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SUPREME COURT OF THE UNITED STATES
_________________
No. 14–103
_________________
BAKER BOTTS L.L.P. et al., PETITIONERS
v.ASARCO LLC
on writ of certiorari to the united states
court of appeals for the fifth circuit
[June 15, 2015]
Justice Thomas delivered the opinion of the
Court.
Section 327(a) of the Bankruptcy Code allows
bank-ruptcy 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 attor-ney
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. ___
(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 –253 (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 (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 (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
(2001) (quoting
Key Tronic Corp. v.
United
States, 511 U. S. 809, 814 (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 (1975) . Although these “[s]tatutory changes to [the American
Rule] take various forms,”
Hardt,
supra, at 253, 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 (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 (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.
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 sec-tions
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
“reason-able 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 (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 specifi-cally nor
explicitly authorizes courts to shift the costs ofadversarial
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 done
in service of the
estate administrator. More specifically, §330(a)(1) allows
“reasonable compensation” only for
“actual, necessary services
rendered.” (Emphasis added.) That qualification is significant.
The word “services” ordinarily refers to “labor performed for
another.” Webster’s New International Dictionary 2288 (def. 4) (2d
ed. 1934); see also Black’s Law Dictionary 1607 (3d ed. 1933)
(“duty or labor to be rendered by one person to another”); Oxford
English Dictionary 517 (def. 19) (1933) (“action of serving,
helping or benefiting; conduct tending to the welfare or advantage
of another”).[
2] Thus, in a
case addressing §330(a)’s predecessor, this Court concluded that
the phrase “ ‘reasonable compensation for services rendered’
necessarily implies loyal and disinterested service in the interest
of” a client.
Woods v.
City Nat. Bank & Trust Co. of
Chicago, 312 U. S. 262, 268 (1941) ; accord,
American
United Mut. Life Ins. Co. v.
Avon Park, 311 U. S.
138, 147 (1940) . Time spent litigating a fee application against
the administrator of a bankruptcy estate cannot be fairly described
as “labor performed for”—let alone “disinterested service to”—that
administrator.
This legislative decision to limit
“compensation” to “services rendered” is particularly telling given
that other provisions of the Bankruptcy Code expressly transfer the
costs of litigation from one adversarial party to the other.
Section 110(i), for instance, provides that “[i]f a bank-ruptcy
petition preparer . . . commits any act that the court
finds to be fraudulent, unfair, or deceptive, on the motion of the
debtor, trustee, United States trustee (or the bankruptcy
administrator, if any),” the bankruptcy court must “order the
bankruptcy petition preparer to pay the debtor . . .
reasonable attorneys’ fees and costs in moving for damages under
this subsection.” §110(i)(1)(C). Had Congress wished to shift the
burdens of fee-defense litigation under §330(a)(1) in a similar
manner, it easily could have done so. We accordingly refuse “to
invade the legislature’s province by redistributing litigation
costs” here.
Alyeska Pipeline, 421 U. S.
, at
271.
III
The law firms, the United States as
amicus
curiae, and the dissent resist this straightforward
interpretation of the statute. The law firms and the Government
each offer a theory for why §330(a)(1) expressly overrides the
American Rule in the context of litigation in defense of a fee
application, and the dissent embraces the latter. Neither theory is
persuasive.
A
We begin with the law firms’ approach.
According to the firms, fee-defense litigation is part of the
“services rendered” to the estate administrator under §330(a)(1).
See Brief for Petitioners 23–30. As explained above, that reading
is untenable. The term “services” in this provision cannot be read
to encompass adversarial fee-defense litigation. See Part II–B,
supra. Even the dissent agrees on this point. See
post, at 1 (opinion of Breyer, J.).
Indeed, reading “services” in this manner could
end up compensating attorneys for the
unsuccessful defense
of a fee application. The firms insist that “estates
do
benefit from fee defenses”—and thus receive a “service” under
§330(a)(1)—because “the estate has an interest in obtaining a just
determination of the amount it should pay its professionals.” Brief
for Petitioners 25–26 (internal quotation marks omitted). But that
alleged interest—and hence the supposed provision of a
“service”—exists whether or not a §327(a) professional prevails in
his fee dispute. We decline to adopt a reading of §330(a)(1) that
would allow courts to pay professionals for arguing for fees they
were found never to have been entitled to in the first place. Such
a result would not only require an unnatural interpretation of the
term “services rendered,” but a particu-larly unusual deviation
from the American Rule as well, as“[m]ost fee-shifting provisions
permit a court to award attorney’s fees only to a ‘prevailing
party,’ ” a “ ‘substantially prevailing’ party,” or “a
‘successful’ litigant,”
Hardt, 560 U. S.
, at 253
(footnote omitted). There is no indication that Congress departed
from the American Rule in §330(a)(1) with respect to fee-defense
litigation, let alone that it did so in such an unusual manner.
B
The Government’s theory, embraced by the
dissent, fares no better. Although the United States agrees that
“the defense of a fee application does not
itself qualify as
an independently compensable service,” it nonetheless contends that
“compensation for such work is properly viewed as part of the
compensation
for the underlying services in the bankruptcy
proceeding.” Brief for United States as
Amicus Curiae 25.
According to the Government, if an attorney is not repaid for his
time spent successfully litigating fees, his compensation for his
actual “services rendered” to the estate administrator in the
underlying proceeding will be diluted.
Id., at 18. The
United States thus urges us to treat fees for fee-defense work “as
a component of ‘reasonable compensation.’ ”
Id., at 33;
accord,
post, at 1 (Breyer, J., dissenting). We refuse to do
so for several reasons.
1
First and foremost, the Government’s theory
cannot be reconciled with the relevant text. Section 330(a)(1) does
not authorize courts to award “reasonable compensation”
simpliciter, but “reasonable compensation
for actual,
necessary services rendered by” the §327(a) professional.
§330(a)(1)(A) (emphasis added). Here, the contested award was tied
to the firms’ work on the fee-defense litigation and is correctly
understood only as compensation for that work. The Government and
the dissent properly concede that litigation in defense of a fee
application is not a “service” within the meaning of §330(a)(1); it
follows that the contested award was not “compensation” for a
“service.” Thus, the only way to reach their reading of the statute
would be to excise the phrase “for actual, necessary services
rendered” from the statute.[
3]
Contrary to the Government’s assertion,
§330(a)(6) does not presuppose that courts are free to award
compensation based on work that does not qualify as a service to
the estate administrator. That provision specifies that “[a]ny
compensation awarded for the preparation of a fee application shall
be based on the level and skill reasonably required to prepare the
application.” The Government argues that because time spent
preparing a fee application is compensable, time spent
defending it must be too. But the provision cuts the other
way. A §327(a) professional’s preparation of a fee application is
best understood as a “servic[e] rendered” to the estate
administrator under §330(a)(1), whereas a professional’s defense of
that application is not. By way of analogy, it would be natural to
describe a car mechanic’s preparation of an itemized bill as part
of his “services” to the customer because it allows a customer to
understand—and, if necessary, dispute—his expenses. But it would be
less natural to describe a subsequent court battle over the bill as
part of the “services rendered” to the customer.
The Government used to understand that time
spent preparing a fee application was different from time spent
defending one for the purposes of §330(a)(1). Just a few years ago,
the U. S. Trustee explained that “[r]easonable charges for
preparing . . . fee applications . . . are
compensable . . . because the preparation of a fee
application is not required for lawyers practicing in areas other
than bankruptcy as a condition to getting paid.” 78 Fed. Reg. 36250
(2013) (emphasis deleted). By contrast, “time spent . . .
defending . . . fee applications” is ordinarily “not
compensable,” the Trustee observed, as such time can be “properly
characterized as work that is for the benefit of the professional
and not the estate.”
Ibid.
To support its broader interpretation of
§330(a)(6), the Government, echoed by the dissent, relies on our
remark in
Jean that “[w]e find no textual or logical
argument for treating so differently a party’s preparation of a fee
application and its ensuing efforts to support that same
application.” 496 U. S., at 162; see
post, at 7. But
that use of
Jean begs the question.
Jean addressed a
statutory provision that everyone agreed authorized court-awarded
fees for fee-defense litigation. 496 U. S., at 162. The “only
dispute” in that context was over what “finding [was] necessary to
support such an award.”
Ibid. In resolving that issue, the
Court declined to treat fee-application and fee-litigation work
differently given that the relevant statutory text—“a court shall
award to a prevailing party . . . fees and other expenses
. . . incurred by that party in any civil action”—could
not support such a distinction.
Id., at 158. Here, by
contrast, the operative language—“reasonable compensation for
actual, necessary services rendered”—reaches only the
fee-application work. The fact that the provision at issue in
Jean “did not mention fee-defense work,”
post, at 5,
is thus irrelevant.
In any event, the Government’s textual foothold
for its argument is too insubstantial to support a deviation from
the American Rule. The open-ended phrase “reasonable compensation,”
standing alone, is not the sort of “specific and explicit
provisio[n]” that Congress must provide in order to alter this
default rule.
Alyeska Pipeline, 421 U. S.
, at
260.
2
Ultimately, the Government’s theory rests on a
flawed and irrelevant policy argument. The United States contends
that awarding fees for fee-defense litigation is a “judicial
exception” necessary to the proper functioning of the Bankruptcy
Code. Brief for United States as
Amicus Curiae 15, n. 7
(internal quotation marks omitted). Absent this exception, it
warns, fee-defense litigation will dilute attorney’s fees and
result in bankruptcy lawyers receiving less compensation than
nonbankruptcy lawyers, thereby undermining the congressional aim of
ensuring that talented attorneys will take on bankruptcy work.
Accord,
post, at 3.
As an initial matter, we find this policy
argument unconvincing. In our legal system,
no attorneys,
regardless of whether they practice in bankruptcy, are entitled to
receive fees for fee-defense litigation absent express statutory
authorization. Requiring bankruptcy attorneys to pay for the
defense of their fees thus will not result inany disparity between
bankruptcy and nonbankruptcy lawyers.[
4]
The United States nonetheless contends that
uncompensated fee litigation in bankruptcy will be particularly
costly because multiple parties in interest may object to fee
applications, whereas nonbankruptcy fee litigation typically
involves just a lawyer and his client. But this argument rests on
unsupported predictions of how the statutory scheme will operate in
practice, and the Government’s conduct in this case reveals the
perils associ-ated with relying on such prognostications to
interpretstatutes: The United States took the opposite view below,
asserting that “requiring a professional to bear the normal
litigation costs of litigating a contested request for payment
. . . dilutes a bankruptcy fee award no more than any
litigation over professional fees.” Reply Brief for Appellant
United States Trustee in No. 11–290 (SD Tex.), p. 15. The speed
with which the Government has changed its tune offers a good
argument against substituting policy-oriented predictions for
statutory text.
More importantly, we would lack the authority to
rewrite the statute even if we believed that uncompensated fee
litigation would fall particularly hard on the bank-ruptcy bar.
“Our unwillingness to soften the import of Con-gress’ chosen words
even if we believe the words lead to a harsh outcome is
longstanding,” and that is no less true in bankruptcy than it is
elsewhere.
Lamie v.
United States Trustee, 540
U. S. 526, 538 (2004) . Whether or not the Government’s theory
is desirable as a matter of policy, Congress has not granted us
“roving authority . . . to allow counsel fees
. . . whenever [we] might deem them warranted.”
Alyeska Pipeline,
supra, at 260. Our job is to
followthe text even if doing so will supposedly “undercut a basic
objective of the statute,”
post, at 3. Section 330(a)(1)
itself does not authorize the award of fees for defending a fee
application, and that is the end of the matter.
* * *
As we long ago observed, “The general practice
of the United States is in opposition” to forcing one side to pay
the other’s attorney’s fees, and “even if that practice [is] not
strictly correct in principle, it is entitled to the respect of the
court, till it is changed, or modified, by statute.”
Arcambel, 3 Dall.
, at 306 (emphasis deleted). We
follow that approach today. Because §330(a)(1) does not explic-itly
override the American Rule with respect to fee-defense litigation,
it does not permit bankruptcy courts to award compensation for such
litigation. We therefore affirm the judgment of the Court of
Appeals.
It is so ordered.