Judge Rejects Fee Defense Provisions in Retention Applications [Delaware Business Court Insider]

Mark Felger and Barry Klayman, co-chair and member of Cozen O’Connor’s Bankruptcy, Insolvency & Restructuring practice group, wrote a Delaware Business Court Insider article on two U.S. Bankruptcy Court for the District of Delaware decisions. In both cases, the court declined to approve retention applications that included provisions that entitled counsel to reimbursement of fees, costs and expenses arising from the successful defense of their fee applications. In In re Boomerang Tube, Judge Mary Walrath, of the District of Delaware, rejected the application of two law firms as counsel to the official committee of unsecured creditors because the retention agreements included fee defense provisions. In her ruling, Judge Walrath concluded that, "Even if the retention agreements were contractual exceptions to the American Rule, they were still not permissible under  the Bankruptcy Code, regardless of the terms in the employment contract." Additionally, a later ruling in In re Samson Resources, was based on Judge Walrath's reasoning in Boomerang Tube. 

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Mark E. Felger

Co-Chair, Bankruptcy, Insolvency & Restructuring

mfelger@cozen.com

(302) 295-2087

Barry M. Klayman

Member

bklayman@cozen.com

(302) 295-2035


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