Baker Botts, LLP v. ASARCO, LLC (2014)
- Docket
- 14-103
- Decided
- 2014-01-01
Summary
Question: Does the Bankruptcy Code allow a firm to be awarded damages for defending a challenge to a fee request? Conclusion: No. Justice Clarence Thomas delivered the opinion of the 6-3 majority. The Court held that the American rule of attorney fee structure—that each litigant pays for his own attorney’s fees—can only be altered through an explicit statutory provision. The Bankruptcy Code does not explicitly depart from this rule; instead it allows for “reasonable compensation” for services rendered, which cannot be properly construed as including litigation regarding a contested fee request. Additionally, the established policy that, absent express statutory language, no attorneys receive compensation for costs incurred litigating fee challenges means that this reading of the statute creates no unfairness in the profession. Therefore, the American rule should still be assumed in force in cases such as this one. In her opinion concurring in part and concurring in the judgment, Justice Sonia Sotomayor wrote that, because the statutory language is clear in this case, the majority opinion should not have considered the policy argument. Justice Stephen G. Breyer wrote a dissenting opinion in which he argued that the Bankruptcy Code grants courts a great deal of discretion in determining how to award “reasonable compensation” for services rendered, and therefore the courts can consider situations such as the costs of fee-related litigation in making such a determination. Because the costs of litigating fee challenges can be so high, factoring those costs into fee determinations can be the only way to ensure that the compensation is “reasonable” as the Bankruptcy Code requires. The American rule can only remain in force if not overridden by statute, and the Bankruptcy Code provides a sufficient statutory exception. Justice Ruth Bader Ginsburg and Justice Elena Kagan joined in the dissent.