Lamie v. United States Trustee

PETITIONER: John M. Lamie
RESPONDENT: United States Trustee
LOCATION: Elk Grove Unified School District

DOCKET NO.: 02-693
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Fourth Circuit

CITATION: 540 US 526 (2004)
GRANTED: Mar 10, 2003
ARGUED: Nov 10, 2003
DECIDED: Jan 26, 2004

ADVOCATES:
Lisa Schiavo Blatt -
Lisa S. Blatt - argued the cause for Respondent
Thomas C. Goldstein - argued the cause for Petitioner

Facts of the case

In the Bankruptcy Reform Act of 1994 Congress created a list of people that corporations could pay while going through Chapter 7 bankruptcy proceedings. The bankruptcy attorney for the corporation was not included in that list. John Lamie, a bankruptcy attorney, challenged the law, arguing that the omission of bankruptcy attorneys from the list was accidental. The bankruptcy court that heard the case ruled that the omission was not inadvertent. Nevertheless, it awarded Lamie the fees in question because money intended to pay them had been set aside in a retainer before the corporation entered Chapter 7 proceedings. A Fourth Circuit Court of Appeals panel reversed the decision to pay Lamie, holding that the retainer was not separate from the corporation's other funds. On the issue of whether the omission of the bankruptcy attorney from the list of acceptable payees, the panel affirmed the lower court's decision.

Question

Did Congress intend to omit bankruptcy attorneys from the list of people a corporation could pay during Chapter 7 bankruptcy proceedings?

Media for Lamie v. United States Trustee

Audio Transcription for Oral Argument - November 10, 2003 in Lamie v. United States Trustee

Audio Transcription for Opinion Announcement - January 26, 2004 in Lamie v. United States Trustee

William H. Rehnquist:

The opinion of the Court in No. 02-693, Lamie versus United States will be announced by Justice Kennedy.

Anthony M. Kennedy:

The petitioner, in this case John Lamie, is a bankruptcy attorney, and the case considers whether a petitioner is entitled to attorney’s fees for work he did on behalf of a bankrupt debtor.

The bankruptcy case for the petitioner’s client began as a reorganization proceeding under Chapter 11.

The client as debtor in possession retained the petitioner as its attorney in the matter.

No one disputes the petitioner is entitled the fees for the work he did in the connection with this Chapter 11 reorganization proceeding.

But in bankruptcy, proceedings can change form one Chapter to another, and that happened here.

The Chapter 11 case was then converted to a Chapter 7 liquidation proceeding.

After the conversion, the petitioner continued to provide services to the debtor facilitating the liquidation proceedings.

A Chapter 7 bankruptcy trustees, who have responsibility for preserving the bankruptcy estate, did not employ the petitioner to do the work however.

This case considers whether the petitioner is entitled to attorney's fees for this later work, the fees to be paid from the chapter 7 bankruptcy estate.

The outcome depends on an interpretation of Section 330(a)(1) of the Bankruptcy Code, and because it is detailed and textual, those who are interested will have to refer to the opinion to see the precise analysis if the Court follows.

Suffusive to say that the Courts of Appeals have divided over the proper interpretation of this Section, and a conflict arises because the Section is awkward and ungrammatical in its wording and its structure.

The courts that have allowed fees in these circumstances begin by saying that this makes the statute ambiguous.

The earlier statute had allowed fees in these circumstances and these courts say that the legislative history showed there was no intent to alter the law in this respect.

Now, we disagree with this result and agree instead with the courts that find that the statute is unambiguous.

The statute is indeed awkward and ungrammatical in part because it contains a surplus word, but where there are two ways to read a statute: to find the statute plain even though it has a surplus word or to disregard the surplus word and treat the statute as ambiguous, the rule against interpreting the statute to contain a surplus word is inappropriate absent other indications.

Here, the statute awkward and ungrammatical but it may be still provide us clear direction, and that direction is to deny this where the attorney has not been employed by the trustee and approved by the court, and we find it instructive furthermore that the legislative history creates more confusion than clarity about congressional intent.

The judgment of the Court of Appeals with the Fourth Circuit is affirmed.

Justice Scalia joins all but part three of the opinion; Justice Stevens concurs in the judgment; Justices Souter and Breyer are joining the opinion for the Court and also join Justice Stevens.