Opinion ID: 496735
Heading Depth: 2
Heading Rank: 2

Heading: Employment of Attorney on Contingent Fee Basis

Text: 19 Cluett also challenges the district court's decision that the provisions in the bankruptcy court order employing attorney Herbert Beigel on a contingent fee basis in the LHLC litigation and setting a contingent fee schedule were not a final order. 7 Cluett contends that the provisions employing Beigel and setting his fees use mandatory language such as shall and only require the bankruptcy court to fill in the blanks to determine Beigel's payment after the LHLC litigation is finally settled. Cluett relies on language in In re Fox, 762 F.2d 54, 55 (7th Cir.1985), to argue that all that is left for the bankruptcy court is a purely mechanical, computerized, or in short 'ministerial' task, whose performance is unlikely either to generate a new appeal or to affect the issue that the disappointed party wants to raise on appeal from the order of remand. Cluett's reliance on Fox is misplaced, not only because that case involved the question of finality of a district court's remand of a case to a bankruptcy court, but also because the bankruptcy court's final determination of compensation for Beigel will involve more than the ministerial task of multiplying the amount of the judgment in the district court case (if any) by the percentages in the contingent fee schedule. Although the provision sets forth a contingent fee schedule and may give the appearance of a final determination as to fees, Beigel must comply with the procedures set forth in the bankruptcy code before getting any fees. That process involves petitioning to the bankruptcy court, notice to creditors, and a hearing. 11 U.S.C. Sec. 330(a) (1982 & Supp. II 1984); Bankr.R. 2002; see Brown v. Gerdes, 321 U.S. 178, 182, 64 S.Ct. 487, 489, 88 L.Ed. 659 (1944); In re Wilson Foods Corp., 36 B.R. 317, 320 (Bankr.W.D.Okla.1984) (noting that notice and hearing are required for applications by professional persons for attorneys fees and compensation). According to the express language of 11 U.S.C. Sec. 328(a) (1982 & Supp. II 1984), Beigel's fees are subject to later change and possibly reduction. Cf. In re General Oil Distributors, Inc., 51 B.R. 794, 802-03 (Bankr.E.D.N.Y.1985) (reducing attorney fee by ten percent of lodestar amount because, among other reasons, litigation conducted by counsel was largely unsuccessful). Section 328(a) provides the following: 20 The trustee ... with the court's approval, may employ or authorize the employment of a professional person ... on any reasonable terms and conditions of employment, including ... on a contingent fee basis. Notwithstanding such terms and conditions, the court may allow compensation different from the compensation provided under such terms and conditions after the conclusion of such employment, if such terms and conditions prove to have been improvident in light of developments not capable of being anticipated at the time of the finding of such terms and conditions. 21 Cluett argues that the bankruptcy court definitively set a mandatory fee because the court deviated from the standard procedure of authorizing employment of attorneys pursuant to section 328 of the bankruptcy code and then determining the rate of their compensation at the end of the case. Section 328, however, explicitly allows the employment of an attorney on a contingent fee basis. In addition, that provision does not prohibit setting a contingent fee schedule, nor does it state that setting a contingent fee schedule, or any rate of compensation, will exempt the fee-seeker from the usual bankruptcy code procedures of notice to creditors and a hearing before the bankruptcy court approves the fees. Indeed, we believe that section 328 read in conjunction with section 330 contemplates that an attorney seeking a contingent fee payment still must apply to the bankruptcy court and that the language of section 328 expressly allows setting a rate of payment at the beginning of an attorney's employment that may later be changed. 22 Furthermore, Beigel may not receive any fee at all if he and LHLC (and the creditors' committee, if they are allowed to join) do not succeed in the pending district court suit. In addition, other courts have held that when a request for fees is not a final request, orders based on such requests are not final orders. See In re Callister, 673 F.2d 305, 306-07 (10th Cir.1982); In re Yermakov, 718 F.2d 1465 (9th Cir.1983); 2 Collier on Bankruptcy, p 331.03, at 331-9 (15th ed. 1987) (interim allowances are always subject to the court's re-examination and adjustment during the course of the case as all expenses of administration must receive the court's final scrutiny and approval). 23