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

——“Sipreme Court, US.

FILED

No. 14-103 DEC 10 204

| OFFICE OF THE CLERK

Iu The

Supreme Court of the Anited States

¢

BAKER BOTTS, L.L.P., et al.,

Petitioners,

Respondent.

On Writ Of Certiorari To The

United States Court Of Appeals

For The Fifth Circuit

¢

BRIEF OF THE NATIONAL ASSOCIATION

OF CHAPTER THIRTEEN TRUSTEES AS

AMICUS CURIAE SUPPORTING PETITIONERS

®

HENRY E. HILDEBRAND, III

Chapter 13 Standing Trustee

P.O. Box 340019

Nashville, TN 37203-0019

615-244-1101

hank@ch13bna.com

Counsel for Amicus Curiae

COCKLE LEGAL BRIEFS (600) 325-4064

WWW COCKLELEGALSRIEPS COM

i

TABLE OF CONTENTS

Page

Interest of the Amicus Curiae .00............cccccecceeeseeeee 1

Summary of the Argument...............0...ccccccccecceseeee, 3

EE OR ids eR Se TCO ae 3)

I. Section 330 grants implicit authority to

award compensation for reasonable litiga-

tion of fee applications.......0..0000000..ccecceeeee 5

Il. Permitting compensation for reasonable

litigation of fee applications in bankruptcy

is consistent with the clear goals of §330... 8

III. Routine diminution of attorney’s fees

would threaten the chapter 13 bankruptcy

i iisccrntitunvniacdacccnconscsianiapsintnegicusmisdesinaiens 12

A. An effective and efficient chapter 13

bankruptcy system demands qualified

debtors’ attorneys .........0....0.cccccececcceeceeee 13

B. Resource limitations in consumer cases

necessitate high-volume practices with

low margins and low fees...................... 15

Conclusion

ii

TABLE OF AUTHORITIES

Page

CASES

Boyd v. Engman, 404 B.R. 467 (W.D. Mich.

Sire wcmseduiascidesivaseensabaededineesesceniigannitnembasseatbanedagis 10

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

Ea iinidnidlisna spouts dreneaenphenapennniatsiiseassisanabinegpusaieniies 11

In re ASARCO, L.L.C., 751 F.3d 291 (5th Cir.

SE tansutosbecapenendiasthadidnidsateentsdianseteimmeseahaiuniaans 7,16

In re Gustav Schaeter Company, 103 F.2d 237

Si CIEE III cnenideencnmisneoanennnnionsnenteninansinnimsialnaiiinddenns 2

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

I i iahtnicinnaindcnhecpunbniacupeceseegpecibananenvemmaatnieiaaannns 9

In re Smith, 317 F.3d 918 (9th Cir. 2002).................... 7

Kay v. Ehrler, 499 U.S. 432 (1991)..................:::eseseeeees y

Lamie v. U.S. Trustee, 540 U.S. 526 (2004) ................. 8

Matter of Maddox, 15 F.3d 1347 (5th Cir. 1994).......... 2

Rugiero v. Nationstar Mortg., LLC, 580 Fed. App’x

ET TIE, TIITIIED iscictriisciioeatnacinniinacsssenminecubinosonneniiies 15

CONSTITUTIONS, STATUTES AND RULES

Se IE: TD I ccarscsbinciss accspbbananaesateidadsaeresaiilécuineusasiaiiciae 6, 8

I Hic randisostaiidiiisintcbaceiacdecdaadossuetibeinan passim

Be Es: Oe I ess tecercciiaearndcnncccasecucadencainaintnnl 6, 7

ey Dia icin niccnindiiciianieesonnnnsmpentecaiion 10

an i reesei na cescrapeneileiiisindancinibieg 6

Be Rey FD seecinccensccvecssesiopecsesoveesine 5, 6, 7, 8

ill

TABLE OF AUTHORITIES - Continued

Page

Be te CE ecccesccsccserccenivevesennn 6, 7, 8, 9, 10

ec Ue AIR cincctscndaceceinabanniseivevcnatscdacadeuwceue 6,7

ek ie Oe III Pidictis idsterdacscctsaneiiptdeasiiebinsiplolianiaiieg caucus 15

ie es sncsciticovsaseecncbes sidiakaesiadimtenueeetiipiaiii 2

Bn OP I Bia hitieec a it i es 15

Br a Oe i a a I a th a 15

ee ae Oe ID cichicnidgichictudadatnibanntindiiisnedieuinasss 15

RPE Ns CIN hinnichssacdadacdiel tisdale Mibianisiicilg cashaaidaitinsnaaiad dati 1

eg 7 Dg _ : ERR perreenrener Monceem ener t are. 11

I Gai: Us CRIN ces caritaichahdettstcihid esta aati oe 1

RL OR OO I caer cuiiaccnisenteaiadadeniinaiaenanetaaataciapa ieee 1

OTHER AUTHORITIES

124 Cong. Rec. HSZ, 304 (1978) .......0.-cccseccccccsessccveseeees 9

Administrative Office of the U.S. Courts, Table

F-2: U.S. Bankruptcy Courts — Business and

Nonbusiness Cases Commenced, by Chapter

of the Bankruptcy Code, During the 12-

Month Period Ending September 30, 2014 ............ 12

Joan Feeney et al., Bankruptcy Law Manual

ies MINE Rintuincsvsecssiewtenssdamdicendednaovasedaseeabooonesederess 13

Keith M. Lundin & William H. Brown, Chapter

13 Bankruptcy (4th ed.) ................220.002- 10, 14, 15, 17

iv

TABLE OF AUTHORITIES — Continued

Page

Lois R. Lupica, The Consumer Bankruptcy Fee

Study: Final Report, 20 Am. Bankr. Inst. L.

Se ren eee 13, 14, 16, 17

National Bankruptcy Review Commission, Bank-

ruptcy: the Next Twenty Years (1997)..............00000++- 13

Timothy S. Springer, Damned If You Do,

Damned If You Don’t — Current Issues for

Professionals Seeking Compensation in Bank-

ruptcy Cases Under 11 U.S.C. § 330, 87 Am.

SNE sae EY GUNIED iventinsscactiiitnccnencensincendntnapatilonsion 9

U.S. Bankruptcy Court for the Central District

of California, Access to Justice in Crisis: Self-

Represented Parties and the Court (2011).............. 14

Elizabeth Warren, A Principled Approach to

Consumer Bankruptcy, 71 Am. Bankr. L.J.

eR cecsanescntbanccehsotncastoaienicnncmbcasdcundannienautitonats 13

Todd J. Zywicki, An Economic Analysis of the

Consumer Bankruptcy Crisis, 99 Nw. U. L.

Ne I spat atccnciciaentncemadapronnnbiaporsncetenmsanntis 16

1

INTEREST OF THE AMICUS CURIAE

The National Association of Chapter Thirteen

Trustees (“NACTT”) is a non-profit, educational or-

ganization composed of consumer bankruptcy profes-

sionals.’ Its membership represents a broad spectrum

of participants in the consumer bankruptcy process

including debtors’ attorneys, creditors’ representa-

tives, and chapter 13 standing trustees. The NACTT’s

voting membership is composed of private trustees

appointed by the U.S. Department of Justice, Execu-

tive Office of the U.S. Trustee, see 28 U.S.C. § 586,

and in the federal judicial districts of North Carolina

and Alabama by the judiciary. Approximately 98%

of the chapter 13 standing trustees in the United

States are voting members of the NACTT. Robert B.

Wilson, a Chapter 13 Standing Trustee for the North-

ern District of Texas and current president of the

NACTT, and the NACTT’s Board of Directors, have

directly authorized Henry E. Hildebrand, II, Chap-

ter 13 Standing Trustee for the Middle District of

' Pursuant to Supreme Court Rule 37.2(a), the NACTT

states that the petitioner has filed a letter with the Court grant-

ing blanket consent to the filing of amicus curiae briefs and that

the respondent has consented to the filing of this brief. Pursuant

to Supreme Court Rule 37.6, the NACTT states that no counsel

for a party authored this brief in whole or in part and that nei-

ther counsel for a party nor any party made a monetary contri-

bution intended to fund the preparation or submission of the

brief. The NACTT is a non-profit association and has used its

own resources in preparing this brief.

2

Tennessee, to prepare and submit this amicus curiae

brief on the NACTT’s behalf.

Historically, Congress and federal courts have

observed that the more efficient and effective chapter

13 programs are those conducted by chapter 13

standing trustees who exercise a broad range of re-

sponsibilities in both the design and effectuation of

chapter 13 plans. See Matter of Maddox, 15 F.3d

1347, 1355 (5th Cir. 1994). A chapter 13 trustee has a

statutory responsibility to participate in the confir-

mation and administration of every chapter 13 plan.

See 11 U.S.C. § 1302. A chapter 13 trustee, like bank-

ruptcy trustees in general, is charged with a respon-

sibility to the system and to maximize recoveries to

creditors. The trustee is empowered to assert claims,

avoid preferences and fraudulent transfers, collect

property of the estate, and examine and object to

creditors’ claims in furtherance of the congressional

goal of equitably distributing property of the estate

to holders of allowed claims. Maddox, 15 F.3d at 1355;

In re Gustav Schaeter Company, 103 F.2d 237 (6th

Cir. 1939). The trustee represents the interests of all

creditors by exercising various powers to ensure that

the collection of the debtor’s disposable income and

disbursement of that money to creditors pursuant to

a confirmed plan occurs according to the dictates of

Congress, as set forth in title 11 of the United States

Code (the “Bankruptcy Code”). Maddox, 15 F.3d at

1355.

The NACTT and its members offer an important

perspective on the issues in this case. The issues

3

before the court stem from a large business bank-

ruptcy case, but the Court’s decision may also affect

compensation in consumer bankruptcy cases, includ-

ing chapter 13 cases. The NACTT and its members

are acutely aware of the importance of qualified coun-

sel in chapter 13 cases. The complexity of the body of

law in chapter 13 cases makes attorney involvement

critical. Any threat to the viability of chapter 13 prac-

tice is, therefore, a threat to the chapter 13 system,

and because chapter 13 practice generally involves

relatively low profit margins on high case volumes,

even small] reductions in attorneys’ fees can affect

that viability.

+

SUMMARY OF THE ARGUMENT

The NACTT agrees with the petitioner that § 330

of the Bankruptcy Code permits courts to award

compensation for fees incurred for reasonable litiga-

tion of a fee application. The statute provides a broad

grant of authority subject to specific prohibitions. The

prohibitions do not apply to compensation for the

litigation of fee application, and the clear negative

implication is that the services are compensable. The

NACTT, however, also notes that the statute’s re-

strictions on compensation do not apply to the same

degree in chapter 13 cases as in other cases and urges

the Court to recognize the distinction between attor-

neys representing the petitioner and attorneys repre-

senting chapter 13 debtors if the Court affirms the

Fifth Circuit in this case.

4

The purposes of § 330 support the petitioner’s

statutory construction. An overarching goal of the

statute since the 1978 Bankruptcy Act has been to

ensure qualified professional participation in the

bankruptcy system by providing compensation com-

mensurate with the compensation for similar non-

bankruptcy-related services. The categorical denial

of fees for defending a fee application has the effect

of diluting the fees that can be obtained by bank-

ruptcy professionals, thwarting the congressional

goal of providing comparable compensation. By allow-

ing objecting parties to force a non-compensable fee

award defense, the Fifth Circuit has given such par-

ties the power to force fee applicants into a lose-lose

proposition — suffer losses from defending a fee appli-

cation or accept a fee reduction to avoid the costs.

This result is uniquely pernicious in the chapter 13

context, where the fees subject to objection by credi-

tors and others include fees for representing the

debtor’s interests.

A contextual analysis of § 330 also supports the

petitioner’s interpretation. Section 330 applies not

only in large business bankruptcy cases but also in

the consumer bankruptcy cases that represent the

large majority of filed bankruptcy cases. An efficient

and effective consumer bankruptcy system depends

on qualified debtors’ attorneys, especially in chap-

ter 13 cases. Unsurprisingly, however, the resources

available to compensate debtors’ attorneys in chapter

13 cases are limited, and providing fees to attract

qualified counsel is challenging. A viable consumer

5

bankruptcy practice generally involves a high volume

of relatively low-fee cases. The margins on these

cases are low, so any fee dilution presents a meaning-

ful threat. The reality, moreover, is that the costs of

any fee defense in chapter 13 cases are likely to be

significant in relation to the core fees simply because

of the size of the core fees.

The NACTT, therefore, urges the Court to reverse

the decision of the Court of Appeals. Even though a

chapter 13 trustee, as a party that may contest a fee

application, may be placed in a more advantageous

position under the Fifth Circuit’s holding, the NACTT

urges reversal because of the broad impact the hold-

ing has on the overall system.

»

ARGUMENT

I. Section 330 grants implicit authority to

award compensation for reasonable litiga-

tion of fee applications

The NACTT agrees with the petitioner that § 330

of the Bankruptcy Code implicitly authorizes courts

to award compensation for reasonable litigation of fee

applications. The NACTT also emphasizes, however,

that the restrictions on compensation in § 330(a)(4XA)

do not apply to the same degree in chapter 13 cases

as in other cases and urges the Court to recognize the

distinctions in any decision affirming the Fifth Cir-

cuit in this case.

6

Section 330 contains a broad grant of authority to

award “reasonable compensation for actual, necessary

services rendered” by, among others, professional per-

sons employed by a trustee under § 327. 11 U.S.C.

§ 330(a)(1). The statute provides factors for determin-

ing the amount of the reasonable compensation, 11

U.S.C. § 330(aX3), (4B), but it only categorically pro-

hibits compensation for:

(i) unnecessary duplication of services; or

(ii) services that were not —

(I) reasonably likely to benefit the

debtor’s estate; or

(II) necessary to the administration of

the case.

11 U.S.C. § 330(aX4XA). The clear negative implica-

tion of this provision is that services that are reason-

ably likely to benefit the estate or necessary to the

administration of the case are compensable. Deter-

mining the amount of compensation under § 330 is

necessary to the administration of the case, so the

costs of reasonable litigation in furtherance of that

determination are compensable under § 330.

Section 330(a)(6) is entirely consistent with this

interpretation. It provides specific guidance for de-

termining the amount of the permissible compensa-

tion for preparing a fee application without any

express grant of authority to award the fees: “Any

compensation awarded for the preparation of a fee

application shall be based on the level and skill

7

reasonably required to prepare the application.” 11

U.S.C. § 330(a)(6). The provision, therefore, confirms

that the general provisions of § 330 permit fees for

the preparation of a fee application. This conclusion

undermines the Fifth Circuit’s fundamental argu-

ment against allowing fees for the defense of a fee

application, that § 330(aX4\A) prohibits the fees

because “[t]he primary beneficiary of a professional

fee application is the professional.” Jn re

ASARCO, L.L.C., 751 F.3d 291, 299 (5th Cir. 2014).

The Fifth Circuit’s interpretation would preclude the

award of fees for the preparation of a fee application

that § 330 clearly permits.

The NACTT, however, also emphasizes the limits

of the case before the Court. Section 330(a\4\A)

applies “[ejxcept as provided in” § 330(aX4XB). 11

U.S.C. § 330(aX4XA); see also In re Smith, 317 F.3d

918, 926 (9th Cir. 2002) (“/Ejxcept for fee awards in

Chapter 12 and 13 cases, the new provision applies to

all awards of reasonable compensation.” (first em-

phasis added)). Section 330(aX4XB) provides authori-

ty to award “reasonable compensation to the debtor’s

attorney” in chapter 13 cases (and chapter 12 cases

filed by individuals) “for representing the interests of

the debtor in connection with the bankruptcy case

based on a consideration of the benefit and necessity

of such services to the debtor and the other factors set

forth in this section.” 11 U.S.C. § 330(a)(4)B). Courts

award debtors’ attorneys’ fees in chapter 13 cases

pursuant to this provision, not § 330(a)(1), which does

not authorize compensation to attorneys except

attorneys employed to represent the trustee under

8

§ 327. See Lamie v. U.S. Trustee, 540 U.S. 526, 534-35

(2004). A holding in this case, therefore, that

§ 330(aX4(A) prohibits an award of fees for the

defense of fees would not directly preclude an award

of similar fees to a debtor’s attorney in a chapter 13

case because § 330(aX4XB) limits the effect of the

restrictions in § 330(aX4\KA). Section 330(aX4XB) also

provides additional support for the award of compen-

sation for the defense of a debtor’s attorney's fees in

individual chapter 12 and chapter 13 cases. Because

the provision authorizes compensation for represent-

ing the interests of the debtor, and because the debtor

may be responsible for any fees not paid from the

estate, the debtor’s attorney may be “representing the

interests of the debtor,” 11 U.S.C. § 330(aX4\B), in

defending the core fee application.

ll. Permitting compensation for reasonable

litigation of fee applications in bankruptcy

is consistent with the clear goals of § 330

The goals of § 330 support awarding fees for rea-

sonable litigation of fee applications in bankruptcy.

As the petitioner explains in detail, § 330 represents

a clear policy departure from the “economy of the

estate” approach that existed prior to the 1978 Bank-

ruptcy Act, which required attorneys in bankruptcy

cases to accept less in bankruptcy cases than they

would receive for similar services in other fields.

Section 330, instead, aims “to ensure competent rep-

resentation of debtors by requiring compensation of

‘attorneys and other professionals serving in a case

9

under Title 11 at the same rate as the attorney or

other professional would be compensated for perform-

ing comparable services’ in non-bankruptcy cases.”

In re Nucorp Energy, Inc., 764 F.2d 655, 658 (9th

Cir. 1985) (quoting 124 Cong. Rec. H32, 394 (1978)).

See generally Timothy S. Springer, Damned If You

Do, Damned If You Don’t —- Current Issues for Pro-

fessionals Seeking Compensation in Bankruptcy

Cases Under 11 U.S.C. § 330, 87 Am. Bankr. L.J. 525,

529 (2013). Especially with respect to § 330(aX4 XB),

which authorizes compensation for attorneys repre-

senting the interests of individual chapter 12 and

chapter 13 debtors, the goals of the statute are also

similar to the goals of fee-shifting provisions in con-

sumer protection and civil rights statutes — to ad-

dress concerns that the cost of counsel would prevent

important access to the court system. See, e.g., Kay

v. Ehrler, 499 U.S. 432, 436 (1991) (“Although [42

U.S.C. § 1988] was no doubt intended to encourage

litigation protecting civil rights, it is also true that its

more specific purpose was to enable potential plain-

tiffs to obtain the assistance of competent counsel in

vindicating their rights.”).

The compensation process under § 330 is a pro-

cess that has no direct counterpart in non-bankruptcy

law. Categorically denying compensation for the fees

incurred in this bankruptcy-specific process would

dilute bankruptcy fees relative to non-bankruptcy

fees. The fees for litigating a fee application are not

analogous to the fees a non-bankruptcy professional

would incur in suing a client that refused to pay a

10

bill. A lawsuit to collect a billed amount is a suit to

enforce an existing contract. The court's role in this

process is primarily to determine the terms of the

contract and the parties’ performance under the

terms. A court reviewing a fee application, in con-

trast, has the discretion to adjust compensation based

on issues that the parties decide non-judicially in the

non-bankruptcy context, issues like the reasonable-

ness of the compensation and whether the services

involved are beneficial or necessary. See 11 U.S.C.

§ 330(aX1)(A), (4B).

Denying compensation for the reasonable fees of

litigating a fee application provides objecting parties

undue leverage. It “would allow a litigious objecting

party to negotiate unwarranted reductions in a fee

award simply because the attorney is faced with a no

win situation: even if the attorney fights the objection

and prevails, the time and resources spent on the

issue often will outweigh the value of the amount in

dispute.” Boyd v. Engman, 404 B.R. 467, 483 (W.D.

Mich. 2009). Chapter 13 cases present 4 unique

concern because § 330(aX4)(B) permits a debtor’s at-

torney to receive fees from the estate for representing

the debtor’s interests (in litigation over exemptions or

dischargeability, for example). See Keith M. Lundin

& William H. Brown, Chapter 13 Bankruptcy § 294.1,

at 94 9-10 (4th ed., sec. rev. June 17, 2004), www.

Ch13online.com. Providing creditors in chapter 13

cases a unilateral ability to impose fee reductions

on debtors’ attorneys would present a destabilizing

threat to the attorneys’ independence.

11

The approach of permitting courts to award fees

for the reasonable costs of litigating fee applications,

the approach implicit in § 330, presents less oppor-

tunity for abuse and gamesmanship than the alterna-

tive. Any compensation ultimately awarded for fees

incurred in litigating a fee application is subject to

scrutiny by interested parties and court review. As

with the process this Court considered in Commis-

stoner, INS v. Jean, “no award of fees is ‘automatic’”

under § 330. 496 U.S. 154, 163 (1990). The § 330

process, therefore, does not create a meaningful in-

centive to make unreasonable fee requests — the costs

of unreasonable or unnecessary litigation of fee appli-

cations are not compensable under any theory. The

alternative approach involves much less oversight. If

the costs of litigating fee applications were categori-

cally non-compensable, then the only check on co-

ercive practices by objecting parties would be Rule

9011 of the Federal Rules of Bankruptcy Procedure

and the courts’ inherent authority to shift fees when a

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

for oppressive reasons. These protections are likely

to be under-inclusive. They place the burden on the

party or the court asserting misconduct, and the pro-

tections involve substantial uncertainty. Objecting

parties subject to these restrictions alone would al-

most certainly retain undue leverage in the signif-

icant gray area surrounding these extraordinary

sanctions. Further, the protections apply under either

approach. Even if permitting compensation for the

costs of reasonable fee litigation did create an oppor-

tunity for abuse, courts would have the same ability

12

to address the behavior under these powers as they

would have to address abuses by fee objectors.

Ill. Routine diminution of attorney’s fees would

threaten the chapter 13 bankruptcy system

Large business bankruptcy cases, like the case

that gives rise to the issues before the Court, repre-

sent only a small percentage of bankruptcy filings,”

and the economics of consumer bankruptcy cases are

substantially different than the economics of large

business bankruptcy cases. The NACTT urges the

Court to interpret § 330 with a recognition of the

consumer cases that make up the vast majority of

bankruptcy filings.

In the chapter 13 cases that the NACTT member

trustees administer, attorney’s fees never approach

the scale of the fees in this case, but the fees are

equally important. Qualified attorneys are vital to

the chapter 13 system. The chapter 13 process is

* Cases involving primarily consumer debts far outnumber

all cases involving primarily business debts, large and small.

For the 12-month period ending September 30, 2014, the Ad-

ministrative Office of the U.S. Courts reports a total of 935,420

non-business bankruptcy filings (including 623,349 under chap-

ter 7; 1,154 under chapter 11; and 310,914 under chapter 13),

compared to only 28,319 business filings. See Administrative

Office of the U.S. Courts, Table F-2: U.S. Bankruptcy Courts -

Business and Nonbusiness Cases Commenced, by Chapter of the

Bankruptcy Code, During the 12-Month Period Ending Sep-

tember 30, 2014, available at http://www.uscourts.gov/Statistics/

BankruptcyStatistics/2014-bankruptcy-filings. aspx.

13

extremely difficult to navigate without the assistance

of an experienced attorney, and the system functions

properly only with the participation of specialized

attorneys. The limitations on the funds available to

compensate attorneys in these cases, however, al-

ready strain the system. Any shift that categorically

reduces the fees actually earned by competent coun-

sel presents a threat.

A. An effective and efficient chapter 13

bankruptcy system demands qualified

debtors’ attorneys

Consumer bankruptcy represents a surprisingly

complex area of law. The National Bankruptcy Re-

view Commission concluded in 1997 that “[nJo area

of bankruptcy law is more complex than consumer

bankruptcy.” National Bankruptcy Review Commis-

sion, Bankruptcy: the Next Twenty Years 79 (1997),

quoted in Lois R. Lupica, The Consumer Bankruptcy

Fee Study: Final Report, 20 Am. Bankr. Inst. L. Rev.

17, 32 (2012) [hereinafter Consumer Bankruptcy Fee

Study}; see also Elizabeth Warren, A Principled

Approach to Consumer Bankruptcy, 71 Am. Bankr.

L.J. 483, 494-95 (1997) (“A strong case could be made

that the consumer bankruptcy system has out-

stripped the business bankruptcy system in twists,

turns, and complications.”). Chapter 13 cases are

among the most challenging consumer bankruptcy

cases. See, e.g., Joan Feeney et al., Bankruptcy Law

Manual § 13.5 (5th ed. 2014). The amendments to the

Bankruptcy Code in the Bankruptcy Abuse Prevention

14

and Consumer Protection Act of 2005 (“BAPCPA”)

only added to this complexity. See, e.g., Lundin & Brown,

supra, § 387.1, at 4 1 (sec. rev. July 3, 2007) (describ-

ing the “many new duties” BAPCPA imposed on Chap-

ter 13 debtors, “including many new and changed

filing requirements,” and noting that some of the new

requirements “were scattered to various chapters and

sections, not always with any obvious logic”).

A competent, compensated attorney to represent

the debtor is a necessity in a chapter 13 case. Success

rates for unrepresented debtors in chapter 13 cases

are dismal. See U.S. Bankruptcy Court for the Cen-

tral District of California, Access to Justice in Crisis:

Self-Represented Parties and the Court 5 (2011) (“The

number of self-represented debtors that manage to

get to confirmation of a chapter 13 plan is 0.4 percent

~— clearly demonstrating that it is nearly impossible

for this population to succeed in chapter 13.”), availa-

ble at http-//ecf-ciao.cacb.uscourts.gov/Communications/

prose/annualreport/2011/sectioniib.htm; see also Con-

sumer Bankruptcy Fee Study, supra, at 81 (reporting

that only “0.8% of all chapter 13 cases filed post-

BAPCPA that ended with the debtor receiving a

discharge were filed pro se”). Effective debtors’ attor-

neys benefit not only the debtors, but the entire

system; unrepresented parties severely slow down a

process that demands efficiency. See Lundin &

Brown, supra, § 93.1, at 7 1 (sec. rev. May 74, 2004)

(“Pro se Chapter 13 cases are almost always a night-

mare for creditors, for the trustee and for the court.”).

15

Chapter 13 cases frequently involve litigation

or professional services at various points throughout

the case. In many instances, the debtors (or the

estate, see, e.g., Rugiero v. Nationstar Mortg., LLC,

580 Fed. App’x 376, 378 (6th Cir. 2014)) need repre-

sentation in non-bankruptcy matters. The chapter 13

estate includes not only any cause of action or lawsuit

held by the debtor at filing, see 11 U.S.C. § 541(a\1),

but also any such interests acquired during the case,

see 11 U.S.C. § 1306(aX1). The length of chapter 13

cases — generally between three and five years, see

il U.S.C. §§ 1322(d), 1325(b)(4) — means that the

court approval of compensation under § 330 affects

the availability of counsel and professionals for many

related matters. Successful resolution of these mat-

ters often benefits not only the debtors but their

estates. The possibility of systemic dilution of the

fees for these services presents 9 threat to the avail-

ability of qualified counsel and professionals.

B. Resource limitations in consumer cases

necessitate high-volume practices with

low margins and low fees

Despite the complexity of chapter 13 practice,

attorneys’ fees in chapter 13 cases are generally

“modest.” Lundin & Brown, supra, § 24.1, at J 2 (sec.

rev. Mar. 30, 2009). Debtors have limited funds to

commit to payment of attorneys, and even the award-

ed fees are subject to the “unspoken truth that debt-

ors’ attorneys rarely collect 100 percent of their

fees in Chapter 13 cases.” Lundin & Brown, supra,

16

§ 294.1, at 9 25 (sec. rev. June 17, 2004). The de-

mands create a pull toward the bankruptcy “mill’

model that overemphasizes case volume over quality

of representation. See Todd J. Zywicki, An Economic

Analysis of the Consumer Bankruptcy Crisis, 99 Nw.

U. L. Rev. 1463, 1531 (2005). Even for the best con-

sumer bankruptcy attorneys, however, efficiency in

case management is critical. See Consumer Bank-

ruptcy Fee Study, supra, at 122 (“Efficiency coupled

with a high level of skill, while important in every

area of law practice, is crucial to the success of a

consumer bankruptcy practice.”). The nature of this

practice requires relatively high case volumes com-

bined with relatively low fees and low per-case profit

margins.

The court below analyzed § 330 primarily through

the lens of the large chapter 11 case before it. The

court dismissed concerns about fee dilution by noting

that the defense fees in the case, though large in

absolute terms, amounted to only about 4.4% of the

core fees. In re ASARCO, L.L.C., 751 F.3d at 301. In

the relatively low-margin consumer bankruptcy con-

text, however, even small percentage reductions in

gross revenues can have a significant effect on profit-

ability. In the consumer bankruptcy context, more-

over, the absolute fee amounts are much smaller.

With typical fee requests measured in thousands,

not millions, of dollars,’ the costs of litigating a fee

* The Consumer Bankruptcy Fee Study found that the av-

erage attorney’s fees in post-BAPCPA chapter 13 cases were

(Continued on following page)

17

dispute in connection with a consumer bankruptcy

case are very likely to represent a much larger per-

centage of the core fee than the 4.4% in this case.

Consumer bankruptcy attorneys are also likely to

be especially affected by fee dilution. Because of the

efficiency required in a complex area of law, the con-

sumer bankruptcy practice, especially chapter 13 prac-

tice, demands specialization. See Lundin & Brown,

supra, § 294.1, at 924 (sec. rev. Jume 17, 2004)

(“Some of the best Chapter 13 debtors’ attorneys

operate computerized offices with specialized para-

legals who manage a large volume of Chapter 13

cases very efficiently.”). Further, many consumer bank-

ruptcy attorneys work in offices that focus narrowly

on consumer bankruptcy cases. See, e.g., Consumer

Bankruptcy Fee Study at 93. For these attorneys, a

reduction in fees from bankruptcy cases largely

translates into a reduction in their total income. The

result is that fee dilution harms the very practices

that the system needs most — practices that make the

investment necessary to specialize in consumer bank-

ruptcy.

$1,491 in dismissed cases and $2,564 in cases that resulted in

a discharge. Lois R. Lupica, The Consumer Bankruptcy Fee

Study: Final Report, 20 Am. Bankr. Inst. L. Rev. 17, 56-57 (2012)

18

CONCLUSION

For the foregoing reasons, the NACTT requests

that the Court reverse the decision of the Court of

Appeals.

Respectfully submitted,

HENRY E. HILDEBRAND, III

Chapter 13 Standing Trustee

P.O. Box 340019

Nashville, TN 37203-0019

615-244-1101

hank@ch13bna.com

Counsel for Amicus Curiae