A widely accepted tenet of the legal system in the United States, the American Rule maintains that each party to a litigation pays its own attorney fees unless a statute or contract provides otherwise. However, application of that statutory or contractual exception is not always clear cut. Nearly two years ago, the U.S. Supreme Court in Baker Botts v. Asarco, 135 S. Ct. 2158 (2015), held that the Bankruptcy Code does not explicitly permit courts to award attorney fees to professionals retained pursuant to §327 of the Bankruptcy Code for work performed in defending fee applications. While the bankruptcy bar's reaction to Asarco was short of enthusiastic, most have since embraced the subsequent jurisprudence narrowly construing Asarco and limiting its holding to the compensation of bankruptcy estate professionals.

This article will: (1) provide a brief overview of Asarco and summarize the legal community's reaction to it and efforts to circumvent it, (2) discuss decisions, such as In re Nortel Networks, No. 09-10138 (KG), 2017 Bankr. LEXIS 674 (Bankr. D. Del. March 8, 2017), where bankruptcy courts have rebuffed attempts to expand Asarco, and (3) provide insight into a party's right to recover attorney fees based on statutory authority under the Bankruptcy Code, express contractual provisions or applicable non-bankruptcy law.

'Asarco' and its Aftermath

Asarco filed for Chapter 11 bankruptcy protection in 2005, saddled with environmental liabilities and finding itself in dire financial straits due to a challenging commodity environment. Asarco retained two law firms to assist in its reorganization efforts, whose retentions were subject to two related provisions of the Bankruptcy Code. The first provision was §327, which permits a bankruptcy trustee or debtor-in-possession to employ professionals—including attorneys, accountants, and financial advisors—to facilitate an effective reorganization so long as such professionals do not hold an interest adverse to the bankruptcy estate.See 11 U.S.C. §327. The second provision was §330, which authorizes a bankruptcy court to award “reasonable compensation for actual, necessary services” performed by a professional person retained pursuant to §327 of the Bankruptcy Code. Id. §330.