for lawyers practicing in areas

other than bankruptcy” and demands work beyond

“routine billing activities” associated with nonbank-

ruptcy practice. 78 Fed. Reg. at 36,250. Compensa-

tion for the additional work required to prepare a fee

application is thus necessary to avoid diluting a pro-

fessional’s compensation for core services.

If Section 330(a)(1) permits compensation for the

preparation of a fee application, there is no apparent

reason to conclude that it does not also permit com-

pensation for the defense of a fee application. Indeed,

this Court squarely rejected an effort to draw an anal-

ogous distinction in the context of the Equal Access to

Justice Act, finding “no textual or logical argument

for treating so differently a party’s preparation of a

fee application and its ensuing efforts to support that

same application.” Jean, 496 U.S. at 162; accord Kin-

ney v. International Bhd. of Elec. Workers, 939 F.2d

690, 694 n.4 (9th Cir. 1991) (“There is no difference in

24

principle between the time spent preparing a fee ap-

plication and the time spent successfully defending

the application in litigation.”).

Respondent and the court of appeals have not iden-

tified a principled basis on which to distinguish be-

tween preparing an application and defending it. In-

stead, they view Section 330(a)(6) as an independent

grant of authority to award compensation for the

preparation of a fee application, and they infer from

the absence of a specific authorization for defense fees

that such fees are unavailable. Pet. App. 15a-16a; Br.

in Opp. 20-23. But that interpretation founders on

Section 330(a)(6)’s text, which contains no affirmative

grant of authority and which differs markedly from

the provisions of Section 330(a) authorizing awards.

Cf. 11 U.S.C. 330(a)(1) (“the court may award” com-

pensation and expenses); 11 U.S.C. 330(a)(4)(B) (“the

court may allow reasonable compensation to the debt-

or’s attorney” in cases under Chapters 12 and 13). In-

stead, Section 330(a)(6) imposes a restriction on

“{alny compensation awarded for the preparation of a

fee application.” It is thus “framed not as a conferral

of authority but as a limitation of authority that al-

ready exists” in Section 330(a)(1). Setser v. United

States, 132 S. Ct. 1463, 1469 (2012).

B. The Arguments Advanced In Favor Of A Complete

Ban On Compensation For Fee-Defense Work Lack

Merit

1. In holding that defense fees are categorically

unavailable, the court of appeals principally relied on

its conclusion that the defense of a fee application is

not compensable under Section 330(a) because it is

neither “reasonably likely to benefit the debtor’s es-

tate” nor “necessary to the administration of the

25

ease.” 11 U.S.C. 330(a)(4)(A)(ii); see Pet. App. 14a-

15a. As explained in Part II, see pp. 31-34, infra, the

court reached the correct conclusion in holding that

the defense of a fee application does not itself qualify

as an independently compensable service under Sec-

tion 330(a). It does not follow, however, that a profes-

sional should never be paid for work performed in de-

fending its fee application. Instead, compensation for

such work is properly viewed as part of the compensa-

tion for the underlying services in the bankruptcy

proceeding. Respondent did not challenge the bank-

ruptcy court’s determination that the underlying ser-

vices at issue here were compensable under the gov-

erning statutory criteria. As with fees incurred in

preparing a fee application, an award of fees incurred

in defending the application may be appropriate and

necessary to ensure that petitioners’ compensation for

those underlying services is “reasonable.”

2. Respondent contends (Br. in Opp. 24-25) that

Section 330(a)(3)(F)’s directive to consider fees earned

'° The D.C. Circuit reached a different conclusion in interpreting

the fee-shifting provision of the Independent Counsel Act,

28 U.S.C. 593(f), which in some cases permits the subject of an in-

dependent counsel investigation to recover fees incurred “during’”’

the investigation. The D.C. Circuit held that this provision does

not authorize an award of fees for “preparing the fee application”

because those fees are not incurred “during” the investigation. Jn

re Olson, 884 F.2d 1415, 1427 (1989) (per curiam). Acknowledging

that the issue was a “close” one, the court rested its decision on the

principle that “any waiver of sovereign immunity must be strictly

construed,” and on legislative history indicating that Congress did

not intend fee-related work to be compensable. /d. at 1427-1428;

see id. at 1427 n.19. Neither consideration applies here. And the

Independent Counsel Act contains no analogue to 11 U.S.C.

330(a)(6), which presupposes that fees for preparing a fee applica-

tion are available.

26

for comparable services outside the bankruptcy con-

text supports the denial of awards for fee defense be-

cause nonbankruptcy lawyers generally must bear

their own costs when they litigate fee disputes with

clients. That comparison is inapt. Billings submitted

by nonbankruptcy professionals are typically subject

to dispute only by the clients with whom the profes-

sionals have contractual relationships. By contrast,

bankruptcy professionals retained by a trustee or

debtor in possession must file extensive applications

to obtain court approval for their fees, and their appli-

cations are subject to objections from numerous par-

ties in interest (including debtors and creditors), the

United States Trustee, and the bankruptcy court it-

self. See 11 U.S.C. 330(a)(1) and (2); Fed. R. Bankr.

P. 2016(a); see also Nucorp, 764 F.2d at 658-659.

The Fifth Circuit’s categorical ban on fees for de-

fense of a fee application thus will not produce equali-

ty of treatment between bankruptcy and nonbank-

ruptcy professionals. To the contrary, bankruptcy

professionals are for this purpose more similarly situ-

ated to lawyers seeking compensation under fee-

shifting statutes, whose fee requests are also subject

to court approval and objections from adverse

parties—and who are typically compensated for time

spent successfully litigating fee matters.

C. In Many Cases, Compensation For Fee-Defense Work

Will Not Be Necessary To Preserve The Reasonable-

ness Of A Professional’s Compensation For Core Ser-

vices

For the reasons stated above, the court of appeals

erred in holding that fee-defense work is never com-

pensable under Section 330(a). Such awards, however,

are not always available. Rather, Section 330(a) and

27

decisions interpreting fee-shifting statutes establish

important limitations that will often bar compensation

for fee defense. The basic principle behind those limi-

tations is that fee-defense work should be compen-

sated only to the extent necessary to preserve the

reasonableness of a professional’s compensation for

core services. Section 330(a) seeks to ensure that pro-

fessionals have adequate incentives to perform core

services in bankruptcy proceedings. Congress did not

intend, however, to encourage fee litigation for its own

sake or to make such litigation an independent source

of profitable work for lawyers.

1. Most fundamentally, fees for defending a fee

application should be awarded only if, and to the ex-

tent that, the application is approved. If the bank-

ruptcy court rejects proffered objections and approves

the fee application, additional fees for defending the

application may be necessary to ensure that the pro-

fessional receives reasonable compensation for its

core services. But if the court concludes that the ob-

jections to the fee application have merit—i.e., that

the underlying services are wholly or partially non-

compensable—that anti-dilution rationale does not

apply.

Consistent with that principle, courts that permit

compensation of fee-defense work under Section

330(a) have generally held that compensation is avail-

able only when a professional “successfully defend{s]|

its fee awards.” Smith, 317 F.3d at 929; see, e.g.,

Manoa Fin. Co., 853 F.2d at 691. For the same rea-

son, when a professional is only partially successful in

responding to objections asserted against a request

for fees, fees should not be awarded for any aspects of

the fee-application defense that did not ultimately

28

succeed. See, e.g., /n re Big Rivers Elec. Corp., 252

B.R. 670, 674-676 (W.D. Ky. 2000) (denying fees for

“unsuccessfully defending [a] portion of [a] fee

award”); In re Quigley Co., 500 B.R. 347, 370-371

(Bankr. S.D.N.Y. 2013) (reducing defense fees in light

of partial disallowance of core fees originally sought).

That approach is well-grounded in decisions inter-

preting fee-shifting statutes. In Jean, this Court di-

rected that “fees for fee litigation should be excluded

to the extent that the applicant ultimately fails to pre-

vail in such litigation.” 496 U.S. at 163 n.10. By way

of example, the Court explained that, “if [a] challenge

to a requested rate for paralegal time resulted in the

court’s recalculating and reducing the award for para-

legal time from the requested amount, then the appli-

cant should not receive fees for the time spent defend-

ing the higher rate.” J/bid.; see, e.g., Thompson v.

Gomez, 45 F.3d 1365, 1367-1368 (9th Cir. 1995).

Limiting compensation to the successful defense

of fee applications also furthers “the large objectives”

of Section 330(a), a consideration on which this Court

has often relied in “limit{ing] courts’ discretion to

award fees despite the absence of express legislative

restrictions.” Martin v. Franklin Capital Corp.,

546 U.S. 132, 139-140 (2005). Awarding fees for the

successful defense of a fee application protects profes-

sionals’ core fees from unreasonable dilution. At the

same time, denying compensation for the unsuccessful

defense of a fee application discourages unjustified fee

requests and encourages settlement of fee disputes.

If, in contrast, defense fees were available even for

unsuccessful fee claims, professionals “would have

every incentive to feather their nests” through exorbi-

tant fee requests and excessive fee litigation, and

29

creditors and United States Trustees would be dis-

couraged from raising “legitimate objections to im-

proper billing entries.” Thompson, 45 F.3d at 1368;

see In re Wind N’ Wave, 509 F.3d 938, 943-944 (9th

Cir. 2007) (“compensating unsuccessful litigation over

fee applications might lead to frivolous fee requests”).

2. Even when a fee applicant ultimately succeeds

in defending its fee application, compensation should

not be awarded to the extent that the amounts re-

quested for fee defense reflect excessive rates or

hours, unnecessary work, or other unreasonable prac-

tices. In this case, for example, the bankruptcy court

reduced petitioners’ award because the defense fees

petitioners originally sought were “higher than were

reasonable or necessary” to defend their fee applica-

tions. Pet. App. 142a. That analysis was consistent

with decisions interpreting fee-shifting statutes, which

permit compensation only for time “reasonably spent”

in establishing a right to a fee award. Gagne, 594 F.2d

at 344 (emphasis added); see Jean, 496 U.S. at 163

(“Exorbitant, unfounded, or procedurally defective fee

applications * * * are matters that the district

court can recognize and discount.”).

In addition, a professional should not receive com-

pensation for time spent curing deficiencies or omis-

sions in its original application. Professionals are re-

quired to maintain accurate time records and to justi-

fy their requests for fees. See Fed. R. Bankr. P

2016(a); 3 Collier 11 330.03[5]-[6], at 330-30 to 330-33.

Accordingly, a professional’s core fee award is not im-

properly diluted by the denial of compensation for

time spent responding to requests for clarification or

additional information made by the court or by the

30

United States Trustee."’ And, as the district court

recognized in this case, a professional also should not

be paid for time spent in litigation to correct “insuffi-

ciently described” or “otherwise deficient” aspects of

its original fee request. Pet. App. 49a; accord Quigley

Co., 500 B.R. at 370-371.

3. If a court determines that compensation for

fee-defense work is necessary to provide reasonable

compensation in a case where the objections to a pro-

fessional’s fee application were frivolous or otherwise

abusive, it should ordinarily consider whether its au-

thority to sanction improper litigation practices pro-

vides a more appropriate source for an award of fees.

This case is unusual because respondent’s creditors

were paid in full and the cost of any award of defense

fees under Section 330(a) will fall on respondent, the

same party that instigated the litigation giving rise to

the bankruptcy court’s fee-defense award. In a more

typical case, the burden of a Section 330(a) award for

fee defense will fall on unsecured creditors, most or all

of whom may have had no involvement in raising the

objections that gave rise to the fee litigation.

When such objections are frivolous, brought in bad

faith, or abusively litigated, a bankruptcy court may

require the objecting party to pay attorney’s fees un-

der Federal Rule of Bankruptcy Procedure 9011(c)(2),

or under the court’s inherent power to impose sanc-

tions where a litigant has “acted in bad faith, vexa-

tiously, wantonly, or for oppressive reasons.” Cham-

" In addition, responding to such inquiries will often be analo-

gous to “reviewing a bill with a client, answering the client’s ques-

tions and addressing the client’s concerns”—routine activities that

are not billed to clients outside the bankruptcy context. Computer

Learning Ctrs., 285 B.R. at 223.

31

bers v. NASCO, Inc., 501 U.S. 32, 45-46 (1991) (cita-

tions omitted); see Pet. App. 2la. Such sanctions

place the burden of defense fees on the responsible

party rather than on innocent creditors. Accordingly,

if a bankruptcy court concludes that a fee objection is

sanctionable under Chambers or Rule 9011(c)(2), it

would likely be an abuse of discretion to award fees

under Section 330(a) instead.

Ii. WORK PERFORMED DEFENDING A FEE APPLICA-

TION DOES NOT CONSTITUTE INDEPENDENTLY

COMPENSABLE “SERVICES RENDERED” UNDER

SECTION 330(a)

Much of petitioners’ analysis is consistent with the

argument outlined in Part I. While petitioners do not

address all of the limitations on a court’s authority to

award defense fees under Section 330(a), they appear

to agree that such fees are available only to the extent

that the fee application is “successful[].” F.g., Pet. Br.

17, 22. Petitioners also emphasize (Br. 23) that “[a]

statutory grant of authority to award reasonable at-

torneys’ fees necessarily includes discretion to award

defense fees to avoid dilution of the core fees previ-

ously earned.”

Petitioners’ textual basis for preventing such

dilution, however, differs from the analysis set

forth above. In the government’s view, Section

330(a)(1)(A)’s reference to compensable “services ren-

dered” is limited to work performed in the underlying

bankruptcy case. The justification for awarding addi-

tional fees for fee-defense work is that such fees are

sometimes necessary and appropriate to ensure that

the professional’s compensation for the underlying

services is “reasonable.” In petitioners’ view, by con-

trast, work performed in successfully defending a fee

32

application itself constitutes “services rendered” for

which the professional should receive “reasonable

compensation” under Section 330(a)(1)(A). See Pet.

Br. 23-30. That interpretation should be rejected be-

cause it is contrary to the most natural reading of the

statutory text and could produce anomalous practical

results.

A. Section 330(a)(1)(A) authorizes awards of com-

pensation for “services rendered” by an attorney or

other professional. When used in this context, the

term “service” ordinarily refers to “labor performed

for another.” Webster’s New International Diction-

ary of the English Language 2288 (2d ed. 1934). Ac-

cordingly, in construing Section 330(a)’s predecessor

provision under the Bankruptcy Act, ch. 541, 30 Stat.

544, this Court concluded that the equivalent phrase

“‘reasonable compensation for services rendered’ nec-

essarily implies loyal and disinterested service in the

interest of” a professional’s client. Woods v. City

Nat'l Bank & Trust Co., 312 U.S. 262, 268 (1941); ac-

cord American United Mut. Life Ins. Co. v. City of

Avon Park, 311 U.S. 138, 148 (1940). Time spent by a

professional preparing and defending its fee applica-

tion is not naturally characterized as “labor performed

for another” or as “disinterested service in the inter-

ests of” the professional’s client. To the contrary, it is

work that the professional does on its own behalf.

B. Petitioners’ reading of the statute could also

produce anomalous practical results. Petitioners cor-

rectly recognize that compensation may be awarded

only for the successful defense of a fee application.

But if fee-defense work is viewed as independently

compensable “services rendered,” it is not readily ap-

parent why fees for such work would be limited to

33

eases in which the fee defense succeeds. On petition-

ers’ theory, an unsuccessful defense of a fee applica-

tion could qualify as a service “necessary to the ad-

ministration of the case,” 11 U.S.C. 330(a)(4)(A)(i) ID,

because even an unsuccessful defense “serves to accu-

rately determine the amount of reasonable compensa-

tion owed by the estate,” Pet. Br. 25.”

C. No such textual or practical difficulties arise if

fees for defending a fee application are viewed as a

means of ensuring that professionals receive “reason-

able compensation” for “services rendered” in the un-

derlying bankruptcy case. When a professional’s de-

fense of its fee application is successful, the court will

by definition have found that those underlying ser-

vices satisfy Section 330(a)’s prerequisites to compen-

sation. Treating additional fees for time spent defend-

ing the fee application as a component of “reasonable

compensation” for those underlying services furthers

the anti-dilution purpose that petitioners correctly

2 The generally accepted rule is that, for purposes of Section

330(a)4)(A)(ii), the necessity and likely benefit of particular ser-

vices should be measured “from the perspective of the time that

the services were rendered, rather than based on hindsight after

the services ha[ve] been performed.” 3 Collier 1 330.03{1)[{b}[iii),

at 330-25 (footnote omitted); see Smith, 317 F.3d at 926; In re Top

Grade Sausage, Inc., 227 F.3d 123, 132 (3d Cir. 2000); In re Ames

Dep't Stores, Inc., 76 F.3d 66, 71 (2d Cir. 1996). But cf. Jn re

Woerner, 758 F.3d 693, 703 (5th Cir. 2014) (Prado, J., specially

concurring) (criticizing the Fifth Circuit’s contrary rule and urging

the court to grant rehearing en banc to overrule it), reh’g en banc

granted, No. 13-50075, 2014 WL 5786536 (Nov. 5, 2014). [f fee-

defense work were treated as potentially compensable “services

rendered,” that approach would suggest that at least some unsuc-

cessful defenses could be compensable, on the theory that the pro-

fessional’s defense of its fee application was reasonable at the time

it was undertaken even though it did not ultimately succeed.

34

emphasize, without adopting an unnaturally broad

reading of the term “services” in Section 330(a)(1)(A)

as encompassing work that professionals perform on

their own behalf. And because a bankruptcy court’s

partial or complete rejection of a fee application re-

flects a determination that the relevant underlying

services are not compensable (7.e., that the “reasona-

ble compensation” for those services is zero) or that

the compensation originally sought was excessive, that

rationale also ensures that fees are not awarded for

unsuccessful fee-defense work.

CONCLUSION

The judgment of the court of appeals should be

reversed.

Respectfully submitted.

DONALD B. VERRILLI, JR.

Solicitor General

JOYCE R. BRANDA

Acting Assistant Attorney

RAMONA D. ELLIOTT General

Deputy Director/General MALCOLM L. STEWART

ounsel Deputy Solicitor General

P. MATTHEW SUTKO BRIAN H. FLETCHER

Associate General Counsel Assistant to the Solicitor

ROBERT J. SCHNEIDER, JR. General

Attorney MICHAEL S. RAAB

Executive Office for United SYDNEY FOSTER

States Trustees Attorneys

DECEMBER 2014