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High court weighs dispute over $5 million law firm spent defending its $120-million bill

Charlotte Bankruptcy Lawyer Bryan W. Stone of Arnold & Smith, PLLC answers the question “Do I need an attorney to file bankruptcy?”

 

Thought your legal bills were high? Copper-mining company Ascaro LLC has litigated its $5 million legal tab with law firm Baker Botts all the way to the United States Supreme Court. The high court will decide if and how much Ascaro has to pay.

Dollar signs Mecklenburg Debt Lawyer Charlotte Chapter 7 AttorneyThe dispute between Ascaro and Baker Botts, at its essence, is about whether Baker Botts can be compensated for defending its own fees.

Bankruptcy courts have the final say on how much advisers called in to work out financial restructuring details in a bankruptcy case get paid. Since the money used to pay advisers could be used to pay creditors, anyone—including debtors and creditors—can challenge fee awards.

Baker Botts represented Ascaro in what the Wall Street Journal called a “contentious Chapter 11 case” that ended with a $6 million judgment against Ascaro for improperly transferring a high-value asset to a parent company shortly before it declared bankruptcy. After the judgment, Ascaro agreed to pay its creditors in full.

Baker Botts was paid an astonishing $113 million in legal fees and another $6 million in expenses. Its relationship with Ascaro went south when the law firm sued Ascaro’s parent company seeking to set aside the aforementioned asset transfer. After that, Ascaro made “an onslaught of fee objections,” according to the Journal, attacking “everything” in Baker Botts’ bills from “time-entry descriptions” to “task codes in invoices, staffing choices, and the necessity and quality of various legal services.”

Baker Botts said it incurred $5 million in fees for time spent defending other fees it charged Ascaro during the company’s bankruptcy. All of Ascaro’s objections were overruled by a United States District Court judge.

Ascaro appealed, and the Fifth Circuit Court of Appeals reversed, ruling in the company’s favor. The appellate court agreed with Ascaro that Baker Botts’ defense of its own fees was not technically a “service” for which Ascaro had to pay.

Baker Botts appealed, arguing that it should not have to absorb the cost of defending its bills. Experts interviewed by the Wall Street Journal said the issue is not lawyers’ greed but is instead “about protecting law firms from a tidal wave of frivolous fee objections.” Bankruptcy insiders worry that if Ascaro is able to escape Baker Botts’ $5-million tab, it will encourage debtors and creditors in other bankruptcy actions to use litigation of fee issues as leverage in disputes that arise in the context of a bankruptcy proceeding.

During oral argument in the case on Feb. 25, Justice Elena Kagan asked Ascaro’s appellate counsel to explain why “the cost of getting paid” should not be part of Ascaro’s bill. If a person agreed to shovel the snow from someone’s driveway for $10, for instance, but had to spend $5 to travel to the person’s driveway, the “reasonable compensation” would be $15, Justice Kagan said.

“And it’s the exact same thing here,” she added. “It’s like by the time you go through all this stuff that you have to go through to get paid, you should get paid more.”

A decision in the case is expected this summer.

If you find yourself needing the services of an experienced Charlotte, North Carolina bankruptcy attorney, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with the best advice for your particular situation.

 

 

About the Author

Bryan 1Bryan Stone is a Partner with Arnold & Smith, PLLC, where he focuses his practice on all aspects of bankruptcy, including: Chapter 7, Chapter 11, Chapter 13, home loan modifications and landlord-tenant issues.

A native of Macon, Georgia, Mr. Stone attended the University of Georgia, where he earned a BBA in Banking and Finance, and Wake Forest University School of Law, where he obtained his law degree.

Following law school, Mr. Stone relocated to Charlotte, where he currently serves as Chair of “Bravo!” – a young professionals organization associated with Opera Carolina – and founded the University of Georgia Alumni Association of Charlotte.

In his spare time, Mr. Stone enjoys perfecting his barbeque skills for the annual “Q-City BBQ Championship” and playing softball in the Mecklenburg County Bar softball league.

 

 

Sources:

http://www.wsj.com/articles/u-s-supreme-court-hears-bankruptcy-lawyers-billing-dispute-1424905043

 

 

Image Credit:

“Dollar symbol” by Svilen.milev – Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons – http://commons.wikimedia.org/wiki/File:Dollar_symbol.jpg#/media/File:Dollar_symbol.jpg

 

 

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