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Tuesday, July 23, 2024 | Back issues
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Bid by Lawyers for More Millions Faces SCOTUS

WASHINGTON (CN) - Attorneys for Asarco who successfully litigated a 20 percent enhancement fee can take their fight for millions more to the Supreme Court, the justices said Thursday.

It was the attorneys at Baker Botts and Jordan, Hyden, Womble, Culbreth & Holzer who brought Asarco back from the brink of financial ruin, and transformed it into a competitive company in "probably the most successful Chapter 11 of any magnitude in the history of the [bankruptcy] code," several courts to have looked at the case have noted.

The copper-mining and smelting firm had declared Chapter 11 bankruptcy in 2005, facing cash-flow and tax problems, as well as environmental liabilities. When it emerged from bankruptcy four years later, it had $1.4 billion in cash, and its environmental liabilities were successfully resolved.

Despite Asarco's financial difficulties, its parent company, Grupo Mexico, had Asarco transfer to it its interest in Southern Copper Co. Asarco's attorneys used that factor to win a judgment against Grupo Mexico valued at between $7 billion and $10 billion.

This award was the largest fraudulent-transfer judgment in Chapter 11 history.

Given their extremely successful work, Baker Botts and Jordan Hyden sought a 20 percent fee enhancement for the entire case, as well as fees for preparing and litigating their final-fee applications.

A court soon awarded Baker Botts $113 million and Jordan Hyden $7 million for fees and expenses after a six-day trial. It approved a fee enhancement for the work performed on the Southern Copper Co. litigation, but not for the firm's entire work for Asarco.

This enhancement amounted to an addition $4.1 million for Baker Botts and $125,000 for Jordan Hyden.

A federal judge in Dallas who affirmed noted: "There is an abundance of evidence which supports [the bankruptcy] court's enhancement award. ... A seven billion dollar judgment, which is recoverable, which saves a company, and funds a 100% recovery for all concerned is a once in a lifetime result."

Though the 5th Circuit affirmed the fee enhancements on April 30, 2014, it said the attorneys cannot recover fee awards for litigation over their fee applications.

Baker Botts had hoped to recover the $5 million it spent fighting in court for its fee award.

"In the absence of explicit statutory guidance, requiring professionals to defend their fee applications as a cost of doing business is consistent with the reality of the bankruptcy process," Judge Edith Jones wrote for a three-judge panel. "The perverse incentives that could arise from paying the bankruptcy professionals to engage in satellite fee litigation are easy to conceive."

Jones acknowledged that this precedent could encourage unscrupulous firms to object to attorneys' fee requests, which would require the attorneys to defend themselves, amounting to a fee reduction.

"This opinion should not be read as encouraging tactical or ill-supported objections to fee applications," Jones said. "We are confident that bankruptcy courts, practicing vigilance and sound case management, can thwart punitive or excessively costly attacks on professional fee applications."

The New Orleans-based panel heaped praise upon the attorneys,

"The bankruptcy court could hardly have been more specific and detailed as to Baker Botts's 'rare and exceptional' performance than it was while placing this description in the context of its 85-page opinion on fees," Jones wrote.

Abbreviating Southern Copper Co., Jones added that "the [bankruptcy] court singled out the firms' prosecution of the SCC Litigation for fee enhancement precisely because it ascribed success to their efforts alone.""The court described the SCC Litigation as Asarco's 'crown jewel,'" Jones wrote.

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