Supreme Court denies law firm payment for defending right to be paid

The Supreme Court on Monday ruled against a top law firm, denying attorneys payment for legal actions they took defending their fees in a billing fight.

Justice Clarence Thomas delivered the 6-3 ruling upholding the U.S. Court of Appeals for the Fifth Circuit’s decision, arguing that the law firm, Baker Botts LLP, was not entitled to be paid for legal actions they undertook to secure payment from their client.

{mosads}The case, Baker Botts LLP et al. v. ASARCO LLC, stems from the fee applications two law firms filed after they represented the Tucson, Ariz.-based mining and refining company in a 2009 bankruptcy case.

ASARCO balked at paying Baker Botts’ $117 million in legal fees. The law firm then spent $5 million defending its right to collect those fees. But the lower court denied the law firm’s right to collect that additional payment and the justices agreed.

Thomas’s ruling said that services that are entitled to compensation under the bankruptcy code refer to labor performed for the client.

Fees incurred by Baker Botts defending their right to collect paid, he said, cannot fairly be described as labor performed for ASARCO.

“We affirm the judgment of the Fifth Circuit under the American Rule, which says each side pays their own attorney fees,” Thomas said, while delivering his decision in court on Monday.

In his written opinion, he said the law firms’ view that fee-defense litigation is part of the ”services rendered” to the estate administrator in a bankruptcy case “not only suffers from an unnatural interpretation of the term ‘services rendered,’ but would require a particularly unusual deviation from the American Rule.”

Thomas said it “would permit attorneys to be awarded fees for unsuccessfully defending fee applications when most fee-shifting provisions permit awards only to ‘a prevailing party.”

Justice Stephen Breyer filed a dissenting opinion, in which Justices Ruth Bader Ginsburg and Elena Kagan joined.

In a statement, Jeff Oldham, the attorney who argued before the Supreme Court on behalf of ASARCO, said he’s delighted with the high 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,” he said.  “ASARCO is gratified that the Fifth Circuit and now the Supreme Court have agreed with its position.” 

This story was updated at 12:58 p.m. to include a statment from Jeff Oldham.