Enough With the Fees-on-Fees Already: ASARCO Really Means What It Says
Saturday, March 19, 2016
We previously posted here and here and here about chapter 11 law firms seeking to be paid their “fees-on-fees” in defending against objections to their fee applications. While the Supremes said “no” in the ASARCO decision, lawyers will be lawyers and they have tried several times to contract around ASARCO. The latest attempt was in New Gulf Resources, LLC, where debtor counsel attempted to contract for a 10% fee premium unless the firm did not incur material fees and expenses in defending against objections to its fee applications.
Creative? Yes, and so said Judge Shannon: “I acknowledge the creative approach to this issue.” Permissible? Of course not: “I do not find that there is a meaningful distinction between the Fee Premium here and the matters considered and ruled upon in Boomerang Tube.” Judge Shannon’s letter ruling can be found here.
We said it before (much to the displeasure of our fellow chapter 11 attorneys) and we say it again. Enough already. We command rates well above $1000 an hour for high-end chapter 11 cases and we get paid millions of dollars for all of the work involved in responsibly representing a chapter 11 debtor or creditors’ committee. (Yes, we know most chapter 11 cases are much smaller than that, but the hard-fought fee application objections usually only occur in the big-money cases). If you don’t like ASARCO’s prohibition against fees-on-fees, don’t take the work. Just as, if you don’t like “busted deal discounts” for M&A work that is unsuccessful, don’t take on the M&A work.
Chapter 11 is full of risks for, most of all, debtors and creditors. We lawyers should willingly accept the risk of fee application objections without pleading to the heavens about the injustice of not being paid for defending against those objections. To quote ourselves from our earlier posting, “as Ann Landers often said, quitcherbellyachin.”
Evan Flaschen is the chair of the Financial Restructuring Group at Bracewell LLP, described by Legal 500 as a "phenomenally committed team" that practices as a "seamless national firm" with "vast international experience." Who's Who Legal has named Evan as the 2015 "Most Highly Regarded Insolvency & Restructuring Individual in the World" who "is 'simply the best' according to our sources." His practice includes representation of many of the world's largest borrowers, institutional investors, private investment funds, Chapter 11 debtors and financial services...