Department of Justice Compels Bankruptcy Counsel to Become More Accountable on Fees

Posted on June 19th, 2013 by Legal Fee Advisors

On June 11, 2013 the DOJ announced new guidelines for payment of attorneys’ fees and expenses that may, for the first time, compel bankruptcy lawyers to become more accountable on how they charge for their services. The new rules represent the first major revision of such rules since 1996. Many have complained that the present rules are too loose, allowing firms to charge for inefficient billing practices.

Acting Associate Attorney General Tony West commented that, “At a time when both the public and the most sophisticated participants in the bankruptcy process say bankruptcy attorneys’ costs are rising too rapidly, these guidelines are designed to ensure that statutory requirements limiting bankruptcy fees to market rates – not premium rates – are followed.”
The guidelines reflect eight core principles, including a mandate that lawyers provide “meaningful disclosure … and transparency in billing practices,” with the goal of “increasing public confidence in the integrity and soundness of the bankruptcy compensation process.” While these changes provide hope that real change may occur, some are skeptical that long-standing practices will change any time soon.

Clearly, the new rules are an attempt to align the bankruptcy court with legal billing standards and practices in the commercial world, and to assure legal billing meets the same requirements for transparency and accountability. In a world of escalating fee requests, it is yet to be seen whether courts will adopt meaningful change, or whether better standards will remain the province of activist corporate entities.

B. Popik | D. Paige
Legal Fee Advisors © 2013