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Over-Secured Lenders and Requests for Attorneys' Fees
The United States Court of Appeals for the Fifth Circuit recently reaffirmed the long-established rule that an over-secured lender's legal and other fees are subject to court approval as reasonable under section 506(b) of the Bankruptcy Code. See Wells Fargo Bank, N.A. v. 804 Congress, L.L.C. (In re 804 Congress, L.L.C.), No. 12-50382, 2014 U.S. App. LEXIS 11819 (5th Cir. June 23, 2014). This rule is embodied in the plain language of section 506(b), which provides that an over-secured creditor may recover “'fees, costs, or charges provided for under the agreement ' under which such claim arose' ' but only to the extent that the fees, costs, or charges are reasonable.” Id. at *8.
While the rule is relatively clear, many consensual reorganization plans provide for payment of secured lenders' and other stakeholders' fees that, while subject to reasonableness review, often are not actually reviewed in any meaningful detail by a bankruptcy court. Indeed, if a plan is consensual and no one objects, there arguably is no need. But 804 Congress is a reminder that the standard nonetheless is there, and that the burden is on the professional to establish reasonableness when the amount of the fees is being challenged. Accordingly, a professional not prepared to affirmatively prove reasonableness proceeds at his or her peril.
Bankruptcy Sales: Finding a Diamond In the Rough
There is no efficient market for the sale of bankruptcy assets. Inefficient markets yield a transactional drag, potentially dampening the ability of debtors and trustees to maximize value for creditors. This article identifies ways in which investors may more easily discover bankruptcy asset sales.
Judge Rules Shaquille O'Neal Will Face Securities Lawsuit for Promotion, Sale of NFTs
A federal district court in Miami, FL, has ruled that former National Basketball Association star Shaquille O'Neal will have to face a lawsuit over his promotion of unregistered securities in the form of cryptocurrency tokens and that he was a "seller" of these unregistered securities.
Blockchain Domains: New Developments for Brand Owners
Blockchain domain names offer decentralized alternatives to traditional DNS-based domain names, promising enhanced security, privacy and censorship resistance. However, these benefits come with significant challenges, particularly for brand owners seeking to protect their trademarks in these new digital spaces.
Why So Many Great Lawyers Stink at Business Development and What Law Firms Are Doing About It
Why is it that those who are best skilled at advocating for others are ill-equipped at advocating for their own skills and what to do about it?
Coverage Issues Stemming from Dry Cleaner Contamination Suits
In recent years, there has been a growing number of dry cleaners claiming to be "organic," "green," or "eco-friendly." While that may be true with respect to some, many dry cleaners continue to use a cleaning method involving the use of a solvent called perchloroethylene, commonly known as perc. And, there seems to be an increasing number of lawsuits stemming from environmental problems associated with historic dry cleaning operations utilizing this chemical.