Bloomberg Law’s® Bankruptcy Law News publishes case summaries of the most recent important bankruptcy law decisions, tracks major commercial bankruptcies, and reports on developments in bankruptcy...
Sept. 23 — Bankruptcy professionals have “mixed perspectives” on the value of attorneys' fee guidelines for large (assets and liabilities of over $50 million) Chapter 11 cases, according to a Government Accountability Office report released Sept. 23.
The U.S. Trustee Program (USTP), which created the guidelines in 2013 to address concerns of excessively high attorneys' fees in big cases, issued a response to the report in which it addressed some criticisms of the guidelines.
Director of the USTP Clifford J. White said in his Sept. 3 statement that some bankruptcy professionals “continue to misunderstand certain aspects of the [guidelines]” and that some of the criticisms “go beyond the purpose of the [g]uidelines and reflect general frustration about the nature of the bankruptcy process and the high cost of [C]hapter 11 case administration.”
The GAO report said there were generally few problems complying with the guidelines in the 94 large cases filed since the guidelines went into effect. But the GAO found that “[b]ankruptcy stakeholders had mixed perspectives of the overall value of the guidelines and of their potential effect on the efficiency and transparency of the Chapter 11 bankruptcy process, or the fees awarded.”
“For example,” the GAO said, “stakeholders with a positive view said the budgeting provision encourages early communication in a case, while those with a negative view said that the unpredictability of bankruptcy cases limit the value of a budget.”
White noted in his statement that the “GAO also correctly acknowledge[d] that the recency of the promulgation of the [guidelines] and their application to fewer than 100 cases reviewed in the report makes definitive conclusions both difficult and premature.
White also made three general observations about the report: 1) “[i]nitial opposition to the guidelines by bankruptcy attorneys appears to be yielding to compliance and improved billing practices[;]” 2) “[t]he USTP should continue its outreach to explain the guidelines to the bankruptcy community[;]” and 3) “[t]he guidelines address matters relating to professional compensation and cannot be expanded to address other legitimate concerns parties may have with the [C]hapter 11 process.”
The report also addressed venue selection and noted that “[a]pproximately 61 percent of large Chapter 11 bankruptcy cases filed since October 2009 were filed in two jurisdictions–the Southern District of New York (SDNY) and the District of Delaware (Delaware).” The GAO said this concentration of cases has had both positive and negative effects for bankruptcy professionals.
“The positive effect most commonly cited by attorneys and judges was the significant large case experience developed by judges in the SDNY and Delaware,” the GAO said. “In contrast, the negative effects most commonly cited by attorneys were the difficulty local bankruptcy firms face in maintaining a bankruptcy practice outside of the SDNY and Delaware and the lack of opportunity for courts outside of these jurisdictions to develop precedent and expertise.”
White responded that although attorneys' fees may be a factor in venue selections, “the USTP's role in policing venue selection is generally more limited to addressing violation of the venue statute and abuse of the process.”
To contact the reporter on this story: Stephanie Cumings in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Jay Horowitz at email@example.com
The GAO report is available at: http://www.gao.gov/products/GAO-15-839
The USTP's response is at: http://src.bna.com/mi
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)