Say your firm does an awesome job in a bankruptcy case. It helps the debtor come up with a plan to pay its debts, put its balance sheet in order, and emerge from Chapter 11 in near-record time.
Your firm's lodestar -- hours times hourly rate -- comes to $5.98 million. You ask for a $1 bonus. Only the U.S. trustee objects to the request, and even he complains only about the $1 million boost. Does the bankruptcy judge have the power to "enhance" your lodestar by the $1 million?
Yes he does, the Fifth Circuit ruled last week.
Bankruptcy lawyers and other professionals across the tri-state area of Louisiana, Mississippi, and Texas rejoiced.
The problem lay in a U.S. Supreme Court case, Perdue v. Kenny A., 130 S. Ct. 1662 (2010) (post here), which held that lawyers in most federal civil rights cases can't get more than their lodestar no matter how well they do for their clients. Did that rule also apply to bankruptcy cases?
The Fifth Circuit, in a thorough opinion by Circuit Judge Jennifer Walker Elrod, said no. CRG Partners Group, L.L.C. v. Neary (In re Pilgrim's Pride Corp.), No. 11-10774 (5th Cir. Aug. 10, 2012). The court therefore affirmed the bankruptcy court's award of the $1 million "enhancement fee".