Consider the Enron bankruptcy and its $416 million in legal fees. It hardly seems that a bankrupt company needs to bear even more fees. While it has long been undisputed that unsecured creditors are generally not entitled to post-bankruptcy fees, the petitioner in Travelers Casualty & Surety Co. of America v. Pacific Gas & Electric, No. 05-1429 (2006), now before the U.S. Supreme Court, hopes to change that and make such fees the burden of the bankrupt if the creditor’s pre-bankruptcy documentation and underlying state law so provides. The ramifications for bankrupt companies and creditors from this change would be monumental.
In Travelers, Travelers issued unsecured surety bonds for the benefit of Pacific Gas & Electric. However, PG&E never suffered any loss relating to matters covered by Travelers; thus Travelers never had an actual claim against PG&E.
