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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.