Major law firms lose cases in the Supreme Court all the time. But it’s not every Term that a Biglaw firm loses in SCOTUS as a party rather than as counsel to a party.
Last Term, Proskauer Rose and Chadbourne & Parke lost in the Troice case, which addressed whether certain types of state-law class actions against law firms might be precluded by the Securities Litigation Uniform Standards Act (answer: sorry law firms, no preclusion). This morning, the Supreme Court dealt another body blow to Biglaw, in the case of Baker Botts L.L.P. v. ASARCO LLC, relating to the important subject of fee applications in bankruptcy.
The Court ruled, 6-3, that the Bankruptcy Code does not allow a bankruptcy court to award attorney’s fees to law firms for work performed in defending a fee application in court. Justice Thomas wrote a fairly straightforward, textualist opinion for his four fellow conservatives and Justice Sotomayor (who joined almost all of that opinion for the Court). Justice Breyer, joined by Justices Ginsburg and Kagan, dissented.
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Considering that law firms can spend hundreds or even thousands of hours fighting over fees in bankruptcy court, Baker Botts is bad news for the bankruptcy bar. In this particular case, Baker Botts and its co-counsel won’t be getting a $5 million fee award they received below for their work for troubled copper company ASARCO.
The bankruptcy lawyers I’ve talked to lately complain that work is slow. The economy is doing relatively well, so bankruptcy filings are down. Interest rates are low, so even companies that run into trouble can often work out deals with their creditors that avoid the need for filing a bankruptcy case.
It’s hard out here for bankruptcy lawyers right now. And Baker Botts doesn’t make it any better.
UPDATE (4:35 p.m.): ASARCO sounds pleased with the ruling. Jeff Oldham, the Bracewell & Giuliani partner who argued the case for ASARCO before the Supreme Court, had this to say: “We are delighted with the Supreme Court’s decision. ASARCO has argued from the beginning that the Bankruptcy Code’s plain text does not authorize Baker Botts’ attempt to get paid from estate funds for its purely self-interested work litigating over its underlying fee requests. ASARCO is gratified that the Fifth Circuit and now the Supreme Court have agreed with its position.”
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Baker Botts L.L.P. v. ASARCO LLC [Supreme Court of the United States]
Baker Botts L.L.P. v. ASARCO LLC [SCOTUSblog]