Baker Botts L.L.P. has filed its application for retention as debtors’ counsel in In re New Gulf Resources, LLC, et al. (Case No. 15-12556, Bankr. D. Del.), and the application incudes a novel “Fee Premium.” Essentially, Baker Botts’ aggregate fees incurred in the case will be increased by 10% (subject to court approval) but … Baker Botts will waive the entire Fee Premium “if, and only if, Baker Botts does not incur material fees and expenses defending against any objection with respect to an interim or final fee application.”  

The Fee Premium is a clear attempt to work around the Supreme Court’s ruling in Baker Botts L.L.P. v. ASARCO LLC, 135 S.Ct. 2158 (2015). In that case, ASARCO (represented by Bracewell & Giuliani LLP) argued, and the Supremes agreed, that bankruptcy courts cannot award fees to a law firm for the time its lawyers spent defending its fees in bankruptcy court. I know – No fees for arguing about fees? Oh the humanity! Click here for our blog entry on the Supreme Court decision.

In New Gulf, Baker Botts maintains that the Supreme Court and the Fifth Circuit before it, hinted that law firms could adjust their hourly rates to account for the risk of eating fees associated with a fee dispute. The Fee Premium is one proposed way to do that, while still allowing for such fees to be avoided if a fee fight is avoided.

The U.S. Trustee has objected to the Fee Premium (surprise!), arguing that it violates the Code’s requirement that fees in bankruptcy be comparable to those outside of bankruptcy. Apparently our non-bankruptcy brethren don’t get fee premiums. Also, the U.S. Trustee argues that the Fee Premium is an “attack” on ASARCO. But perhaps it is just a clever hack. The motion and objection are set for hearing on January 19, 2016. Stay tuned for an update then.

In the meantime, other law firms have taken a different approach to hacking ASARCO. They have seized on the language in the decision that says, win or lose, each litigant must pay his own attorney’s fees unless a statute or contract provides otherwise. Based on this, they have included in their retention letters a contractual agreement to pay fees for defending against fee objections. Not surprisingly, the U.S. Trustee has objected to those attempts, as well.[1]