Baker Botts L.L.P. v. Asarco LLC




United States Supreme Court


135 S.Ct. 2158 (2015)
No. 14-103
Argued: February 25, 2015????Decided: June 15, 2015


Respondent ASARCO LLC hired petitioner law firms pursuant to ?327(a) of the Bankruptcy Code to assist it in carrying out its duties as a Chapter 11 debtor in possession. See 11 U.?S.?C. ?327(a). When ASARCO emerged from bankruptcy, the law firms filed fee applications requesting fees under ?330(a)(1), which permits bankruptcy courts to “award .?.?. reasonable compensation for actual, necessary services rendered by” ?327(a) professionals. ASARCO challenged the applications, but the Bankruptcy Court rejected ASARCO’s objections and awarded the law firms fees for time spent defending the applications. ASARCO appealed to the District Court, which held that the law firms could be awarded fees for defending their fee applications. The Fifth Circuit reversed, holding that ?330(a)(1) did not authorize fee awards for defending fee applications.

Held:?Section ?330(a)(1) does not permit bankruptcy courts to award fees to ?327(a) professionals for defending fee applications. Pp.?3-13.

(a)?The American Rule provides the “?’basic point of reference’?” for awards of attorney’s fees: “?’Each litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise.’?” Hardt v. Reliance Standard Life Ins. Co., 560 U.?S. 242, 252-253. Because the rule is deeply rooted in the common law, see, e.g., Arcambel v. Wiseman, 3 Dall. 306, this Court will not deviate from it “?’absent explicit statutory authority,’?” Buckhannon Board & Care Home, Inc. v. West Virginia Dept. of Health and Human Resources, 532 U.?S. 598, 602. Departures from the American Rule have been recognized only in “specific and explicit provisions,” Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.?S. 240, 260, usually containing language that authorizes the award of “a reasonable attorney’s fee,” “fees,” or “litigation costs,” and referring to a “prevailing party” in the context of an adversarial “action,” see generally Hardt, supra, at 253, and nn. 3-7. Pp.?3-4.

(b)?Congress did not depart from the American Rule in ?330(a)(1) for fee-defense litigation. Section 327(a) professionals are hired to serve an estate’s administrator for the benefit of the estate, and ?330(a)(1) authorizes “reasonable compensation for actual, necessary services rendered.” The word “services” ordinarily refers to “labor performed for another,” Webster’s New International Dictionary 2288. Thus, the phrase “?’reasonable compensation for services rendered’ necessarily implies loyal and disinterested service in the interest of” a client, Woods v. City Nat. Bank & Trust Co. of Chicago, 312 U.?S. 262, 268. Time spent litigating a fee application against the bankruptcy estate’s administrator cannot be fairly described as “labor performed for”–let alone “disinterested service to”–that administrator. Had Congress wished to shift the burdens of fee-defense litigation under ?330(a)(1), it could have done so, as it has done in other Bankruptcy Code provisions, e.g., ?110(i)(1)(C). Pp.?4-7.

(c)?Neither the law firms nor the United States, as amicus curiae, offers a persuasive theory for why ?330(a)(1) should override the American Rule in this context. Pp.?7-13.

(1)?The law firms’ view–that fee-defense litigation is part of the “services rendered” to the estate administrator–not only suffers from an unnatural interpretation of the term “services rendered,” but would require a particularly unusual deviation from the American Rule, as it would permit attorneys to be awarded fees for unsuccessfully defending fee applications when most fee-shifting provisions permit awards only to “a ‘prevailing party,’?” Hardt, supra, at 253. Pp.?7-8.

(2)?The Government’s argument is also unpersuasive. Its theory–that fees for fee-defense litigation must be understood as a component of the “reasonable compensation for [the underlying] services rendered” so that compensation for the “actual .?.?. services rendered” will not be diluted by unpaid time spent litigating fees–cannot be reconciled with the relevant text. Section 330(a)(1) does not authorize courts to award “reasonable compensation,” but “reasonable compensation for actual, necessary services rendered,” and the Government properly concedes that litigation in defense of a fee application is not a “service.” And ?330(a)(6), which presupposes compensation “for the preparation of a fee application,” does not suggest that time spent defending a fee application must also be compensable. Commissioner v. Jean, 496 U.?S. 154, distinguished.

The Government’s theory ultimately rests on the flawed policy argument that a “judicial exception” is needed to compensate fee-defense litigation and safeguard Congress’ aim of ensuring that talented attorneys take on bankruptcy work. But since no attorneys are entitled to such fees absent express statutory authorization, requiring bankruptcy attorneys to bear the costs of their fee-defense litigation under ?330(a)(1) creates no disincentive to bankruptcy practice. And even if this Court believed that uncompensated fee-defense litigation would fall particularly hard on the bankruptcy bar, it has no “roving authority .?.?. to allow counsel fees .?.?. whenever [it] might deem them warranted,” Alyeska Pipeline, supra, at 260. Pp.?8-13.

751 F.?3d 291, affirmed.

THOMAS, J., delivered the opinion of the Court, in which ROBERTS, C.?J., and SCALIA, KENNEDY, and ALITO, JJ., joined, and in which SOTOMAYOR, J., joined as to all but Part III-B-2. SOTOMAYOR, J., filed an opinion concurring in part and concurring in the judgment. BREYER, J., filed a dissenting opinion, in which GINSBURG and KAGAN, JJ., joined.