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Vol 14, Num 2 l July 2016

Ethics and Professional Compensation

► In This Issue:

In re Jones Challenges Sanctions Ordered Under Bankruptcy Rule 9011

ABI

Marta Alfonso
Morrison, Brown, Argiz
& Farra, LLC
Miami

In Hoover v. Harger (In re Jones), the Bankruptcy Appellate Panel for the Sixth Circuit considered an appeal from an attorney who was sanctioned sua sponte by the Northern District of Ohio’s bankruptcy court and ordered to pay opposing counsel’s attorney fees. The appellant alleged that the bankruptcy court had abused its discretion in imposing sanctions based on erroneous factual findings.

By way of background, the appellant represented two plaintiffs in a state court action seeking damages for a defendant for intentional infliction of emotional distress, civil conspiracy and malicious prosecution. Well into the state court action, the defendant filed for personal bankruptcy protection. In response, the appellant sought relief from the automatic stay to continue the state court proceedings and filed an adversary proceeding seeking the denial of the defendant-debtor’s discharge pursuant to 11 U.S.C. §§ 727(a)(3), 727(a)(4)(A) and 523(a)(6) based on the claims raised in the state court case. The defendant-debtor responded by asserting counterclaims alleging abuse of process with a purpose of harassment. Eventually, the appellant’s clients, the plaintiffs, withdrew their motion for relief from the automatic stay and moved to dismiss the adversary proceeding.
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Professional Fees: Under Increased and Continuing Scrutiny

ABI

Joanne Lau
Stroock & Stroock & Lavan LLP
New York

Professional fees are increasingly a hot-button issue in bankruptcy cases. This article examines three recent ongoing, high-profile bankruptcy cases that reflect the growing scrutiny of professional fees: Caesars Entertainment Operating Co. Inc., et al., SunEdison Inc., et al. and Sabine Oil & Gas Corp., et al.

Section 330 of the Bankruptcy Code provides, in relevant part, that estate professionals may be awarded “reasonable compensation for actual, necessary services rendered” and &ldreimbursement for actual, necessary expenses.” When determining whether the requested compensation is reasonable, the court may take into account many factors, including “the rates charged for such services” and “whether the compensation is reasonable based on the customary compensation charged by comparably skilled practitioners in cases other than [bankruptcy cases].” Although controversial, courts have long held that rates for restructuring professionals should not be higher than those for nonbankruptcy professionals, and this argument has been raised by those analyzing fee applications.
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