Baker Botts L.L.P. v. Asarco LLC

• Decision Date: 15 June 2015
• Docket Number: No. 14–103.,14–103.
• Citation: 576 U.S. 121,192 L.Ed.2d 208,135 S.Ct. 2158
• Parties: BAKER BOTTS L.L.P. et al., Petitioners v. ASARCO LLC.
• Court: U.S. Supreme Court

576 U.S. 121

135 S.Ct. 2158

192 L.Ed.2d 208

BAKER BOTTS L.L.P. et al., Petitioners

v.ASARCO LLC.

No. 14–103.

Supreme Court of the United States

Argued Feb. 25, 2015.

Decided June 15, 2015.

Aaron Streett, Houston, TX, for Petitioners.

Jeffrey L. Oldham, Houston, TX, for Respondent.

Brian H. Fletcher for the United States as amicus curiae, by special leave of the Court, supporting the petitioners.

Evan A. Young, Baker Botts L.L.P., Austin, TX, Omar J. Alaniz, Baker Botts L.L.P., Dallas, TX, G. Irvin Terrell, Aaron M. Streett, Counsel of Record, Michelle S. Stratton, Shane Pennington, Baker Botts L.L.P., Houston, TX, Wm. Bradford Reynolds, Baker Botts L.L.P., Washington, DC, Shelby A. Jordan, Nathaniel P. Holzer, Jordan, Hyden, Womble, Culbreth & Holzer, P.C., Corpus Christi, TX, for Petitioners.

Paul D. Clement, Jeffrey M. Harris, Bancroft PLLC, Washington, DC, Jeffrey L. Oldham, Counsel of Record, Bryan S. Dumesnil, Bradley J. Benoit, Heath A. Novosad, Bracewell & Giuliani LLP, Houston, TX, for Respondent.

Justice THOMAS delivered the opinion of the Court.

Section 327(a) of the Bankruptcy Code allows bankruptcy trustees to hire attorneys, accountants, and other professionals to assist them in carrying out their statutory duties. 11 U.S.C. § 327(a). Another provision, § 330(a)(1), states that a bankruptcy court "may award ... reasonable compensation for actual, necessary services rendered by" those professionals. The question before us is whether § 330(a)(1) permits a bankruptcy court to award attorney's fees for work performed in defending a fee application in court. We hold that it does not and therefore affirm the judgment of the Court of Appeals.

I

In 2005, respondent ASARCO LLC, a copper

mining, smelting, and refining company, found itself in financial trouble. Faced with falling copper prices, debt, cash flow deficiencies, environmental liabilities, and a striking work force, ASARCO filed for Chapter 11 bankruptcy. As in many Chapter 11 bankruptcies, no trustee was appointed and ASARCO—the " ‘debtor in possession’ "—administered the bankruptcy estate as a fiduciary for the estate's creditors. §§ 1101(1), 1107(a).

Relying on § 327(a) of the Bankruptcy Code, which permits trustees to employ attorneys and other professionals to assist them in their duties, ASARCO obtained the Bankruptcy Court's permission to hire two law firms, petitioners Baker Botts L.L.P. and Jordan, Hyden, Womble, Culbreth & Holzer, P.C., to provide legal representation during the bankruptcy.¹ Among other services, the firms prosecuted fraudulent-transfer claims against ASARCO's parent company and ultimately obtained a judgment against it worth between $7 and $10 billion. This judgment contributed to a successful reorganization in which all of ASARCO's creditors were paid in full. After over four years in bankruptcy, ASARCO emerged in 2009 with $1.4 billion in cash, little debt, and resolution of its environmental liabilities.

The law firms sought compensation under § 330(a)(1), which provides that a bankruptcy court "may award ... reasonable compensation for actual, necessary services rendered by" professionals hired under § 327(a). As required by the bankruptcy rules, the two firms filed fee applications. Fed. Rule Bkrtcy. Proc. 2016(a). ASARCO, controlled once again by its parent company, challenged the compensation requested in the applications. After extensive discovery and a 6–day trial on fees, the Bankruptcy Court rejected ASARCO's objections and awarded the firms approximately $120 million for their work in the bankruptcy proceeding plus a $4.1 million enhancement for exceptional performance. The court also awarded the firms over $5 million for time spent litigating in defense of their fee applications.

ASARCO appealed various aspects of the award to the District Court. As relevant here, the court held that the firms could recover fees for defending their fee application.

The Court of Appeals for the Fifth Circuit reversed. It reasoned that the American Rule—the rule that each side must pay its own attorney's fees—"applies absent explicit statutory ... authority" to the contrary and that "the Code contains no statutory provision for the recovery of attorney fees for defending a fee application." In re ASARCO, L.L.C., 751 F.3d 291, 301 (2014) (internal quotation marks omitted). It observed that § 330(a)(1) provides "that professional services are compensable only if they are likely to benefit a debtor's estate or are necessary to case administration." Id., at 299. Because "[t]he primary beneficiary of a professional fee application, of course, is the professional," compensation for litigation defending that application does not fall within § 330(a)(1). Ibid .

We granted certiorari, 573 U.S. ––––, 135 S.Ct. 44, 189 L.Ed.2d 897 (2014), and now affirm.

II

A

"Our basic point of reference when considering the award of attorney's fees is the bedrock principle known as the American Rule: Each litigant pays his own attorney's fees, win or lose, unless a statute or contract provides otherwise." Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 252–253, 130 S.Ct. 2149, 176 L.Ed.2d 998 (2010) (internal quotation marks omitted). The American Rule has roots in our common law reaching back to at least the 18th century, see Arcambel v. Wiseman, 3 Dall. 306, 1 L.Ed. 613 (1796), and "[s]tatutes which invade the common law are to be read with a presumption favoring the retention of long-established and familiar [legal] principles," Fogerty v. Fantasy, Inc., 510 U.S. 517, 534, 114 S.Ct. 1023, 127 L.Ed.2d 455 (1994) (internal quotation marks and ellipsis omitted). We consequently will not deviate from the American Rule " ‘absent explicit statutory authority.’ " Buckhannon Board & Care Home, Inc. v. West Virginia Dept. of Health and Human Resources, 532 U.S. 598, 602, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001) (quoting Key Tronic Corp. v. United States, 511 U.S. 809, 814, 114 S.Ct. 1960, 128 L.Ed.2d 797 (1994) ).

We have recognized departures from the American Rule only in "specific and explicit provisions for the allowance of attorneys' fees under selected statutes." Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 260, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). Although these "[s]tatutory changes to [the American Rule] take various forms," Hardt, supra, at 253, 130 S.Ct. 2149 they tend to authorize the award of "a reasonable attorney's fee," "fees," or "litigation costs," and usually refer to a "prevailing party" in the context of an adversarial "action," see, e.g., 28 U.S.C. § 2412(d)(1)(A) ; 42 U.S.C. §§ 1988(b), 2000e–5(k) ; see generally Hardt, supra, at 253, and nn. 3–7, 130 S.Ct. 2149 (collecting examples).

The attorney's fees provision of the Equal Access to Justice Act offers a good example of the clarity we have required to deviate from the American Rule. See 28 U.S.C. § 2412(d)(1)(A). That section provides that "a court shall award to a prevailing party other than the United States fees and other expenses ... incurred by that party in any civil action (other than cases sounding in tort) ... brought by or against the United States" under certain conditions. Ibid. As our decision in Commissioner v. Jean, 496 U.S. 154, 110 S.Ct. 2316, 110 L.Ed.2d 134 (1990), reveals, there could be little dispute that this provision—which mentions "fees," a "prevailing party," and a "civil action"—is a "fee-shifting statut[e]" that trumps the American Rule, id., at 161, 110 S.Ct. 2316.

B

Congress did not expressly depart from the American Rule to permit compensation for fee-defense litigation by professionals hired to assist trustees in bankruptcy proceedings. Section 327(a) authorizes the employment of such professionals, providing that a "trustee, with the court's approval, may employ one or more attorneys, accountants, appraisers, auctioneers, or other professional persons, that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist [him] in carrying out [his] duties." In other words, § 327(a) professionals are hired to serve the administrator of the estate for the benefit of the estate.

Section 330(a)(1) in turn authorizes compensation for these professionals as follows:

"After notice to the parties in interest and the United States Trustee and a hearing, and subject to sections 326, 328, and 329, the court may award to a trustee, a consumer privacy ombudsman appointed under section 332, an examiner, an ombudsman appointed under section 333, or a professional person employed under section 327 or 1103 —

"(A) reasonable compensation for actual, necessary services rendered by the trustee, examiner, ombudsman, professional person, or attorney and by any paraprofessional person employed by any such person; and "(B) reimbursement for actual, necessary expenses." (Emphasis added.)

This text cannot displace the American Rule with respect to fee-defense litigation. To be sure, the phrase "reasonable compensation for actual, necessary services rendered" permits courts to award fees to attorneys for work done to assist the administrator of the estate, as the Bankruptcy Court did here when it ordered ASARCO to pay roughly $120 million for the firms' work in the bankruptcy proceeding. No one disputes that § 330(a)(1) authorizes an award of attorney's fees for that kind of work. See Alyeska Pipeline, supra, at 260, and n. 33, 95 S.Ct. 1612 (listing § 330(a)(1)'s predecessor as an example of a provision authorizing attorney's fees). But the phrase "reasonable compensation for actual, necessary services rendered" neither specifically nor explicitly authorizes courts to shift the costs of adversarial litigation from one side to the other—in this case, from the attorneys seeking fees to the administrator of the estate—as most statutes that displace the American Rule do.

Instead, § 330(a)(1) provides compensation for all § 327(a) professionals—whether accountant, attorney, or auctioneer—for all manner of work...