Republican Lawmaker Wants Federal Review of Attorneys' Chapter 11 Billing Practices, Venue Shopping

A Midwestern senator has put American bankruptcy attorneys in his proverbial crosshairs over what he characterized as the possible “abusive practices” of some professionals in the industry. The lawmaker wondered in a publicly released letter if updated federal guidelines under Section 330 of the Bankruptcy Code would do enough to protect creditors while also calling for a review of forum (court) selection practices.

In an electronic letter to Gene Dodaro, Comptroller General of the United States, Sen. Charles Grassley (R-IA) requested a formal Government Accountability Office (GAO) review of fees involved in corporate bankruptcy cases, especially large ones. Grassley, the ranking member on the Senate Judiciary Committee, makes the request in advance of a coming guideline enactment for compensation and reimbursement terms in large corporate Chapter 11 cases. The guidelines, issued by the Department of Justice to assist the U.S. Trustees when reviewing applications for compensation and reimbursement, will be enacted on November 1.

“It is imperative, in a court of equity like the Bankruptcy Court, that Congress monitor whether large corporate Chapter 11 cases are ‘cash cows’ for certain professionals at the expense of creditors and debtors alike, thereby subverting Congressional intent,” Grassley wrote. He piggybacked the request with another to review the issue of venue shopping and whether it contributes to excessive fees being paid to legal professionals by creditors and debtors.

-Brian Shappell, CBA, CICP, NACM staff writer

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