- U.S. Court of Appeals, Fifth Circuit Case No. 11-10744- Not yet published
- U.S. Bankruptcy Court, N.D. Texas, Ft. Worth Division ruling granting $1million fee enhancement was affirmed on the basis that the U.S. Supreme Court's decision in Perdue v. Kenny A, 130 S.Ct. 1662 (2010), which curtailed the authority of district courts to award fee enhancements in federal fee shifting, is not binding authority in bankruptcy cases. The Fifth Circuit, accordingly, upheld the bankruptcy court's application of the fee enhancement analysis set forth in In re Mirant Corp., 354 B.R. 13 (Bankr. N.D. Tex 2006). The Fifth Circuit specifically noted that the Supreme Court did not indicate that Perdue was intended to apply outside the fee-shifting context, thus a Perdue-like approach is not justified in the bankruptcy context without a clear statement from the Supreme Court or Congress.
- Procedural context:
- This case was certified by the Honorable Judge Micheal Lynn for direct appeal to the Fifth Circuit Court. The Bankruptcy Court had originally denied a fee enhancement request, finding that CRG had failed to satisfy the strict requirements of the Supreme Court's 2010 ruling in Perdue. CRG appealed and the District Court, agreeing with CRG, held that the fee-shifting decision of Perdue was not binding authority in the bankruptcy proceeding. It therefore remanded the case for further proceedings. On remand, Judge Lynn granted the $1 million fee enhancement, relying on the analysis established in Mirant. The Trustee appealed, contending that Perdue narrowly circumscribed the Bankruptcy Court's discretion to grant fee enhancements and thus, the bankruptcy court, by relying on Mirant, applied the incorrect standard. The Fifth Circuit, however, determined that the Perdue decision did not overrule prior precedent in the bankruptcy court and affirmed the $1,000,000 fee enhancement.
- This appeal arose in the context of the Pilgrim's Pride bankruptcy, a highly unusual Chapter 11 proceeding in which the Debtors emerged from a large complex bankruptcy case in approximately 1 year with a 100 percent dividend to creditors and pre-petition shareholders receiving $450 million in new equity interests. The Debtors used CRG Partners Group, LLC and William Snyder in that group as their chief restructuring officer. It was not disputed that CRG had provided superior services that contributed to outstanding results in the Debtors' cases; however, once the plan was confirmed CRG sought not only $5.98 million in fees, but an additional fee enhancement of $1million. There were no objections filed to the fees sought, but the United States Trustee objected to the $1 million fee enhancement on the basis that CRG had failed to satisfy the strict requirements of the Supreme Court's 2010 holding in Perdue. The Bankruptcy Court agreed and initially denied the fee enhancement. On appeal, the district court held that the Fifth Circuit's previously-established precedent in bankruptcy cases was not displaced by the Perdue decision. It, therefore, remanded the case. On remand, the bankruptcy court applied the fee enhancement analysis that it had established in Mirant and granted CRG's requested fee enhancement. The Fifth Circuit panel, on direct appeal, noted that the Perdue case dealt only with federal fee-shifting issues, including certain policy concerns that were unique to fee-shifting cases. Accordingly, the Fifth Circuit declined to extend Perdue to bankruptcy fee enhancements.
- Stewart, Elrod and Southwick
Thelma McCoy v. USA
Summarizing by Craig Geno
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