It’s always risky when the Supreme Court grants certiorari in a bankruptcy case. While the Court’s opinion may bring clarity to the narrow question upon which certiorari was granted, it often creates a host of unintended problems in other areas.
This month’s grant of certiorari to resolve the split between the Fifth and Ninth Circuits over the compensability of legal fees incurred by estate counsel in defending a fee award may present far more downside risk to bankruptcy professionals than upside potential. See In re ASARCO, L.L.C.), 751 F.3d 291 (5th Cir. 2014), cert. granted, Baker Botts L.L.P. v. ASARCO L.L.C., 2014 WL 3795992 (Oct. 2, 2014).
On the narrow question, the current strong majority view is that there is discretion to award fees for the successful defense of a fee award in an appropriate case. While the Fifth Circuit adopted a per se rule prohibiting such awards, it may have been better for bankruptcy professionals to leave that decision as the outlier than to risk its nation-wide adoption by the Supreme Court.