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(3) Fee of $34,473 requested by attorneys for unsecured creditors' committee for time spent in preparing fee applications was excessive. (4) Final fee application of law firm whose representation of Chapter 11 trustee had produced a confirmed plan only about eight months after trustee was appointed, as well as an anticipated dividend to creditors of from 24% to 61%, well above that anticipated at time of plan confirmation, would be allowed as filed, notwithstanding that law firm's hourly rates were significantly higher than rates charged by the largest firms in judicial division where court sat. Firm's rates were in keeping with those of other Texas firms in larger markets such as Dallas in which law firm was based, and fees requested reflected services which were reasonable and necessary in complicated Chapter 11 case such as debtor's, and which conferred material benefit on estate. (5) Fee of $326,145 requested by Chapter 11 trustee, based not on percentage of amounts distributed under plan but under "lodestar" method advocated by objecting parties, would be allowed, notwithstanding trustee's failure to atomistically describe in fee application how each service that he performed benefited estate. Trustee's services were necessary at time they were performed and benefited estate by resulting in confirmation of plan only about eight months after trustee was appointed, as well as in anticipated dividend to creditors well in excess of that anticipated at time of plan confirmation.; and (6) Fees of more than $900,000 requested by financial advisor to trustee in complicated Chapter 11 case would be approved, where financial advisor's work had laid ground-work for plan that was presented to and approved by court roughly eight months after trustee was appointed, and most creditors had praised financial advisor's work. (7) Fact that there was some overlap in services provided by different law firms representing Chapter 11 trustee did not automatically require disallowance of fees for such services, where services were generally helpful to effect a confirmed plan.
xii. In re Mitchell, 498 B.R. 213 (Bankr. E.D. N.C. 2013)
Issue: Law firm that had represented individual Chapter 11 debtor-in-possession for several months, prior to being disqualified for undisclosed conflict of interest, filed application for allowance of administrative expense claim for value of legal services that it provided prior to being disqualified.
Holdings: The Bankruptcy Court, A. Thomas Small, J., held that: (1) Bankruptcy statute dealing with limitations on compensation of professionals employed by estate spoke of professionals "employed," not "validly employed." Statute's use of permissive verb "may," in authorizing court to deny compensation to professionals who are not disinterested or suffer from adverse interest, signaled that decision whether to deny compensation was committed to court's discretion. (2) Court would exercise discretion that it possessed to deny any compensation to experienced law firm that, despite being aware of fact that it was currently representing individual with 50% interest in entity to which debtor transferred her real property prepetition, had failed to disclose this conflict in seeking employment as debtor's counsel.
©2014 William L. Norton III
