U.S. Fifth Circuit, sitting En Banc, Suggests that Attorneys Should be Compensated for Services Reasonably Likely to Benefit Client at the Time they were Performed

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In the context of a debtor’s counsel’s petition for legal fees under the Bankruptcy Code, the Fifth Circuit rejected a “hindsight” standard under which attorneys are only compensated for those services which ultimately resulted in a material benefit to the estate. Rather, “the text and legislative history of §330 contemplate a prospective standard for the award of attorney’s fees relating to bankruptcy proceedings—one that looks to the necessity or reasonableness of legal services at the time they were rendered. Under this framework, if a fee applicant establishes that its services were ‘necessary to the administration’ of a bankruptcy case or ‘reasonably likely to benefit’ the bankruptcy estate ‘at the time at which they were rendered,’ then the services are compensable.  In assessing the likelihood that legal services would benefit the estate, courts adhering to a prospective standard ordinarily consider, among other factors, the probability of success at the time the services were rendered, the reasonable costs of pursuing the action, what services a reasonable lawyer or legal firm would have performed in the same circumstances, whether the attorney’s services could have been rendered by the Trustee and his or her staff, and any potential benefits to the estate (rather than to the individual debtor).” In re Woerner, 783 F.3d 266 (5th Cir. 2015) (en banc).

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