Hindsight is 330.

A law firm appealed the partial denial of its bankruptcy fee application.  The bankrupty court said “its ruling was informed by the bad conduct of the Debtors themselves, which should have lead [the firm] to withdraw from the case sooner than it ultimately did.”  The district court said the record showed that “this bankruptcy proceeding was doomed at the outset, and arguably could not have been filed in good faith under Chapter 11.”   Barron & Newburger, P.C. v. Texas Skyline, Ltd., No. 13-50075 (July 15, 2014).  The Fifth Circuit affirmed, noting that its earlier opinion of  In re: Pro-Snax Distributors, Inc., 157 F.3d 414 (5th Cir. 1998) rejected a “reasonableness” test in the application of Bankruptcy Code § 330 — which would have asked “whether the services were objectively beneficial toward the completion of the case at the time they were performed” — in favor of a “hindsight” approach, asking whether the professionals’ work “resulted in an identifiable, tangible, and material benefit to the bankruptcy estate.”  That said, all three panel members joined a special concurrence asking the full Court to reconsider Pro-Snax en banc, observing that its outright rejection of forward-looking reasonableness “appears to conflict with the language and legislative history of § 330, diverges from the decisions of other circuits, and has sown confusion in our circuit.”

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