Interpreting Bankruptcy Code §§502 and 506: Post-Petition Attorneys’ Fees in a Post-Travelers World
by: Prof. Mark S. Scarberry
Pepperdine University School of Law; Malibu, Calif.
ABI Robert M. Zinman Resident Scholar; Alexandria, Va.
Editor’s Note: The following is an abstract of an article forthcoming in the Winter issue of the ABI Law Review.
Under the Bankruptcy Code, the filing of a bankruptcy petition creates a gulf
between the pre-petition and post-petition worlds. The allowable amount of a
claim in bankruptcy is determined as of the petition date. Interest stops
accruing on claims (other than over-secured claims) as of the petition date;
post-petition interest is not an allowable part of an unsecured claim. It would
seem that post-petition attorneys’ fees similarly would not be an allowable
part of an unsecured claim, even if the claim arises under a contract or
statute that calls for the creditor’s attorneys’ fees to be added to the debt.
The right to fees (pre- and post-petition) under a contract or statute with
respect to a pre-petition debt is itself a pre-petition claim that typically
will be discharged, regardless of whether the fees that are allowed in the
bankruptcy case include post-petition fees. Because the right is a pre-petition
claim, there is an argument (with its genesis in the 1982 United Merchants
decision of the Second Circuit applying pre-Code law) that post-petition fees
are allowable as pre-petition contingent claims, either in an estimated amount
or in an amount established after the fees are incurred. The majority of courts
(where the debtor is insolvent) have rejected the Second Circuit’s argument and
thus held that post-petition fees are not allowable with respect to
pre-petition unsecured claims. The article provides an argument from the text
of Bankruptcy Code §§502(b), 506(a) and 506(b) in support of the majority view,
a textual argument that the article concludes is determinative.
ABI’s 19th Annual Winter Leadership Conference: Committee Educational Session
ABI’s 19th Annual Winter Leadership Conference, which will be held Dec. 6-8, 2007 at the Westin Mission Hills Resort in Rancho Mirage, Calif., will feature two panels that will discuss the Fee Study, described below, and hedge funds’ involvement in bankruptcy cases. These are joint sessions of the Financial Advisors, Investment Banking, Professional Compensation, Public Companies and Claims Trading Committees.
PART I: Full Disclosure: The Results of the ABI Professional Fee Study. Prof. Stephen J. Lubben takes your questions on the landmark ABI-funded Fee Study and its ramifications. The Q&A session will also feature a panel moderated by C.R. “Chip” Bowles Jr., chair of the Fee Study Steering Committee and Practitioner’s Panel (Greenebaum Doll & McDonald PLLC; Louisville, Ky.). Gerald A. Shapiro (CRG Partners, LLC; Wilton, Conn.), J. Scott Victor (National City Capital Markets-Investment Banking; Conshohocken, Pa.) and Keith J. Shapiro (Greenburg Traurig LLP; Chicago).
PART II: Hedge Fund Competition for Control of Public Chapter 11 Debtors and Their Reorganizations. A panel will discuss issues relating to the prevalence of hedge funds competing for control of and/or substantial ownership of public chapter 11 debtors and their reorganizations. H. Slayton Dabney (King & Spalding; New York), James D. Decker (Alvarez & Marsal; Atlanta), Peter M. Gilhuly (Latham & Watkins LLP; Los Angeles) and M. Steven Liff (Sun Capital Partners, Inc.; Los Angeles).