Notes on 11 U.S.C. § 330 : US Code - Notes

Search Notes on 11 U.S.C. § 330 : US Code - Notes

(Pub. L. 95-598, Nov. 6, 1978, 92 Stat. 2564; Pub. L. 98-353, title
III, Secs. 433, 434, July 10, 1984, 98 Stat. 370; Pub. L. 99-554,
title II, Secs. 211, 257(f), Oct. 27, 1986, 100 Stat. 3099, 3114;
Pub. L. 103-394, title I, Sec. 117, title II, Sec. 224(b), Oct. 22,
1994, 108 Stat. 4119, 4130; Pub. L. 109-8, title II, Sec. 232(b),
title IV, Secs. 407, 415, title XI, Sec. 1104(b), Apr. 20, 2005,
119 Stat. 74, 106, 107, 192.)
HISTORICAL AND REVISION NOTES
LEGISLATIVE STATEMENTS
Section 330(a) contains the standard of compensation adopted in
H.R. 8200 as passed by the House rather than the contrary standard
contained in the Senate amendment. Attorneys' fees in bankruptcy
cases can be quite large and should be closely examined by the
court. However bankruptcy legal services are entitled to command
the same competency of counsel as other cases. In that light, the
policy of this section is to compensate attorneys and other
professionals serving in a case under title 11 at the same rate as
the attorney or other professional would be compensated for
performing comparable services other than in a case under title 11.
Contrary language in the Senate report accompanying S. 2266 is
rejected, and Massachusetts Mutual Life Insurance Company v. Brock,
405 F.2d 429, 432 (5th Cir. 1968) is overruled. Notions of economy
of the estate in fixing fees are outdated and have no place in a
bankruptcy code.
Section 330(a)(2) of the Senate amendment is deleted although the
Securities and Exchange Commission retains a right to file an
advisory report under section 1109.
Section 330(b) of the Senate amendment is deleted as unnecessary,
as the limitations contained therein are covered by section 328(c)
of H.R. 8200 as passed by the House and contained in the House
amendment.
Section 330(c) of the Senate amendment providing for a trustee to
receive a fee of $20 for each estate from the filing fee paid to
the clerk is retained as section 330(b) of the House amendment. The
section will encourage private trustees to serve in cases under
title 11 and in pilot districts will place less of a burden on the
U.S. trustee to serve in no-asset cases.
Section 330(b) of H.R. 8200 as passed by the House is retained by
the House amendment as section 330(c) [section 15330].
SENATE REPORT NO. 95-989
Section 330 authorizes the court to award compensation for
services and reimbursement of expenses of officers of the estate,
and other professionals. The compensation is to be reasonable, for
economy in administration is the basic objective. Compensation is
to be for actual necessary services, based on the time spent, the
nature, the extent and the value of the services rendered, and the
cost of comparable services in nonbankruptcy cases. There are the
criteria that have been applied by the courts as analytic aids in
defining "reasonable" compensation.
The reference to "the cost of comparable services" in a
nonbankruptcy case is not intended as a change of existing law. In
a bankruptcy case fees are not a matter for private agreement.
There is inherent a "public interest" that "must be considered in
awarding fees," Massachusetts Mutual Life Insurance Co. v. Brock,
405 F.2d 429, 432 (C.A.5, 1968), cert. denied, 395 U.S. 906 (1969).
An allowance is the result of a balance struck between moderation
in the interest of the estate and its security holders and the need
to be "generous enough to encourage" lawyers and others to render
the necessary and exacting services that bankruptcy cases often
require. In re Yale Express System, Inc., 366 F.Supp. 1376, 1381
(S.D.N.Y. 1973). The rates for similar kinds of services in private
employment is one element, among others, in that balance.
Compensation in private employment noted in subsection (a) is a
point of reference, not a controlling determinant of what shall be
allowed in bankruptcy cases.
One of the major reforms in 1938, especially for reorganization
cases, was centralized control over fees in the bankruptcy courts.
See Brown v. Gerdes, 321 U.S. 178, 182-184 (1944); Leiman v.
Guttman, 336 U.S. 1, 4-9 (1949). It was intended to guard against a
recurrence of "the many sordid chapters" in "the history of fees in
corporate reorganizations." Dickinson Industrial Site, Inc. v.
Cowan, 309 U.S. 382, 388 (1940). In the years since then the
bankruptcy bar has flourished and prospered, and persons of merit
and quality have not eschewed public service in bankruptcy cases
merely because bankruptcy courts, in the interest of economy in
administration, have not allowed them compensation that may be
earned in the private economy of business or the professions. There
is no reason to believe that, in generations to come, their
successors will be less persuaded by the need to serve in the
public interest because of stronger allures of private gain
elsewhere.
Subsection (a) provides for compensation of paraprofessionals in
order to reduce the cost of administering bankruptcy cases.
Paraprofessionals can be employed to perform duties which do not
require the full range of skills of a qualified professional. Some
courts have not hesitated to recognize paraprofessional services as
compensable under existing law. An explicit provision to that
effect is useful and constructive.
The last sentence of subsection (a) provides that in the case of
a public company - defined in section 1101(3) - the court shall
refer, after a hearing, all applications to the Securities and
Exchange Commission for a report, which shall be advisory only. In
Chapter X cases in which the Commission has appeared, it generally
filed reports on fee applications. Usually, courts have accorded
the SEC's views substantial weight, as representing the opinion of
a disinterested agency skilled and experienced in reorganization
affairs. The last sentence intends for the advisory assistance of
the Commission to be sought only in case of a public company in
reorganization under chapter 11.
Subsection (b) reenacts section 249 of Chapter X of the
Bankruptcy Act ([former] 11 U.S.C. 649). It is a codification of
equitable principles designed to prevent fiduciaries in the case
from engaging in the specified transactions since they are in a
position to gain inside information or to shape or influence the
course of the reorganization. Wolf v. Weinstein, 372 U.S. 633
(1963). The statutory bar of compensation and reimbursement is
based on the principle that such transactions involve conflicts of
interest. Private gain undoubtedly prompts the purchase or sale of
claims or stock interests, while the fiduciary's obligation is to
render loyal and disinterested service which his position of trust
has imposed upon him. Subsection (b) extends to a trustee, his
attorney, committees and their attorneys, or any other persons
"acting in the case in a representative or fiduciary capacity." It
bars compensation to any of the foregoing, who after assuming to
act in such capacity has purchased or sold, directly or indirectly,
claims against, or stock in the debtor. The bar is absolute. It
makes no difference whether the transaction brought a gain or loss,
or neither, and the court is not authorized to approve a purchase
or sale, before or after the transaction. The exception is for an
acquisition or transfer "otherwise" than by a voluntary purchase or
sale, such as an acquisition by bequest. See Otis&Co. v.
Insurance Bldg. Corp., 110 F.2d 333, 335 (C.A.1, 1940).
Subsection (c) [enacted as (b)] is intended for no asset
liquidation cases where minimal compensation for trustees is
needed. The sum of $20 will be allowed in each case, which is
double the amount provided under current law.
HOUSE REPORT NO. 95-595
Section 330 authorizes compensation for services and
reimbursement of expenses of officers of the estate. It also
prescribes the standards on which the amount of compensation is to
be determined. As noted above, the compensation allowable under
this section is subject to the maxima set out in sections 326, 328,
and 329. The compensation is to be reasonable, for actual necessary
services rendered, based on the time, the nature, the extent, and
the value of the services rendered, and on the cost of comparable
services other than in a case under the bankruptcy code. The effect
of the last provision is to overrule In re Beverly Crest
Convalescent Hospital, Inc., 548 F.2d 817 (9th Cir. 1976, as
amended 1977), which set an arbitrary limit on fees payable based
on the amount of a district judge's salary, and other, similar
cases that require fees to be determined based on notions of
conservation of the estate and economy of administration. If that
case were allowed to stand, attorneys that could earn much higher
incomes in other fields would leave the bankruptcy arena.
Bankruptcy specialists, who enable the system to operate smoothly,
efficiently, and expeditiously, would be driven elsewhere, and the
bankruptcy field would be occupied by those who could not find
other work and those who practice bankruptcy law only occasionally
almost as a public service. Bankruptcy fees that are lower than
fees in other areas of the legal profession may operate properly
when the attorneys appearing in bankruptcy cases do so
intermittently, because a low fee in a small segment of a practice
can be absorbed by other work. Bankruptcy specialists, however, if
required to accept fees in all of their cases that are consistently
lower than fees they could receive elsewhere, will not remain in
the bankruptcy field.
This subsection provides for reimbursement of actual, necessary
expenses. It further provides for compensation of paraprofessionals
employed by professional persons employed by the estate of the
debtor. The provision is included to reduce the cost of
administering bankruptcy cases. In nonbankruptcy areas, attorneys
are able to charge for a paraprofessional's time on an hourly
basis, and not include it in overhead. If a similar practice does
not pertain in bankruptcy cases then the attorney will be less
inclined to use paraprofessionals even where the work involved
could easily be handled by an attorney's assistant, at much lower
cost to the estate. This provision is designed to encourage
attorneys to use paraprofessional assistance where possible, and to
insure that the estate, not the attorney, will bear the cost, to
the benefit of both the estate and the attorneys involved.
REFERENCES IN TEXT
The date of the enactment of the Bankruptcy Reform Act of 1994,
referred to in subsec. (b)(2), is the date of enactment of Pub. L.
103-394, which was approved Oct. 22, 1994.
AMENDMENTS
2005 - Subsec. (a)(1). Pub. L. 109-8, Sec. 1104(b)(1), inserted
"an ombudsman appointed under section 333, or" before "a
professional person" in introductory provisions.
Pub. L. 109-8, Sec. 232(b), inserted "a consumer privacy
ombudsman appointed under section 332," before "an examiner" in
introductory provisions.
Subsec. (a)(1)(A). Pub. L. 109-8, Sec. 1104(b)(2), inserted
"ombudsman," before "professional person".
Subsec. (a)(3). Pub. L. 109-8, Sec. 407(1), in introductory
provisions, substituted "In" for "(A) In" and inserted "to an
examiner, trustee under chapter 11, or professional person" after
"awarded".
Subsec. (a)(3)(E), (F). Pub. L. 109-8, Sec. 415, added subpar.
(E) and redesignated former subpar. (E) as (F).
Subsec. (a)(7). Pub. L. 109-8, Sec. 407(2), added par. (7).
1994 - Subsec. (a). Pub. L. 103-394, Sec. 224(b), amended subsec.
(a) generally. Prior to amendment, subsec. (a) read as follows:
"After notice to any parties in interest and to the United States
trustee and a hearing, and subject to sections 326, 328, and 329 of
this title, the court may award to a trustee, to an examiner, to a
professional person employed under section 327 or 1103 of this
title, or to the debtor's attorney -
"(1) reasonable compensation for actual, necessary services
rendered by such trustee, examiner, professional person, or
attorney, as the case may be, and by any paraprofessional persons
employed by such trustee, professional person, or attorney, as
the case may be, based on the nature, the extent, and the value
of such services, the time spent on such services, and the cost
of comparable services other than in a case under this title; and
"(2) reimbursement for actual, necessary expenses."
Subsec. (b). Pub. L. 103-394, Sec. 117, designated existing
provisions as par. (1) and added par. (2).
1986 - Subsec. (a). Pub. L. 99-554, Sec. 211(1), inserted "to any
parties in interest and to the United States trustee" after
"notice".
Subsec. (c). Pub. L. 99-554, Sec. 257(f), inserted reference to
chapter 12.
Subsec. (d). Pub. L. 99-554, Sec. 211(2), added subsec. (d).
1984 - Subsec. (a). Pub. L. 98-353, Sec. 433(1), struck out "to
any parties in interest and to the United States trustee" after
"After notice".
Subsec. (a)(1). Pub. L. 98-353, Sec. 433(2), substituted "nature,
the extent, and the value of such services, the time spent on such
services" for "time, the nature, the extent, and the value of such
services".
Subsec. (b). Pub. L. 98-353, Sec. 434(a), substituted "$45" for
"$20".
Subsec. (c). Pub. L. 98-353, Sec. 434(b), added subsec. (c).
EFFECTIVE DATE OF 2005 AMENDMENT
Amendment by Pub. L. 109-8 effective 180 days after Apr. 20,
2005, and not applicable with respect to cases commenced under this
title before such effective date, except as otherwise provided, see
section 1501 of Pub. L. 109-8, set out as a note under section 101
of this title.
EFFECTIVE DATE OF 1994 AMENDMENT
Amendment by section 117 of Pub. L. 103-394 effective Oct. 22,
1994, and applicable with respect to cases commenced under this
title before, on, and after Oct. 22, 1994, and amendment by section
224(b) of Pub. L. 103-394 effective Oct. 22, 1994, and not
applicable with respect to cases commenced under this title before
Oct. 22, 1994, see section 702 of Pub. L. 103-394, set out as a
note under section 101 of this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Effective date and applicability of amendment by section 211 of
Pub. L. 99-554 dependent upon the judicial district involved, see
section 302(d), (e) of Pub. L. 99-554, set out as a note under
section 581 of Title 28, Judiciary and Judicial Procedure.
Amendment by section 257 of Pub. L. 99-554 effective 30 days
after Oct. 27, 1986, but not applicable to cases commenced under
this title before that date, see section 302(a), (c)(1) of Pub. L.
99-554.
EFFECTIVE DATE OF 1984 AMENDMENT
Amendment by Pub. L. 98-353 effective with respect to cases filed
90 days after July 10, 1984, see section 552(a) of Pub. L. 98-353,
set out as a note under section 101 of this title.