Barron & Newburger, P.C. v. Texas Skyline, Ltd. (In Re Woerner)
758 F.3d 693
5th Cir.2014Background
- Woerner filed a voluntary Chapter 11 petition on May 13, 2010, on the eve of a state-court judgment against him.
- Barron & Newburger (B & N) represented Woerner in the Chapter 11 proceeding.
- The case was converted to Chapter 7 on April 20, 2011, terminating B & N’s services.
- B & N sought approximately $134,000 in fees; the bankruptcy court allowed about $19,409 and disallowed the rest as unreasonable under § 330 and Pro-Snax.
- The district court affirmed, holding the fee award was reasonable only to the extent allowed and that the remaining fees were not reasonably likely to benefit the estate.
- B & N appeals, arguing misapplication of Fifth Circuit precedent and § 330 standards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Pro-Snax standard was misapplied | B & N contends the court used the wrong standard (hindsight) and should apply business judgment or prospective tests. | Woerner argues Pro-Snax is binding Fifth Circuit precedent requiring a hindsight/material-benefit test. | The bankruptcy court did not err in applying Pro-Snax; standard not abused. |
| Whether denial of fees for amending schedules was an abuse of discretion | B & N contends amended schedules/security disclosures provided a benefit and should be compensated. | Court properly denied these fees as not reasonably likely to benefit the estate and due to debtor misconduct. | The district court did not abuse its discretion in denying these fees. |
Key Cases Cited
- Pro-Snax Distribs., Inc. v. Andrews & Kurth, L.L.P., 157 F.3d 414 (5th Cir. 1998) (adopts hindsight/‘material benefit’ standard for post-PPP services; clarifies § 330 factors)
- Lamie v. U.S. Trustee, 540 U.S. 526 (U.S. 2004) (limits recovery for debtor’s attorneys after conversion; undercuts Pro-Snax interpretation)
- In re Ames Department Stores, Inc., 76 F.3d 66 (2d Cir. 1996) (recognizes ‘reasonably likely to benefit the estate’ standard for compensation)
- In re Taxman Clothing Co., 49 F.3d 310 (7th Cir. 1995) (illustrates consideration of probability of benefit in fee awards)
- In re Cahill, 428 F.3d 536 (5th Cir. 2005) (standard of review for bankruptcy court conclusions of law and factual findings)