Montana Department of Revenue v. Duncan

No. 09-36062; 2010 WL 4903952
The Ninth Circuit Court of Appeals affirmed the Bankruptcy Court's denial of a creditor with an undisputed and over-secured claim for attorney's fees pursuant to 11 U.S.C. §506(b) because the fees were inherently unreasonable. However, the Court stated that the Bankruptcy Court's ruling did not create a per se rule that an over-secured creditor with an unchalleneged claim are never entitled to attorney's fees under §506(b).
Procedural context:
Appeal from denial of attorney's fees under §506(b).
The Montana Department of Revenue ("MDOR") held an undisptued and over-secured claim in the Duncan's bankruptcy estate. Although the MDOR had three salaried attorneys working, including a bankruptcy specialist, the MDOR hired outside counsel. When outside counsel applied for fees in the amount of $13,447.50, pursuant to §506(b), the Bankruptcy Court denied the fees as "inherently unreasonable." The Court of Appeals upheld the Bankruptcy Court's decision noting that the burden is MDOR to establish the reasonableness of the requested fees and the MDOR never explained why outside counsel's work was necessary, or what value it added to the litigation.

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