Baker Botts, LLP v. ASARCO, LLC

PETITIONER: Baker Botts, LLP
RESPONDENT: ASARCO, LLC
LOCATION: U.S. Court of Appeals for The Fifth Circuit

DOCKET NO.: 14-103
DECIDED BY: Roberts Court (2010-2016)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 576 US (2015)
GRANTED: Oct 02, 2014
ARGUED: Feb 25, 2015
DECIDED: Jun 15, 2015

ADVOCATES:
Brian H. Fletcher - Assistant to the Solicitor General, Department of Justice, for the United States as amicus curiae, for the petitioner
Aaron M. Streett - for the petitioner
Jeffrey L. Oldham - for the respondent

Facts of the case

Baker Botts, LLP, along with Jordan, Hyden, Womber, Culbreth & Holzer, PC, was awarded about $120 million in fees for representing Asarco, LLC in its Chapter 11 bankruptcy case, from which Asarco had emerged in 2009 with a reorganization plan that would pay its creditors in full. Baker Botts then filed for a final fee request, which Asarco contested. The bankruptcy court awarded Baker Botts more than $117 million to cover the fees in addition to $5 million for expenses incurred defending the fee claims. The district court affirmed. The U.S. Court of Appeals for the Fifth Circuit held that the Bankruptcy Code did not allow the firms to recover $5 million spent defending the fee request against Asarco's opposition.

Question

Does the Bankruptcy Code allow a firm to be awarded damages for defending a challenge to a fee request?

Media for Baker Botts, LLP v. ASARCO, LLC

Audio Transcription for Oral Argument - February 25, 2015 in Baker Botts, LLP v. ASARCO, LLC

Audio Transcription for Opinion Announcement - June 15, 2015 in Baker Botts, LLP v. ASARCO, LLC

John G. Roberts, Jr.:

Justice Thomas has our opinion in Case 14-103, Baker Botts v. ASARCO.

Clarence Thomas:

This case comes to us on a writ of certiorari to the United States Court of Appeals for the Fifth Circuit.

In 2005, respondent ASARCO LLC, copper mining company, filed for Chapter 11 Bankruptcy. As in many Chapter 11 Bankruptcies no trustee was appointed and ASARCO, the debtor-in-possession, administered the bankruptcy estate.

ASARCO got the bankruptcy court's permission to hire two law firms, petitioners here, to assist in carrying out its duties of administering the estate.

After ASARCO emerged from bankruptcy, those firms filed fee applications seeking compensation for their work.

ASARCO challenged the request, but the Bankruptcy Court overruled their objections and awarded the firm's attorney's fees for their work in the bankruptcy proceedings.

It also awarded them fees for time spent litigating in defense of their fee applications.

The District Court affirmed the defense award.

But the Fifth Circuit reversed concluding that the Bankruptcy Code does not allow courts to award fees for time spent defending fee applications.

In an opinion filed with the clerk today we affirm the judgment of the Fifth Circuit.

Under what is known as the American Rule each side pays its own attorney's fees.

That rule applies unless a statute explicitly says otherwise.

And here the relevant statute, Section 330(a)(1) of the Bankruptcy Code, does not expressly deviate from the American Rule with respect to fee defense litigation.

Section 330(a)(1) allows courts to award “reasonable compensation for actual, necessary services rendered”.

The word services refers to labor performed for another, and time spent litigating a fee application against the administrator of a bankruptcy estate cannot fairly be described as labor performed for that administrator.

Section 330(a)(1) thus does not depart from the American Rule with respect to fee defense litigation.

For these reasons and others set forth in our opinion, we affirm the judgment of the Fifth Circuit.

Justice Sotomayor has filed an opinion concurring in part and concurring in the judgment.

Justice Breyer has filed a dissenting opinion, in which Justices Ginsburg and Kagan have joined.