The U.S. Supreme Court has provided new stimulus to the use of mediation in disputes over attorney fees in its June 15, 2015, decision in Baker Botts LLP v. Asarco. Baker Botts was employed by the bankruptcy debtor estate and, after extensive litigation resulting in a very successful plan, was awarded more than $114 million in fees. In addition, it was awarded approximately $5 million for the fees and costs incurred in defending the underlying fee award on appeal. The Supreme Court paid strict adherence to the “American Rule,” and found that statutes within the Bankruptcy Code were insufficient to constitute exceptions to that Rule.

For Baker Botts, that means the firm has to absorb the $5 million it spent on appeals of its fee award. If a firm knows that it will not be compensated for its efforts in defending fee awards obtained in any sort of case, whether bankruptcy or not, it makes sense for firms to try to find alternativeĀ­ and less expensive ways of resolving fee disputes.

In a similar vein, about six weeks earlier in the term, the Supreme Court examined the “final order” doctrine in bankruptcy cases and, in a move drawing the doctrine closer to the non-bankruptcy test for appealability of an order, the Court in Bullard v. Blue Hills Bank (decided May 4, 2015) said that an order denying confirmation of a proposed plan is not itself an appealable “final order.” The Court’s central point was that denial of confirmation of the proposed plan did not dispose of the case in any way, and left the parties with doors open to negotiate a more acceptable resolution without serious disadvantage to either. In so holding, the Court also explained its opposition to the notion of piecemeal appeals.

Both Asarco and Bullard point to a clearly defined expectation by the Supreme Court that bankruptcy practitioners find ways to negotiate resolutions to bankruptcy disputes. 

Hon. Peter W. Bowie, who spent 27 years as a bankruptcy judge for the U.S. Bankruptcy Court, Southern District of California, is of counsel at Ballard Spahr LLP, where he focuses his bankruptcy practice of mediation dispute resolution. For more information, please contact him at 619.487.0787 or bowiep@ballardspahr.com.


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