The U.S. Supreme Court’s 6-3 split decision in Baker Botts LLP v. Asarco LLC will have long standing implications for all bankruptcy professionals’ compensation, potentially making it much more costly for all professionals retained in chapter 11 cases. In this case, the Court ruled that amounts incurred by a law firm litigating a fee dispute did not constitute “services rendered” to a debtor, and as such, were not required to be paid by the debtor’s estate. The ruling strictly interprets the language of §330(a) of the Bankruptcy Code, which applies to all professionals retained in chapter 11 cases, ranging from investment banks, financial and valuation advisors to law firms. The Supreme Court’s holding serves to tilt the playing field against these professionals, likely increasing fee disputes, as debtors and creditors will no longer fear that a debtor’s estate will be responsible for amounts incurred by professionals in responding to fee objections. Given the serious implications of the ruling, all bankruptcy professionals should be aware of this decision and its potential repercussions.
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