Indemnification And Fee Premium Provisions Did Not Surmount ASARCO.
In Baker Botts L.L.P. v. ASARCO, Inc., 135 S. Ct. 2158, 2169 (2015) [discussed in our June 19, 2015 post], SCOTUS held that bankruptcy estate counsel cannot obtain fee recovery for defending the propriety of their fee applications under 11 U.S.C. § 330. Although two firms recently took a stab at structuring around ASARCO, two Delaware bankruptcy judges rejected the attempts to do so.
Counsel for the Committee of Unsecured Creditors (Committee Counsel) inserted a provision in its retention agreement with the Committee that it was entitled to indemnification from the bankruptcy estates in the event Committee Counsel incurred costs, expenses, and fees to defend its fee applications before the bankruptcy court. Although arguing that fee recovery was sought under 11 U.S.C. § 328(a) rather than § 330 and that the recovery fell within a contractual exception to the fee prohibitions, the bankruptcy judge in In re Boomerang Tube, Inc., Case No. 15-11247 (Bankr. D. Del. Jan. 29, 2016) did not buy that these distinctions surmounted ASARCO, given that § 328(a) has no express provision of fees in this context and that the contract was between Committee and Committee Counsel (with the bankruptcy estate being a nonsignatory to it).
Baker Botts tried again, after ASARCO, to gain fee entitlement for “fees on fees” defense work by structuring a provision in its retention that allowed for a 10% Fee Premium with respect to aggregate fees, a Fee Premium which would be waived if BB did not incur material fees and expenses from defending its fee applications. The bankruptcy judge in In re New Gulf Resources LLC, Case No. 15-12566 (BLS) (Docket Nos. 228 & 334, Feb./Mar. 2016) found that this creative arrangement still ran afoul of ASARCO’s reasoning.
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