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

No. 14-103

OFFICE OF THE CLERK

Supreme Court of the United States

°

BAKER BOTTS L.L.P. AND JORDAN, HYDEN,

WOMBLE, CULBRETH & HOLZER, P-C.,

Petitioners,

Vv.

ASARCO LLC,

Respondent.

+

On Writ Of Certiorari To The

United States Court Of Appeals

For The Fifth Circuit

¢

BRIEF FOR AMICI CURIAE

BANKRUPTCY LAW SCHOLARS

IN SUPPORT OF PETITIONERS

¢

SUSAN M. FREEMAN

Counsel of Record

NEEL S. KOTHARI

JUSTIN J. HENDERSON

LEWIS ROCA ROTHGERBER LLP

201 E. Washington Street, Suite 1200

Phoenix, Arizona 85004

(602) 262-5756

SFreeman@LRRLaw.com

Counsel for Amici Curiae

COCKLE LEGAL BRIEFS (800) 225-4964

WWW COCKLELEGALBRIEFS COM

i

TABLE OF CONTENTS

Page

ee GP GEA BEE OUD visscasccctscesnnsvcsscessesevere ili

STATEMENT OF INTEREST OF AMICI CU-

SUE cigsaidheci ste dlbaabantidclas tak emaboucanc nosed asmmbiaandentiabad okies 1

SUMMARY OF ARGUMENT ........................ iste 2

OEE ficccacimnidendaniecenbiinsdsdianciinicdidedidienatsasa: 4

I. PRE-BANKRUPTCY CODE REQUIRE-

MENTS OF ECONOMY MANDATED

LIMITED FEE AWARDS ....................:00006 4

A. Equity Receiverships.......................+.+. 5

B. Section 77B Brings Reorganization

Law Under the 1898 Act...................... 6

C. The Chandler Act Replaces Section

FP eistiodnnieckocsaniuabsinecemnininiddeabimnemaaies 10

BP IN TD visas cs dsiticcicanssssitsevceds 11

il. UNDER THE FORMER BANKRUPTCY

ACT, COURTS HAD DISCRETION TO

CONSIDER AND AWARD DEFENSE

FEES IN APPROPRIATE CIRCUM-

I TEIIED detcinsunsstaidannaheaksasiecesacretsdibitinieccies 14

III. CONGRESS ENACTED SECTION

330(A) TO ENSURE BANKRUPTCY

PROFESSIONALS WOULD BE COM-

PENSATED AT MARKET RATES, IN-

CLUDING FOR PREPARATION OF FEE

APPLICATIONS, WITHOUT CHANG-

ING THE LAW ON “FEE DEFENSE”

il

TABLE OF CONTENTS -— Continued

Page

IV. FEE DEFENSE FEES ARE AWARDED

IN COMPARABLE NON-BANKRUPTCY

IN ccditanincsnsderencpsnisunedsavessucnbinndducsnnies 27

ill

TABLE OF AUTHORITIES

Page

CASES:

Auto Alliance Int'l, Inc. v. U.S. Customs Serv.,

155 Fed. App’x 226 (6th Cir. 2005)... ee. 24

Bagby v. Beal, 606 F.2d 411 (3d Cir. 1979)................ 23

Bd. of Trs. of Hotel & Rest. Emps. Local 25 v.

JPR, Inc., 136 F.3d 794 (D.C. Cir. 1998) ................ 24

Brown v. Gerdes, 321 U.S. 178 (1944)........0.....0. eee. 6

Callaghan v. Reconstr. Fin. Corp., 297 U.S. 464

ERC RPM ee OI ERE ae ee es 8

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

EARNEST Sade Be ee So oR tant ops 24

Cohen v. de la Cruz, 523 U.S. 213 (1998) .................. 17

Commissioner, I.N.S. v. Jean, 496 U.S. 154

tA cones enanr be eNO Ae haere 22, 23

Davis v. Bd. of Sch. Comm'rs, 526 F.2d 865 (5th

I I clases chissasesennca decane disrobbinlesteletacieabah aati aalac a aot 24

Fegley v. Higgins, 19 F.3d 1126 (6th Cir. 1994)......... 24

Finn v. Childs Co., 181 F.2d 431 (2d Cir. 1950)......... 13

Gagne v. Maher, 5€4 F.2d 336 (2d Cir. 1979),

~ ge we ft ey | nee 22, 23

Gonter v. Hunt Valve Co., 510 F.3d 610 (6th Cir.

ec ea cuiameaninens 24

Greensfelder v. St. Louis Pub. Serv. Co., 114

ee ee en Ce BI Neethernecisciieniimiacinnsinvneciinstnieen 13

iv

TABLE OF AUTHORITIES — Continued

Page

Hairston v. R & R Apartments, 510 F.2d 1090

SP I: CUE Giniceaad ec hcnnceriadiiatels dda pid natincniceniol 23

Hutto v. Finney, 437 U.S. 678 (1978) ...................-000 23

In re Ark. Fuel Oil Corp., Cities Serv. Co., 234

Be I, Gre Gir. NU, CD oceticceitccecrneiicnnctinintresunsonien 15

In re Carolina Cooperage Co., 96 F. 950

FN 4 add) NERRARE SGN Ee ne SE Re eR Rr 12

In re Detroit Int'l Bridge Co., 111 F.2d 235 (6th

ai MII iia tucson cabiese ata ocnieita tat tecealntainaaeimencepaanene 16

In re Mt. Forest Fur Farms of Am., 157 F.2d

Py SA PUD sancti csisisstssnnsnamsbureneciimanussiiacnte 13

In re Mullendore, 527 F.2d 1031 (10th Cir.

I castes lecaaiicns aceaksdcacaeratedanieaniai camaninaaaaanicennin 14

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

RI SEIEEL ciksncsacarnstavsncensaisiceincancommnenion 21, 22, 24, 25

In re Oppenheimer, 146 F. 140 (M.D. Pa. 1906) ........ 12

In re Paramount Publix Corp., 83 F.2d 406 (2d

A, Se cciiiaiagiistisbssintatecdivabesiad-victadeninateatilaheansaatiagiibneniabiibe 7

In re Pilgrim’s Pride Corp., 690 F.3d 650 (5th

SE IIE ic sccscooniatnocenocecesaaeinaredewiioliatisvunasashehdiousauinnenianiiikin 23

In re Solar Mfg. Corp., 206 F.2d 780 (3d Cir.

nee cc urssettsivingousciodiaehehak cndeiesaas ediceasomchdasieea sacagensinieasaabtacsigndiunaioana 14

In re Standard Gas & Elec. Co., 106 F.2d 215

Re ny as lacidinseiceaiencddibecafaseneiniitinpiansnidhsteidsnddiigantimeabianote 13

In re United Corp., File No. 54-184-1, 39 S.E.C.

391, 0059 WL 59228 (Sept. 30, 1954)............... 15, 16

TABLE OF AUTHORITIES — Continued

Page

In re W. Counties Constr. Co., 182 F.2d 409 (7th

ON I ia act needa clade biel taedrenaichreeddddaawtanecbimiente 13

Johnson v. Georgia Highway Express, Inc., 488

ce ey OS EEE Ee ee eT 23

Johnson v. Mississippi, 606 F.2d 635 (5th Cir.

i a 23

Mass. Mut. Life Ins. Co. v. Brock, 405 F.2d 429

ie EER Ria Per entan e O 11, 20

Matter of Beverly Crest Convalescent Hosp.,

Ine., 548 F.26 SLT (Otha Civ. GTS) 2.2... ccccccccccccsess.:. 20

Midlantic Nat'l Bank v. New Jersey Dep’t of

Envtl. Protection, 474 U.S. 494 (1986) .........0......... 17

Milbank, Tweed & Hope v. McCue, 111 F.2d 100

RRA re UM AE RNY LER Ale ae era ene 13

Official Creditors’ Comm. of Fox Markets, Inc.

v. Ely, 337 F.2d 461 (9th Cir. 1964)... ee. 13

Pawlak v. Greenawalt, 713 F.2d 972 (3d Cir.

I i aa aa a il ic 24

Pennsylvania Pub. Welfare Dep’t. v. Davenport,

Ae ees Se ass cercaictsacnsncenniaciisctudencadeniiilioceonsieaal 17

Porzig v. Dresdner, Kleinwort, Benson, N. Am.,

or ome Be Bi ty to; eeneanmee 23

Prandini v. Nat'l Tea Co., 585 F.2d 47 (3d Cir.

BNI scisicsiwdsscossineircio chacedatooraensteoonnalamiunnindiaieeieaicnncedacens: 23, 25

Pub. Interest Research Group of N.dJ., Inc. v.

Windall, 51 F.3d 1179 (3d Cir. 1995)

vi

TABLE OF AUTHORITIES — Continued

Page

Saldivar v. Rodela, 894 F. Supp. 2d 916 (W.D.

IEE Srctsadatcoacaccconiedincesieiiciensitdipeninekiantbnisiamssinel 24

Scribner & Miller v. Conway, 238 F.2d 905 (2d

8, EAR RTS Pee see ee een Re re a a 16

Sec. & Exchange Comm’n v. Cogan, 201 F.2d 78

Lk REESE SER et eae srertinaes PRR mem ARS 16

Standard Gas & Elec. Co. v. S.E.C., 212 F.2d

Se I e icidiccisicscteiecienndsmanaamiinciebuaiinns 15

Stark v. Woods Bros. Corp., 109 F.2d 969 (8th

cc SE casein lcdeeciaidsociichs uhnnetatipndpiualbnbaccapiiieiuninlaicabaiaiitiasiebnis 13

Surface Transit, Inc. v. Saxe, Bacon & O’Shea,

te Re CG SD ocicecistiectsicnencnssntsnesseseese 16

Torres v. Sachs, 69 F.R.D. 343 (S.D.N.Y. 1975) ......... 24

United States v. Chicago, M., St. P. & P.R. Co.,

I a it I intel dnanictbantiniiboiceianansnsnian 6

York Int'l Bldg., Inc. v. Chaney (In re York Int'l

Bldg., Inc.), 527 F.2d 1061 (9th Cir. 1975)............. 13

Ziegler Coal Co. v. Dir. Office of Workers’

Comp. Programs, 326 F.3d 894 (7th Cir.

A Te et RN oh RE See ee SR 24

STATUTES:

OD Se Oe IN wisiiciniesinctscciccnstinitninmiisccodenneactoiitn 24

11 U.S.C. § 107 (1934) (repealed 1978)............0.......... 4

ee ie ID ininssiisiccedenieansticniciedibionsnianiildiicescecienitias 7

Be ds 0 ee isiicstisanstndinatinimncianicieene 14, 17, 18, 21, 23

vll

TABLE OF AUTHORITIES — Continued

Page

Be res te IEE P isidceccnlncdicesacccesnassnnscncostindeadsnte 21

ee ee IE aesicininistonhasercecsenssaiietanesenssevensinenns 18

il lilo ascsdnnms da cdeinbonninahinceinndneniventii 18

11 U.S.C. § 501 (1938) (repealed 1978)... 4

Be es ae RII dia ssesnesinsnsiccontatesmesiesissosbenniats 18

ee I i cdi idbay cidenheinbitionkipincenpecninnnsnins 16

Be , Oe EE iiiiiiatintsnsnececcntindsndsnnmeesenenasnessze 24

Be et Oe UE aa thetithntiiedddrdianiabenannminsinionssexrninnncbisinssind 10

SS RR, I i sca ciaieemranibiamianiniinincatibunpneeddnbiitiil 24

Se anh SI scien snsseesncceisctimbanidaaiindsinsinmnnaivchesiinn 24

ae TD 6 I issn ea scccdibnennnvesinionssnsndnsniiesonsenss 12

Is a ls lt nalnsnscltsaehaseemignoeinianicks 24

SCs, IOI ai cn cnceinistdpisceasencepimesiinisesianpamitchs 24

ST I aa rien ait a attend cidiadeinbiiiabiadile 23

Se EE ED iiisbd cnecininodenwisnresentnactonemninds 24

ES MI sd acaactas anit bade ninsldisincnstedbonbnnibliiasisisadon 24

IT Oe SIN dc iadicdnniandsesdabinacipdaicndincennasehiadinnivadise 24

i ral pisses ccna lenisivietinsibiscsanla 24

Be rer IID dsc, cocdnisteniantnnanecicdbidedadatiniasnasiacascads 24

a on assim putaneinmndieelansscieebbonsaniosticne 23

Ee SOD a ivcitinndsitacsansinnpidnovesiinienieisonbaninsaoun 23

OO Ee EE 23

vii

TABLE OF AUTHORITIES — Continued

Page

43 U.S.C. § TRGB TOND) .ncccvcssccsscsersncdssianicesmatnanaes 24

GB UE... § BOYD oni icceieccissncesuesveecncensscunuaeaaea 24

RULES AND REGULATIONS:

FED. R. BANKR. P. 10-215 (repealed) in 421 U.S.

LORD, DODDS CIF cc cesinsncssnscntincsicnonsantane 12,13

FED. R. BANKR. P. 219% cX1) (repealed) in 411

CW G6 WG ic cececsissoncessiessscosinessiasieamianniaaiaann 12,14

S.B.C. Release No. 36-1939 ..................ccccccsssssesecccseees 16

SEC Rules and Regulations under the Public

Utility Holding Company Act of 1935 (1938),

Rule U-11F-2, 1939 WL 37605 (Feb. 23,

BGO). oocicececesedesscessasonseetosisnneheniabanieiiaas tina mann 16

OTHER AUTHORITIES:

Bankruptcy Act of 1898, § 12, 30 Stat. 544

(1898) (repealed 1978) ................ccccccccsssscosesees passim

Bankruptcy Reform Act of 1978, Pub. L. No.

95-598, 92 Stat. 2549 (1978).............cccccccceeeees 2, 4, 20

Bankruptcy Reform Act of 1994, § 224(b), Pub.

L.. Ne. 100-206 (Oot. BB, 1G) nccccsdcsacicsccsscssnmeeee 21

Chandler Act, Chapter X, 52 Stat. 840, 11

U.S.C. § 501 (1938) (repealed 1978)............... passim

124 Conc. Rec. H11,091-92 (daily ed. Sept. 28,

BI FG) occicncocsncsscssssecnscacesicdiniisaaeianaaan 19, 20

TABLE OF AUTHORITIES — Continued

Developments in the Law: Reorganization

Under Section 77B of the Bankruptcy Act —

1934-1936, 49 Harv. L. Rev. 1111 (1936)................. 8

H.R. Rep. No. 595, at 329-30 (1978), reprinted

in 1978 U.S.C.C.A.N. 5963, 6286. .......................... 20

Stephen J. Lubben, What We “Know” About

Chapter 11 Cost Is Wrong, 17 FORDHAM J. OF

Corp. & FINANCIAL LAW 141 (2012) .......... eee 21

Emmett McCaffery, Corporate Reorganization

Under the Chandler Bankruptcy Act, 26

ID cc ccnanenuenonsaccesssnscuscecnsooes 7

6 JAMES WM. MOORE, ET AL., COLLIER ON BANK-

sa mensisbetnnoncneson 5,6

a, sosusnusunnnneneussenenns 5

os cunnnasusnnbanenvonscess 6

6A JAMES WM. MOORE, ET AL., COLLIER ON

EY CIE WE," ID © D cc ccccnccceccnccescceccncsecssecceces 6

cu satnsneesencnonssocses 6, 7,11

a caseemaanens 7, 10, 13, 16

Professional Fees in Bankruptcy: Hearing on

Certain Problems Associated with Evaluating

and Monitoring the Fees Charged by Profes-

sionals Against Estates in Bankruptcy Before

the Subcomm. on Courts and Administrative

Practice of the S. Comm. on the Judiciary,

ES 18, 19

xX

TABLE OF AUTHORITIES — Continued

Securities and Exchange Commission, REPORT

ON THE STUDY AND INVESTIGATION OF THE

Work, ACTIVITIES, PERSONNEL AND FUNCTIONS

OF PROTECTIVE AND REORGANIZATION COMMIT-

db te) RR eae 5.8,9,10

Securities and Exchange Commission, REPORT

ON THE STUDY AND INVESTIGATION OF THE

Work, ACTIVITIES, PERSONNEL AND FUNCTIONS

OF PROTECTIVE AND REORGANIZATION COMMIT-

TEES, PART VIII 250 (1940)................20000: 5, 7, 8, 9, 10

1 HenRY J. SOMMER AND ALAN N. RESNICK,

COLLIER ON BANKRUPTCY 97.05 (16th ed.

Alfred B. Teton, Reorganization Revised, 48

pL Re eee eer 7,10

United States Supreme Court, Genera! Order,

Po Ged RG) ERROR sie ceaiereerbanasees set ryercrenoe tes 12

United States Supreme Court, General Order,

Se Cares UI OR aciiieicatiincicidssanscincehinnnncindieasaniminiainie 12

STATEMENT OF INTEREST OF AMICI CURIAE

Amici Curiae are law professors who teach and

write in the field of bankruptcy law.’ Amici are not

predisposed to systematically advance the parochial

interests of debtors or creditors or federal or state

governmental bodies.’ They file this brief because of

their academic interest in promoting the coherent

interpretation of the Bankruptcy Code and the

‘ Amici file this brief with the written consent of all parties.

Supreme Court Rule 37. No counsel for a party authored this

brief in whole or in part. No person or entity including Amici or

their counsel made a monetary contribution for the preparation

or submission of this brief; it has been prepared pro bono

publico. Professor Kenneth N. Klee was engaged by Baker &

Botts LLP to serve as an expert witness on behalf of the

ASARCO LLC bankruptcy estate in connection with the sub-

stantive issues out of which this subsequent fee litigation arose.

That engagement is long terminated. Neither Mr. Klee nor his

firm, Klee Tuchin Bogdanoff & Stern LLP, has been involved in

the dispute over the legal fees at issue in this case.

* Douglas G. Baird is Professor of Law at the University of

Chicago Law School. Daniel J. Bussel is a Professor of Law at

the University of California, Los Angeles (UCLA) School of Law.

Laura B. Bartell] is a Professor of Law at Wayne State Universi-

ty. Kenneth N. Klee is a Professor of Law Emeritus at the UCLA

School of Law. Stephen Lubben is a Professor of Law at Seton

Hall University School of Law. Bruce A. Markell is a Professor of

Law at Florida State University College of Law and a Visiting

Professor at Northwestern University School of Law. Charles W.

Mooney, Jr. is a Professor of Law at the University of Pennsy)-

vania Law School. Scott Pryor is a Professor of Law at Regent

University School of Law. David Skeel is a Professor of Law at

the University of Pennsylvania Law School. Messrs. Bussel,

Klee, Markell and Pryor are also members of this Court's bar.

2

effective and efficient functioning of the bankruptcy

system.

°

SUMMARY OF ARGUMENT

Before enactment of the Bankruptcy Reform Act

of 1978, courts supervising corporate reorganizations

exercised discretion to authorize the payment of fees

incurred by estate professionals in successfully de-

fending objections to their fee applications.

In the allowance of professional fees and expens-

es, however, they applied a “principle of economy”

that had the effect of imposing below-market fees on

those bankruptcy professionals whose fees were

subject to court supervision, and generally precluded

recovery of the expenses of routine preparation of fee

applications.

This Court has often noted that established pre-

Code bankruptcy practices, when not inconsistent

with the express terms of the Bankruptcy Code,

continue to guide the interpretation of the Bankrupt-

cy Code. Thus, understanding this pre-Code back-

ground is imperative to properly construing the

current provisions of the Bankruptcy Code relating to

the compensation of estate professionals.

In 1978, Congress deliberately liberalized the

allowance of fees by eliminating the “principle of

economy.” In rejecting this pre-Code limiting principle

on fee allowance, Congress expressed no intention of

3

upsetting the longstanding understanding that a

court supervising the allowance of fees in a reorgani-

zation proceeding retained discretion to allow fees

incurred in successfully overcoming meritless objec-

tions to fee allowance.

Indeed, continuing the pre-Code practice of

allowing fees for defending fee applications was

consistent with Congress’s overall! objective in 1978 to

ensure that professionals who devoted themselves to

bankruptcy practice would not be limited to sub-

standard fees as had been the case under prior law,

but rather would be compensated in a manner equiv-

alent to professionals of comparable skill, experience

and ability retained by private clients in comparable

non-bankruptcy representation.

Most lawyers, of course, are not in the position of

having to litigate the reasonableness of their fees

with anyone other than the client that engaged them,

much less multiple adversaries of that client. So the

issue of compensation for the defense of objections to

fee allowance is not routine in most commercial

practices. In contrast, any party in interest may

object to any bankruptcy estate professional’s pro-

posed fees.

Fee applications and objections thereto are not

unique to bankruptcy. In comparable circumstances

when fees are court-approved, including federal

statutes providing for fee shifting under court super-

vision, courts hearing objections generally allow fees

for a successful defense — a practice upheld by this

4

Court. Such additional defensive fees are included to

avoid diluting fee awards by imposing the expense of

meritless fee litigation on the applicant. Congress’s

policy of comparability to non-bankruptcy practice, as

well as the parallel long-established pre-Code prac-

tice under prior bankruptcy law, accordingly man-

dates allowance of defense fees in bankruptcy cases

subject to the discretion of the supervising court.

®

ARGUMENT

I. PRE-BANKRUPTCY CODE REQUIRE-

MENTS OF ECONOMY MANDATED LIM-

ITED FEE AWARDS.

Before the Bankruptcy Reform Act of 1978 (as

subsequently amended, the “Bankruptcy Code”),

reorganization law was governed in turn by case law

developed in federal equity receivership proceedings,

Section 77B of the Bankruptcy Act of 1898 (enacted

1934), and the Chandler Act (enacted 1938).‘

* Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92

Stat. 2549 (1978) (codified as amended at title 11, United States

Code).

* Bankruptcy Act of 1898, 30 Stat. 544 (1898) (repealed

1978); § 77B, 48 Stat. 911, 11 U.S.C. § 107 (1934) (repealed

1978); Chandler Act, Chapter X, 52 Stat. 840, 883, 11 U.S.C.

§ 501 (1938) (repealed 1978).

5

A. Equity Receiverships.

The 1898 Bankruptcy Act included provisions for

“compositions,” as well as liquidations, but prior to

1934, most business restructuring occurred through

federal equity receiverships rather than under the

1898 Act.” Not only counsel for debtors and receivers,

but also for multiple committees of stockholders,

reorganization managers, and creditors, received com-

pensation for their participation in the reorganization

* Bankruptcy Act of 1898, § 12, 30 Stat. 544, 563 (1898)

(repealed 1978); 6 JAMES WM. MOORE, ET AL., COLLIER ON BANK-

RupTCY 40.03 at 21-28 (14th ed. 1978) [hereinafter CoLLIER

14TH] (discussing limitations on bankruptcy compositions,

including lack of provisions to address secured debt); see Securi-

ties and Exchange Commission, REPORT ON THE STUDY AND

INVESTIGATION OF THE Work, ACTIVITIES, PERSONNEL AND FUNC-

TIONS OF PROTECTIVE AND REORGANIZATION COMMITTEES, PART I at

869 (1937) [hereinafter 1937 SEC REporT] (“Prior to the enact-

ment of Section 77 and Section 77B of the Bankruptcy Act, the

favored method for effecting a corporate reorganization was

through the federal consent receivership.”); Securities and

Exchange Commission, REPORT ON THE STUDY AND INVESTIGATION

OF THE WorRK, ACTIVITIES, PERSONNEL AND FUNCTIONS OF PROTEC-

TIVE AND REORGANIZATION COMMITTEES, PART VIII 250 at 61

(1940) (hereinafter 1940 SEC Report] (“Prior to the enactment

of Sections 77 and 77B, there was seldom resort to the provi-

sions of the Bankruptcy Act for the purpose of effecting the

reorganization of corporations whose securities were held by the

general public. When such enterprises became involved in

financial difficulties serious enough to entail judicial proceed-

ings, they were customarily reorganized through the medium of

equity receivership despite the disadvantages and limitations of

that procedure... ”).

6

under agreed plans.” Little or no court supervision of

these fees occurred, and litigating fee objections was

not a material part of reorganization practice in the

pre-1934 period.’

B. Section 77B Brings Reorganization

Law Under the 1898 Act.

One of the purposes of amending the 1898 Act to

include Section 77B in 1934 was “the desire to reduce

the costs of reorganization.™

In Section 77B reorganizations, committees and

interested parties could no longer set their own fees

by private agreements or plan provisions.” Section

77B(cX9) provided that the supervising court “may

allow a reasonable compensation for the services

* See United States v. Chicago, M., St. P & PR. Co., 282

U.S. 311, 319-20 (1931) (describing equity receivership plan

compensation provisions for multiple committees of creditors,

stockholders and managers).

"6 CouueR 14TH 4 0.04[2.3] at 58 (“(T)he receivership

mechanism afforded only a perfunctory examination on the

fairness of the essential phases of the proposed plan, since the

theory was that the court could not contro] the plan .. [and}

[t]he receivership itself was costly and wasteful.”); United States

v. Chicago, 282 U.S. at 324-28 (holding that the power to

regulate commerce did not authorize regulation of equity

receivership plan compensation provisions).

* Brown v. Gerdes, 321 U.S. 178, 181 (1944) (“Sec. 77B, like

§ 77 of the Bankruptcy Act, had as one of its purposes the

establishment of more effective control over reorganization fees

and expenses”).

* 6A COLLIER 14TH 4 13.01 at 514 (14th ed. 1977).

7

rendered and reimbursement for the actual and

necessary expenses incurred in connection with the

proceeding and the plan by officers, parties in inter-

est, depositaries, reorganization managers and com-

mittees or other representatives of creditors or

stockholders, and the attorneys or agents of any of

the foregoing and of the debtor.” Courts implement-

ed this provision by applying strict standards of

“benefit to the estate” which were perceived by some

to impede the functioning of the reorganization

process.”

Multiple committees of creditors and interested

parties participated in Section 77B proceedings, but

their fee requests were often denied as duplicative

and beneficial only to those parties, not the estate.

Even when courts found their services to be beneficial

to the estate, however, attorneys still received low fee

allowances under the “conservation of the estate”

principle.” This Court held that economic administra-

tion restrictions on fees and expenses in bankruptcy

cases under Section 77B must be strictly enforced

“even when the compensation allowed was, in special

* 11 U.S.C. § 207(cX9); see also In re Paramount Publix

Corp., 83 F.2d 406, 407 (2d Cir. 1936) (discussing this provision).

" 6A COLLIER 14TH 7 13.01 at 516-17; Emmett McCaffery,

Corporate Reorganization Under the Chandler Bankruptcy Act,

26 Cauir. L. REV. 643, 657-58 (1938); Alfred B. Teton, Reorgani-

zation Revised, 48 YALE L.J. 573, 603-04 (1939); 1940 SEC

REPORT. .

" Teton, supra n.11 at 606 (1939); 6A CoLLIER 14TH J 13.01

at 515-16, J 13.02 at 542 n.45.

8

circumstances, materially less than that which oth-

erwise might have been considered reasonable.””

Following the enactment of Section 77B, the

Securities and Exchange Commission, under the

direction of future Justice William O. Douglas, under-

took an extensive study of the abuses of bankruptcy

reorganizations by participants in the process to the

detriment of investors. The study was undertaken in

conjunction with the legislative process leading to

enactment of the 1938 Chandler Act. With respect to

professional fees, the SEC Report stated that the

“vice is that the bar has been charging all that the

traffic will bear. It has forsaken the tradition that its

members are officers of the court and should request

and expect only modest fees.” The SEC found that

the problem with fees arose when attorneys did not

* Callaghan v. Reconstr. Fin. Corp., 297 U.S. 464, 468

(1936); 1940 SEC Report at 244 (“Consistently with the policy

thus disclosed by its legislative history, and with the policy of

the Bankruptcy Act, of which it was an integral part, the courts

demanded tha. proceedings under Section 77B be economically

administered, and they construed strictly the limitations upon

allowances, though this resulted in occasional hardship to an

individual applicant.”); Developments in the Law: Reorganization

Under Section 77B of the Bankruptcy Act — 1934-1936, 49 Harv.

L. Rev. 1111, 1202 (1936) (“The courts have relied both on the

need for economy in the administration of the corporate assets

and on the policy adopted of giving participants in the reorgani-

zation the character of court officers, entitled to receive less than

would be their due were they agents of parties not involved in

judicial proceedings.”).

** See 1937 SEC Report; 1940 SEC Reporr.

* 1937 SEC Report at 215.

9

“promote reorganization expeditiously, economically,

and solely in the interests of investors,” but also

found that “compensation was not always excessive”

and “(t]he importance of the role of lawyers in reor-

ganizations is difficult to overemphasize.””

The SEC further advised that the principle of

economy had severe drawbacks that “were likely in

some measure to react to the detriment of investors,

especially as reorganization proceedings under Sec-

tion 77B tended to become the exclusive bailiwick of

those accustomed in the past to dominate equity

reorganizations.” The SEC therefore recommended

* 1937 SEC Report at 211-12.

" Td. at 213; see id. (“They advise receivers and trustees

with respect to virtually every step taken which does not

concern the detailed operation of the particular business. They

aid in the formulation of the policies of committees, draft the

deposit agreement and reorganization plan, and defend them

against attack.... The determination of the relative rights of

security holders may require negotiation or litigation by attor-

neys.... Attorneys must be employed for these tasks and are

entitled to fair and reasonable compensation.” (emphasis add-

ed)).

‘* 1940 SEC Report at 252. For example, objecting minori-

ties, “however honest{] and abl{e],” were not compensated;

“attorneys were deemed not connected with ‘benefit to the estate’

if they were concerned entirely with seeking more favorable

terms in the plan of reorganization for those whom they repre-

sented”; although Section 77B(c) “afforded all creditors and

stockholders the right to be heard on the proposed confirmation

of a plan,” compensation to their counsel “was almost uniformly

denied,” even for “interveners with substantial holdings who

forced material changes in the plan adopted”; and, once a

committee was in the field, usually dominated by the debtor, any

(Continued on following page)

10

that, unlike the practice under Section 77B,

“(rleasonable compensation for services rendered and

reimbursement for proper costs and expenses in-

curred by parties in interest and their attorneys in

connection with the administration of the estate or

with a plan of reorganization should be allowed by

the court.””

C. The Chandler Act Replaces Section

77B.

The Chandler Act enacted Chapter X as the

successor to Section 77B. Legislating on the basis of

the SEC Report, the principal solutions in the Chan-

dler Act to perceived problems under prior reorgani-

zation law were appointing disinterested trustees to

displace management in large cases, restricting the

role of multiple committees of creditors, and utilizing

advisory assistance of the SEC, including with re-

spect to SEC recommendations on professional fees.”

subsequent committee seeking compensation was required to

show “the need for separate representation, i.e., that the existing

committee was not honest or efficient or was otherwise disquali-

fied.” Id. at 249-52.

** 1937 SEC Report at 902.

* Teton, supra n.11 at 573; see also 6A COLLIER 14TH J 13.02

at 528-29. The Borah Act in 1937 also made bankruptcy and

receivership fee sharing a crime, which was extended in 1949 to

include attorneys for parties in such cases. 18 U.S.C. § 155. See

1 HENRY J. SOMMER AND ALAN N. RESNICK, COLLIER ON BANK.

RUPTCY 4 7.05 at 7-107 — 7-111 (16th ed. 2014) [hereinafter

COLLIER 16TH].

11

The Chandler Act included a detailed and com-

prehensive scheme for the supervision and allowance

of reorganization fees and expenses.” Fee authoriza-

tion was expanded and “democratized” to encourage

participation by individuals and independent commit-

tees, but judicial control was strengthened.”

The principle of economy remained in effect

under the Chandler Act, however. In Massachusetts

Mutual Life Insurance Co. v. Brock, for example, the

court remanded fee awards because the trial court

failed to consider “the public interest which is inher-

ent in bankruptcy matters,” even though it had

properly considered the time spent on the case by the

trustee and his counsel, the complexity of the issues,

and the commendable results achieved.”

D. Bankruptcy Rules.

This Court promulgated General Orders from

time to time which governed procedures in bankruptcy

™ 6A COLLIER 14TH 9 13.01 at 519; see also Chandler Act,

§ 241, 52 Stat. 840, 900 (1938) (trustee, court officers, attorneys

for debtors and petitioning creditors); id. § 242 (indenture

trustees, committees, representatives of creditors or stockhold-

ers, other interested parties except the SEC, and attorneys for

all); id. § 243 (creditors, stockholders and their attorneys in

connection with plans); id. § 247, 52 Stat. 840, 901 (fee applica-

tions to be heard by the court upon notice); id. § 250, 52 Stat.

840, 901-02 (appeals of fee awards).

= 6A COLLIER 14TH J 13.01 at 519-21.

* 405 F.2d 429, 432 (5th Cir. 1968).

12

a

courts.” Following passage of the Rules Enabling Act,

the Court promulgated Federal Rules of Bankruptcy

Procedures in 1973.”

Former Bankruptcy Rule 219 provided that

compensation was allowable by the court “for services

rendered in the administration of a bankrupt estate

shall be reasonable, and in making allowances the

court shall give due consideration to the nature,

extent, and value of the services rendered as well as

to the conservation of the estate and the interests of

creditors.” As a result, although allowances from the

estate were within the “sound judicial discretion of

the court,”” “economy [was] strictly enjoined, by the

well-known policy of the bankruptcy act ae

In Chapter X cases, fees were approved under

procedures and guidelines set forth in former Rule

10-215.” Although not explicitly required by that

* E.g., 267 U.S. 613, 614 (1925) (XLII required that every

attorney seeking an allowance of compensation from a bankrupt

estate file a petition under oath with the referee, setting forth a

full and detailed statement of services, amount claimed, and any

partial allowance, accompanied by an affidavit regarding no

agreement for sharing of fees).

* See 28 U.S.C. § 2075 (1970); 411 U.S. 991 (1973).

* Fep. R. BANKR. P. 219(cX1) (repealed) (emphasis added) in

411 U.S. at 1036.

* In re Carolina Cooperage Co., 96 F. 950, 954 (E.D.N.C.

1899).

* In re Oppenheimer, 146 F. 140, 141 (M.D. Pa. 1906).

” Id., Fep. R. BANKR. P. 10-215 (repealed) in 421 U.S. 1019,

1050-53 (1975) (providing for “reasonable compensation for

(Continued on following page)

13

rule, the “principle of economy” still governed, and led

courts to impose below-market fees on bankruptcy

professionals.”

Courts interpreting Rule 10-215 looked to the

value of the debtor’s estate, the amount available for

allowances, and the ability of the reorganized debtor

to pay, in determining fee reasonableness.*' Courts

held that those rendering professional services could

not expect to be compensated on a scale equal to that

obtainable in private employment.” In some cases,

courts would benchmark bankruptcy lawyers’ fees

against prevailing judicial salaries which then (as

now) lagged market rates for attorney services in

sophisticated commercial matters.”

necessary services and reimbursement of necessary expenses

incurred in a Chapter X case”).

*” 6A COLLIER 14TH 4 13.02 at 537; Greensfelder v. St. Louis

Pub. Serv. Co., 114 F.2d 53, 61 (8th Cir. 1940); Milbank, Tweed &

Hope v. McCue, 111 F.2d 100, 101 (4th Cir. 1940).

" 6A COLLIER 14TH 913.02 at 538-39; In re W. Counties

Constr Co., 182 F.2d 409 (7th Cir. 1950); Finn v. Childs Co., 181

F.2d 431, 435-36 (2d Cir. 1950).

@ 6A COLLIER 14TH 4 13.02 at 539-40 n.37; In re Mt. Forest

Fur Farms of Am., 157 F.2d 640, 647 (6th Cir. 1946); Stark v.

Woods Bros. Corp., 109 F.2d 969 (8th Cir. 1940); In re Standard

Gas & Elec. Co., 106 F.2d 215, 216-17 (3d Cir. 1939).

* See, e.g., Official Creditors’ Comm. of Fox Markets, Inc. v.

Ely, 337 F.2d 461, 466 (9th Cir. 1964): York Int'l Bldg., Inc. v.

Chaney (In re York Int'l Bidg., Inc.), 527 F.2d 1061, 1073 (9th

Cir. 1975).

14

Congress’s 1978 comprehensive overhaul of

bankruptcy law paid particular attention to reform-

ing the pre-Code system of professional compensa-

tion. 11 U.S.C. Section 330 deliberately excised Rule

219’s reference to “conservation of the estate and the

interests of creditors” and substituted, as a required

factor, “the cost of comparable services” in non-

bankruptcy matters. The guiding principle of the 1978

reform was to encourage talented professionals to

specialize in bankruptcy practice instead of retreating

to seek more favorable fees in other areas of commer-

cial law.

Il. UNDER THE FORMER BANKRUPTCY

ACT, COURTS HAD DISCRETION TO

CONSIDER AND AWARD DEFENSE FEES

IN APPROPRIATE CIRCUMSTANCES.

Under pre-Code law, subject to the principle of

economy, district courts had “sound discretion” to

determine “the proper amounts to be awarded to fee

claimants in reorganization proceedings.” This was

an equitable determination, with two components of

direct import to this case:

(1) Professional fees incurred in preparing fee

applications were subject to disallowance under the

economy principle, which required “a balancing of the

competing equities of the persons affected which in

* In re Solar Mfg. Corp., 206 F.2d 780, 781 (3d Cir. 1953);

see also In re Mullendore, 527 F.2d 1031, 1038 (10th Cir. 1975).

15

the interests of fairness [courts] must make appropri-

ate practical distinctions in distributing the costs of

the burden of the litigation, [which] has been recog-

nized as a salutary rule which helps preserve the

assets of the estate.””

(2) Professional fees incurred in defending

against a third party’s objection to a fee award were

granted, however, when the court — with input from

the SEC — deemed the circumstances to be appropri-

ate. See In re Ark. Fuel Oil Corp., Cities Serv. Co., 234

F. Supp. 31, 39-40 (D. Del. 1964) (exercising discre-

tion to deny fee litigation fees, but noting “policy of

the Commission to allow supplemental fees wherever

applicants have prevailed in the reviewing court”).

As explained clearly in Jn re United Corp., the

pre-Code rationale behind denying fees for preparing

fee applications “does not in our opinion apply to

services and expenses in connection with the success-

ful defense, on appeal by others, of an award made to

the applicant by the fee tribunals. In such case we

think equitable considerations justify the awarding of

compensation for the services required to defend

the initial allowance, and to the extent applicant’s

* In re United Corp., File No. 54-184-1, 39 S.E.C. 391, 396,

0059 WL 59228, at *5 (Sept. 30, 1954) (internal quotation marks

and alterations omitted) (and citing, e.g., Standard Gas & Elec.

Co. v. S.E.C., 212 F.2d 407, 413 (8th Cir. 1954) (fees allowance

expenditures generally denied, but portion allowed as incurred

at SEC’s request)).

16

request relates to services of that nature it is entitled

to favorable consideration.””

The SEC served an important advisory role in

Chapter X cases.” Because of the SEC’s statutory role

in Chapter X cases in reviewing attorneys’ fee appli-

cations and recommending appropriate allowances,

and given its stature as a disinterested agency expe-

rienced in reorganization affairs, courts granted

considerable weight to the SEC’s views on fees.”

* 39 S.E.C. at 396-97, 0059 WL 59228, at *5.

” See, e.g., Surface Transit, Inc. v. Saxe, Bacon & O'Shea,

266 F.2d 862 (2d Cir. 1959) (“[T]he recommendations of the

Securities and Exchange Commission, representative of the

public interest, are entitled to great weight.”). See Sec. &

Exchange Comm'n v. Cogan, 201 F.2d 78 & n.5 (9th Cir. 1951)

(quoting 15 U.S.C. § 79k(f)); SEC Rules and Regulations under

the Public Utility Holding Company Act of 1935 (1938), Rule U-

11F-2, quoted in S.E.C. Release No. 35-1939 at *4 n.1, 1939 WL

37605 (Feb. 23, 1940).

* 6A COLLIER 14TH 4 13.02 at 529-30; Scribner & Miller v.

Conway, 238 F.2d 905 (2d Cir. 1956) (SEC recommendations

should be followed unless court shows reasons otherwise based

on specific findings); In re Detroit Int'l Bridge Co., 111 F.2d 235,

238 (6th Cir. 1940) (SEC recommendations entitled to weight,

but not conclusive).

17

Ill. CONGRESS ENACTED SECTION 330(A)

TO ENSURE BANKRUPTCY PROFES.-

SIONALS WOULD BE COMPENSATED AT

MARKET RATES, INCLUDING FOR

PREPARATION OF FEE APPLICATIONS,

WITHOUT CHANGING THE LAW ON

“FEE DEFENSE” FEES.

Pre-Code bankruptcy practice guides interpreta-

tion of the Bankruptcy Code, except to the extent that

practice is inconsistent with new statutory lan-

guage.” “We __ will not read the Bankruptcy Code to

erode past bankruptcy practice absent a clear indica-

tion that Congress intended such a departure.”

In Section 330, Congress set forth five factors for

courts to use in fixing “reasonable compensation for

actual, necessary services” performed by bankruptcy

professionals: “the time, the nature, the extent, and

the value of such services, and the cost of comparable

services other than in a case under this title.”

* See, e.g., Midlantic Nat'l Bank v. New Jersey Dep't of

Envtl. Protection, 474 U.S. 494, 501 (1986) (“The normal rule of

statutory construction is that if Congress intends for legislation

to change the interpretation of a judicially created concept, it

makes that intent specific .... The Court has followed this rule

with particular care in construing the scope of bankruptcy

codifications.”) (citations omitted).

“ Cohen v. de la Cruz, 523 U.S. 213, 221 (1998), quoting

Pennsylvania Pub. Welfare Dep’t. v. Davenport, 495 U.S. 552,

563-64 (1990).

“11 U.S.C. § 330 (1978), as reprinted in CoLLiER 16TH, B

Appx. pt. 4(a) at 4-22 (currently expanded as set forth below).

18

Neither Section 330 nor any other part of the

Bankruptcy Code rejects or alters pre-Code law

allowing professional fees incurred in the defense of

fee application objections in appropriate circumstanc-

es. Final fee rulings on such objections are plainly

“necessary services” as the allowance of fees must be

made before all bankruptcy estate assets can be

distributed to administrative and prepetition claim-

ants and the case can be closed.“

Likewise, preparation of fee applications that are

required before fees can be awarded are plainly

“necessary services” — without that work, bankruptcy

courts cannot determine whether compensability

criteria in Bankruptcy Code Sections 330 and 331

and Federal! Rule of Bankruptcy Procedure 2014 have

been met. Inclusion of such fees as a type of necessary

work, payable upon termination of the principle of

economy, was clarified by the 1994 enactment of

Section 330(a\(6), setting forth compensability stand-

ards for that routine, although time-consuming,

task.“ The legislative history of that provision shows

Congress’s concern that professionals were charging

“hefty fees just for preparing their bills.”™

“ See 11 U.S.C. § 350 (requiring case to be fully adminis-

tered before it is closed); § 1123(aX9XA) (administrative expens-

es, including allowed fees, must be fully paid or provided for in

order to confirm a reorganization plan).

“ 11 U.S.C. § 330(aX6).

“ Professional Fees in Bankruptcy: Hearing on Certain

Problems Associated with Evaluating and Monitoring the Fees

(Continued on following page)

19

Compensability of fee application services and

the award of fees in appropriate cases for defending

fee challenges are informed by Congress’s expressed

intention that supervising courts consider the cost of

comparable services in non-bankruptcy cases in

allowing compensation. The requirement to consider

fees paid to other, non-bankruptcy professionals was

added to implement the “policy of this Section to

compensate attorneys and other professionals serving

in a case under title 11 at the same rate as the attor-

ney or other professional would be compensated for

performing comparable services other than in a case

under title 11.”"° Fee defense is not a routine task. It

can, as in this case, involve complex, hotly contested

adversary litigation.

Charged by Professionals Against Estates in Bankruptcy Before

the Subcomm. on Courts and Administrative Practice of the S.

Comm. on the Judiciary, 102d Cong. 4 (1992) (statement of the

Hon. Howard M. Metzenbaum, United States Senator); id. at 65-

67 (statement of Marcy J.K. Tiffany, U.S. Trustee, Region 16)

(explaining that fee application fees are permitted under case

law, and that unlike non-bankruptcy cases, court appearances

are required for fee approval in bankruptcy, but amounts billed

may be excessive); id. at 122 (statement of Keith Shapiro,

partner at law firm of Holleb & Coff) (“While the majority of

surveyed courts allow full compensation for time spent comply-

ing with applicable fee statutes and rules, a significant number

of courts do not ... [which] is yet another example of a lack of

uniformity in the application of the Code’s fee provisions which

could be rectified by a simple amendment.”); id. at 157-58 (Keith

Shapiro’s explanation that fee applications are more complex

than preparation of invoices).

“© 124 Conc. Rec. H11,091-92 (daily ed. Sept. 28, 1978); 124

Conc. Rec. $17,408 (daily ed. Oct. 6, 1978).

20

Indeed, the legislative history shows that the

House of Representatives, whose version of this Code

provision was ultimately enacted, intended by that

language “to overrule Matter of Beverly Crest Conva-

lescent Hospital, Inc., 548 F.2d 817 (9th Cir. 1976),

which set an arbitrary limit on fees payable, based on

the amount of a district judge’s salary, and other,

similar cases that require fees to be determined based

on notions of conservation of the estate and economy

of administration.”” The House explained that “[i]f

that case were allowed to stand, attorneys that could

earn much higher incomes in other fields would leave

the bankruptcy arena.” In enacting the final version

of the Bankruptcy Reform Act of 1978, the House also

expressly overruled Massachusetts Mutual Life

Insurance Co. v. Brock,“ reiterating that “[nJotions of

economy of the estate in fixing fees are outdated and

have no place in a bankruptcy code,” and stated that

“bankruptcy legal services are entitled to command

the same competency of counsel as other cases.””

“ H.R. Rep. No. 595, at 329-30 (1978), reprinted in 1978

U.S.C.C.A.N. 5963, 6286.

“ Id.; see also id. (without fee parity, “(b]ankruptcy special-

ists, who enable the system to operate smoothly, efficiently, and

expeditiously, would be driven elsewhere, and the bankruptcy

field would be occupied by those who could not find other work

and those who practice bankruptcy law only occasionally almost

as a public service”).

“ 405 F.2d 429, 432 (5th Cir. 1968).

“ 124 Conc. Rec. H11,091-92 (daily ed. Sept. 28, 1978).

21

The current version of Section 330 is even more

explicit. It provides that when “determining the

amount of reasonable compensation to be awarded

, the court shall consider all relevant factors,

including (F) whether the compensation is reason-

able based on the customary compensation charged by

comparably skilled practitioners in cases other than

cases under this title.””

IV. FEE DEFENSE FEES ARE AWARDED IN

COMPARABLE NON-BANKRUPTCY CON-

TEXTS.

Congress has provided for fee awards in numer-

ous federal statutes. When fee awards are contested

in litigation under those statutes, courts have ad-

dressed fees incurred in defending those fee awards

on multiple occasions. Those cases set the standard of

fees for comparable non-bankruptcy professional

services as required by Section 330(a)(3)(F).

As explained in In re Nucorp Energy, Inc.,

“talttorneys’ fees in bankruptcy cases are in the most

important respect similar to attorneys’ fees in other

statutory cases. As in the case of other statutory fees,

fees are awarded to bankruptcy counsel pursuant to

“ 11 U.S.C. § 330(aX3XF); Bankruptcy Reform Act of 1994,

§ 224(b), Pub. L. No. 103-394 (Oct. 22, 1994) (emphasis aided);

see Stephen J. Lubben, What We “Know” About Chapter 11 Cost

Is Wrong, 17 FORDHAM J. OF Corp. & FINANCIAL Law 141 (2012)

(analysis of the context of chapter 11 reorganization professional

fees and actual cost of reorganization in absolute terms).

22

Congress’ express directive that attorneys are to

receive reasonable compensation for all services

rendered in the course of their representation.”

This Court held in Commissioner, I.L.N.S. v. Jean

that courts may award fees under the Equal Access to

Justice Act for fees incurred in litigating a fee request

without additionally proving a fee request objection

was not substantially justified.” The reasoning is apt:

Any given civil action can have numerous

phases. While the parties’ postur.s on indi-

vidual matters may be more or less justified,

the EAJA — like other fee-shifting statutes —

favors treating a case as an inclusive whole,

rather than as atomized line-items. See, e.g.,

Sullivan v. Hudson, 490 U.S. 877, 888 (1989)

(where administrative proceedings are “nec-

essary to the attainment of the results Con-

gress sought to promote by providing for fees,

they should be considered part and parcel of

the action for which fees may be awarded”).

Cf. Gagne v. Maher, 594 F.2d 336, 344 (CA2

1979) (“[DJjenying attorneys’ fees for time

spent in obtaining them would ‘dilute the

value of a fees award by forcing attorneys in-

to extensive uncompensated litigation in or-

der to gain any fees’” under 42 U.S.C.

§ 1988), aff’d on other grounds, 448 U.S. 122

(1980); Pennsylvania v. Delaware Valley Citi-

zens’ Council for Clean Air, 478 U.S. 546, 559

” 764 F.2d 655, 662 (9th Cir. 1985).

* 496 U.S. 154, 165-66 (1990).

23

(1986) (fees for postjudgment proceedings to

enforce consent decree properly compensable

as a cost litigation under § 304(d) of the

Clean Air Act); New York Gaslight Club, Inc.

v. Carey, 447 U.S. 54 (1980) (fees for admin-

istrative proceedings included under § 706(k)

of Title VII of the Civil Rights Act of 1964).*

Fee defense fees are routinely awarded in

cases arising under the Civil Rights Attorney’s

Fees Awards Act (including an affirmance by this

Court),” the Fair Housing Act,* Title VII,” labor

* 496 U.S. at 161-62.

“ 42 U.S.C. § 1988; see, e.g., Hutto v. Finney, 437 U.S. 678,

693, 700 (1978) (appellate fee award for defending challenge to

fee award against state agency); Johnson v. Mississippi, 606

F.2d 635, 637-38 (5th Cir. 1979); Bagby v. Beal, 606 F.2d 411,

415-16 (3d Cir. 1979); Gagne v. Maher, 594 F.2d 336, 344 (2d Cir.

1979), aff'd, 448 U.S. 122 (1980); see also Porzig v. Dresdner,

Kleinwort, Benson, N. Am., LLC, 497 F.3d 133, 143-44 (2d Cir.

2007) (also Age Discrimination in Employment Act, 29 U.S.C.

§ 626).

“ E.g., Hairston v. R & R Apartments, 510 F.2d 1090 (7th

Cir. 1975) (remanding for fee defense fees under 42 U.S.C.

§ 3612(p) (formerly cited as 42 U.S.C. § 3612(c))).

* Prandini v. Nat'l Tea Co., 585 F.2d 47, 53-54 (3d Cir.

1978) (collecting cases holding that fees for time spent on fee

applications “and successful fee appeals” may be awarded). Title

VII jurisprudence is especially persuasive because bankruptcy

courts regularly apply the reasonableness factors for a fee award

set forth in a Title VII case, Johnson v. Georgia Highway

Express, Inc., 488 F.2d 714, 717 (5th Cir. 1974); see, e.g., In re

Pilgrim’s Pride Corp., 690 F.3d 650, 656 (5th Cir. 2012) (“Follow-

ing the Bankruptcy Code’s enactment, we made clear that the

lodestar, Johnson factors, and § 330 coalesced to form the

(Continued on following page)

24

statutes,’ and many other federal statutes.” See also

Nucorp, 764 F.2d at 660 (discussing cases).

framework that regulates the compensation of professionals

employed by the bankruptcy estate.”).

” E.g., Fegley v. Higgins, 19 F.3d 1126, 1135 (6th Cir. 1994)

(Fair Labor Standards Act case, 29 U.S.C. § 216(b), noting on

remand that it would “leave it to the discretion of the district

court as to whether to increase the previous award of ._.

attorney fees” in light of the fact that the plaintiff’s attorney

“expended additional effort upon this appeal”); Pawlak v.

Greenawalt, 713 F.2d 972, 981-84 (3d Cir. 1983) (Labor-

Management Reporting and Disclosure Act, 29 U.S.C. §§ 401-

531, approving fees incurred in fee litigation from union treas-

ury for enforcing statutory rights and thereby conferring

common benefit).

* Davis v. Bd. of Sch. Comm'rs, 526 F.2d 865, 868 (5th Cir.

1976) (Emergency School Aid Act of 1972, § 718, 20 U.S.C.

§ 1617 (repealed by Pub. L. No. 95-561, Title VI, § 601(bX2), 92

Stat. 2268 (1978)); Torres v. Sachs, 69 F.R.D. 343, 348 n.5

(S.D.N.Y. 1975) (Voting Rights Act, 52 U.S.C. § 10310 (formerly

cited as 42 U.S.C. § 1973(e))); Camacho v. Bridgeport Fin., Inc.,

523 F.3d 973, 981 (9th Cir. 2008) (Fair Debt Collection Practices

Act, 15 U.S.C. § 1692k(aX3)); Ziegler Coal Co. v. Dir., Office of

Workers’ Comp. Programs, 326 F.3d 894, 903 (7th Cir. 2003)

(Longshore and Harbor Workers’ Compensation Act, § 928, 33

U.S.C. § 928); Gonter v. Hunt Valve Co., 510 F.3d 610, 620-21

(6th Cir. 2007) (False Claims Act, 31 U.S.C. §3730); Pub.

Interest Research Group of N.J., Inc. v. Windali, 51 F.3d 1179,

1190 (3d Cir. 1995) (Clean Water Act, 33 U.S.C. § 1365(d)); Auto

Alliance Int'l, Inc. v. U.S. Customs Serv., 155 Fed. App’x 226, 229

(6th Cir. 2005) (Freedom of Information Act, 5 U.S.C.

§ 552(aX4XEXi)); Saldivar v. Rodela, 894 F. Supp. 2d 916, 939

(W.D. Tex. 2012) (International Child Abduction Remedies Act,

22 U.S.C. § 9007(bX3) (formerly cited as 42 U.S.C. § 11607(bX3))):

Bd. of Trs. of Hotel & Rest. Emps. Local 25 v. JPR, Inc., 136 F.3d

794, 808 (D.C. Cir. 1998) (Employee Retirement Income Security

Act, 29 U.S.C. § 1132(gX2XD)).

25

The rationale for awarding fees for fee defenses

in these non-bankruptcy settings is consistent with

Congress’s intention that fee awards in bankruptcy

cases be at full market rates in order to attract

competent specialist professionals into the bankrupt-

cy field. Failing to award fees for fee defense requires

the applicant to bear the cost of defending its awards

from meritless objections without any further com-

pensation. “If an attorney is required to expend time

litigating his fee claim, yet may not be compensated

for that time, the attorney’s effective rate for all the

hours expended on the case will be correspondingly

decreased. Recognizing this fact, attorneys may

become wary about taking Title VII cases, civil rights

cases, or other cases for which attorneys’ fees are

statutorily authorized.”

For bankruptcy fee allowances to be truly compa-

rable to the compensation earned by lawyers billing

their private clients at fair market rates in other

commercial matters, fee applicants must be compen-

sated, not only for the incremental cost of preparing

elaborate fee applications not required in non-

bankruptcy matters, but also for the successful de-

fense of the awards in respect of such applications. In

other commercial settings, third parties have no

opportunity to object to the fees earned by the lawyer

under the lawyer’s retention agreement. The court

must compensate the bankruptcy estate professional

” Prandini, 585 F.2d at 53; see Nucorp, 764 F.2d at 661.

26

for defending a fee award to ensure truly comparable

fees.

Congress’s intention to allow full market com-

pensation for bankruptcy professionals, rather than

maintain the dysfunctional principle of economy that

imposed below-market compensation, is fully accom-

plished only when the supervising court can consider

the facts and determine in its discretion whether a

fee award for all the work in the case — including

defending a fee application — is reasonable and neces-

sary. Indeed the case for allowance of full compensa-

tion for successful fee defense is at its most

compelling when, as here, creditors were paid in full

under a hard-fought but highly successful confirmed

plan, yet a disgruntled shareholder proffered numer-

ous meritless objections to the allowance of the pro-

fessional fees that achieved that remarkably

successful result.

27

CONCLUSION

For the foregoing reasons, the judgment below

should be reversed.

Respectfully submitted,

SuSAN M. FREEMAN

Counsel of Record

NEEL S. KOTHARI

JUSTIN J. HENDERSON

LEWIS ROCA ROTHGERBER LLP

201 E. Washington Street

Suite 1200

Phoenix, Arizona 85004

(602) 262-5756

SFreeman@LRRLaw.com

Counsel for Amici Curiae