With names like Madoff and Lehman part of our everyday vernacular, bankruptcies are now commonplace in American culture. While part of the mainstream, media coverage is often dedicated to the fees that professionals earn in these bankruptcy cases. The headlines often tell of eye-popping dollars that are doled out to these professionals, yet little coverage is dedicated to the procedure underlying those payments, and the different payment schemes contemplated by the Bankruptcy Code.
Approximately five years ago, the Second Circuit authored a decision entitled Riker, Danzig, Scherer, Hyland & Perretti v. Official Committee of Unsecured Creditors (In re Smart World Technologies),1 wherein a bankruptcy court’s ability to reduce the fees of bankruptcy professionals that were retained under §328 of the Bankruptcy Code was significantly curtailed. This article will discuss: (i) a description of the retention of bankruptcy professionals under the Bankruptcy Code, (ii) the confusion among courts regarding §328 of the Bankruptcy Code leading up to Smart World, (iii) an analysis of Smart World and its impact on the fee requests of bankruptcy professionals retained under §328 of the Bankruptcy Code, and (iv) in light of Smart World, practical tips to those professionals seeking retention and payment under §328 of the Bankruptcy Code.
