Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Over-Secured Lenders and Requests for Attorneys' Fees

By Mark A. McDermott and Christine A. Okike
November 30, 2014

The United States Court of Appeals for the Fifth Circuit recently reaffirmed the long-established rule that an over-secured lender's legal and other fees are subject to court approval as reasonable under section 506(b) of the Bankruptcy Code. See, Wells Fargo Bank, N.A. v. 804 Congress, L.L.C. (In re 804 Congress, L.L.C.), No. 12-50382, 2014 U.S. App. LEXIS 11819 (5th Cir. June 23, 2014). This rule is embodied in the plain language of section 506(b), which provides that an over-secured creditor may recover “'fees, costs, or charges provided for under the agreement ' under which such claim arose' ' but only to the extent that the fees, costs, or charges are reasonable.” Id. at 8.

While the rule is relatively clear, many consensual reorganization plans provide for payment of secured lenders' and other stakeholders' fees that, while subject to reasonableness review, often are not actually reviewed in any meaningful detail by a bankruptcy court. Indeed, if a plan is consensual and no one objects, there arguably is no need. But 804 Congress is a reminder that the standard nonetheless is there, and that the burden is on the professional to establish reasonableness when the amount of the fees is being challenged.

Facts

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
Major Differences In UK, U.S. Copyright Laws Image

This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.

The Article 8 Opt In Image

The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.

Strategy vs. Tactics: Two Sides of a Difficult Coin Image

With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.

Legal Possession: What Does It Mean? Image

Possession of real property is a matter of physical fact. Having the right or legal entitlement to possession is not "possession," possession is "the fact of having or holding property in one's power." That power means having physical dominion and control over the property.

The Anti-Assignment Override Provisions Image

UCC Sections 9406(d) and 9408(a) are one of the most powerful, yet least understood, sections of the Uniform Commercial Code. On their face, they appear to override anti-assignment provisions in agreements that would limit the grant of a security interest. But do these sections really work?