THE PRO-SNAX PROBLEM: HOW THE FIFTH CIRCUIT TOOK "REASONABLENESS"TO A WHOLE NEW LEVEL I. II.
III. IV.
INTRODUCTION ..................................... THE BANKRUPTCY CODE ................................... THE PRO-SNAX OPINION ............................. THE PRO-SNAX PROBLEM: REASONABLENESS NOT GOOD ENOUGH ...........................................
716 ...... 722 ...... 724
A.
Pro-Snax: An ErroneousStandard.......... .......... 724 1. The Hindsight Standardis Inconsistent with § 330's Statutory Language ................ ..... 725 2. Pro-Snax 's Faulty Reliance on Melp........................ 726
B.
The Effect Pro-SnaxHas on the Fifth Circuit: Inconsistency .................... .................. 730 1. The Three Standards ................. ..... 730 2. "Harmonizing"the Three Standards with § 330.......732 3. Exceptions to Pro-Snax:From Bad to Worse .......... 734 a. The "Mandatory Services" Exception ........ 735 b. The "Defining Benefit" Exception ............. 737 c. The "Lack of Success" Exception............... 740 Circuit Split: How Other Courts View Pro-Snax and Attorney Compensation ............... ................ 744
C. V. VI.
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CONCLUSION ............................................. 746 A PROMISING FUTURE-RECENT UPDATES FROM THE FIFTH CIRCUIT ............................................ ..... 747
I.
INTRODUCTION
Professionals are paid for the services they provide, including attorneys representing a bankrupt client. But attorney compensation has always been a delicate issue in bankruptcy cases. While debtors strive to maintain their estate and creditors want what is owed to them, attorneys are one of the first parties getting paid.' The Bankruptcy Code2 (the Code) was designed to resolve these competing claims that inevitably arise with a 1. Attorney's fees incurred during the bankruptcy are characterized as an "administrative expense" and are generally paid in full before other unsecured claims if they are "actual, necessary costs and expenses of preserving the estate." 11 U.S.C. §§ 507(a)(2), 503(b)(1)(A) (2012). This priority, however, does not extend above secured claims. See id. §§ 362(d)(1), 363(e), 364(d) (granting secured parties "adequate protection" of an interest in property, entitling these parties to receive compensation for their claims at least to the extent of the value of their collateral). 2. This Comment uses the terms "Bankruptcy Code" and "Code" to refer to the Bankruptcy Reform Act of 1978, Pub. L. No. 95-598, 92 Stat. 2549 (codified as amended at 11 U.S.C. §§ 101-1532 (2012)).
713