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Litton Loan Servicing, L.P. v. Dennis Schubert

Summarizing by Amir Shachmurove


Case Type:
Case Status:
21-1555 (6th Circuit, Aug 16,2022) Published
Bankruptcy court may consider the results obtained by professionals in awarding fees under 11 U.S.C. Sec. 330(a)(3), even though it is not listed as a factor in the statute. The use of "including" in the statute and direction to take into account "all relevant factors" authorized the bankruptcy court to consider the results obtained even though it was not specifically identified as a factor. Further, the bankruptcy court did not abuse its discretion in halving the fees, finding such a reduction consistent with cases from other jurisdictions where results were minimal.
Procedural context:
After a hearing, the bankruptcy court allowed one-half of the fees sought by special counsel for the trustee, special counsel appealed to the district court which reversed twice, but upheld the halving of fees on the third appeal to the district court. Special counsel appealed to the Court of Appeals.
Village Apothecary filed a Chapter 7 bankruptcy in 2015 and the trustee retained special counsel to investigate causes of action which they estimated could result in recovery of over $1.6 million dollars. Counsel spent a year investigating and drafted a complaint asserting various claims against the owner of the debtor. Discussions between counsel for the owner, the trustee and his counsel resulted in a settlement of $38,000 with the owner. Counsel for the trustee then sought approval of fees of about $37,000, which the court considered along with fee requests from the trustee and his general counsel. Although no one objected to the fee applications, the court held a hearing to determine if the fees should be reduced "given the amount of the benefit to the estate." The bankruptcy court ultimately halved the fees awarded to special counsel.
Gilman, Stranch and Nalbandian, authored by Nalbandian

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