11 U.S.C. § 327 — Employment of professional persons

Page 55 TITLE 11—BANKRUPTCY § 327 him, the combined total of the fees payable to the in- terim trustee and the permanent trustee may not ex- ceed the amount specified in this section. Under cur- rent law, very often a receiver receives a full fee and a subsequent trustee also receives a full fee. The result- ant ‘‘double-dipping’’, especially in cases in which the receiver and the trustee are the same individual, is det- rimental to the interests of creditors, by needlessly in- creasing the cost of administering bankruptcy estates. Subsection (e) [enacted as (d)] permits the court to deny compensation to a trustee if the trustee has been derelict in his duty by employing counsel, who is not disinterested. Editorial Notes AMENDMENTS 2019—Subsec. (a). Pub. L. 116–54, § 4(a)(4)(A), inserted ‘‘, other than a case under subchapter V of chapter 11’’ after ‘‘7 or 11’’. Subsec. (b). Pub. L. 116–54, § 4(a)(4)(B), inserted ‘‘sub- chapter V of chapter 11 or’’ after ‘‘In a case under’’. 1994—Subsec. (a). Pub. L. 103–394 substituted ‘‘25 per- cent on the first $5,000 or less, 10 percent on any amount in excess of $5,000 but not in excess of $50,000, 5 percent on any amount in excess of $50,000 but not in excess of $1,000,000, and reasonable compensation not to exceed 3 percent of such moneys in excess of $1,000,000’’ for ‘‘fifteen percent on the first $1,000 or less, six per- cent on any amount in excess of $1,000 but not in excess of $3,000, and three percent on any amount in excess of $3,000’’. 1986—Subsec. (b). Pub. L. 99–554 amended subsec. (b) generally, substituting ‘‘under chapter 12 or 13 of this title’’ for ‘‘under chapter 13 of this title’’, ‘‘expenses of the United States trustee or of a standing trustee ap- pointed under section 586(b) of title 28’’ for ‘‘expenses of a standing trustee appointed under section 1302(d) of this title’’, and ‘‘under section 1202(a) or 1302(a) of this title’’ for ‘‘under section 1302(a) of this title’’. 1984—Subsec. (a). Pub. L. 98–353, § 430(a), substituted ‘‘and three percent on any amount in excess of $3000’’ for ‘‘three percent on any amount in excess of $3,000 but not in excess of $20,000, two percent on any amount in excess of $20,000 but not in excess of $50,000, and one percent on any amount in excess of $50,000’’. Subsec. (d). Pub. L. 98–353, § 430(b), amended subsec. (d) generally. Prior to amendment, subsec. (d) read as follows: ‘‘The court may deny allowance of compensa- tion for services and reimbursement of expenses of the trustee if the trustee— ‘‘(1) failed to make diligent inquiry into facts that would permit denial of allowance under section 328(c) of this title; or ‘‘(2) with knowledge of such facts, employed a pro- fessional person under section 327 of this title.’’ Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2019 AMENDMENT Amendment by Pub. L. 116–54 effective 180 days after Aug. 23, 2019, see section 5 of Pub. L. 116–54, set out as a note under section 101 of this title. EFFECTIVE DATE OF 1994 AMENDMENT Amendment by Pub. L. 103–394 effective Oct. 22, 1994, and not applicable with respect to cases commenced under this title before Oct. 22, 1994, see section 702 of Pub. L. 103–394, set out as a note under section 101 of this title. EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by Pub. L. 99–554 dependent upon the judicial district in- volved, see section 302(d), (e) of Pub. L. 99–554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98–353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98–353, set out as a note under section 101 of this title. REFERENCES IN SUBSECTION (b) TEMPORARILY DEEMED TO INCLUDE ADDITIONAL REFERENCES Until the amendments made by subtitle A (§§ 201 to 231) of title II of Pub. L. 99–554 become effective in a district and apply to a case, for purposes of such case any reference in subsec. (b) of this section— (1) to chapter 13 of this title is deemed to be a ref- erence to chapter 12 or 13 of this title, (2) to section 1302(d) of this title is deemed to be a reference to section 1302(d) of this title or section 586(b) of Title 28, Judiciary and Judicial Procedure, and (3) to section 1302(a) of this title is deemed to be a reference to section 1202(a) or 1302(a) of this title, see section 302(c)(3)(A), (d), (e) of Pub. L. 99–554, set out in an Effective Date of 1986 Amendment; Transition and Administrative Provisions note under section 581 of Title 28. § 327. Employment of professional persons (a) Except as otherwise provided in this sec- tion, the trustee, with the court’s approval, may employ one or more attorneys, accountants, ap- praisers, auctioneers, or other professional per- sons, that do not hold or represent an interest adverse to the estate, and that are disinterested persons, to represent or assist the trustee in car- rying out the trustee’s duties under this title. (b) If the trustee is authorized to operate the business of the debtor under section 721, 1202, or 1108 of this title, and if the debtor has regularly employed attorneys, accountants, or other pro- fessional persons on salary, the trustee may re- tain or replace such professional persons if nec- essary in the operation of such business. (c) In a case under chapter 7, 12, or 11 of this title, a person is not disqualified for employ- ment under this section solely because of such person’s employment by or representation of a creditor, unless there is objection by another creditor or the United States trustee, in which case the court shall disapprove such employ- ment if there is an actual conflict of interest. (d) The court may authorize the trustee to act as attorney or accountant for the estate if such authorization is in the best interest of the es- tate. (e) The trustee, with the court’s approval, may employ, for a specified special purpose, other than to represent the trustee in conducting the case, an attorney that has represented the debt- or, if in the best interest of the estate, and if such attorney does not represent or hold any in- terest adverse to the debtor or to the estate with respect to the matter on which such attor- ney is to be employed. (f) The trustee may not employ a person that has served as an examiner in the case. (Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2563; Pub. L. 98–353, title III, § 430(c), July 10, 1984, 98 Stat. 370; Pub. L. 99–554, title II, §§ 210, 257(e), Oct. 27, 1986, 100 Stat. 3099, 3114.) HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 327(a) of the House amendment contains a technical amendment indicating that attorneys, and perhaps other officers enumerated therein, represent, rather than assist, the trustee in carrying out the trustee’s duties. Page 56 TITLE 11—BANKRUPTCY § 328 Section 327(c) represents a compromise between H.R. 8200 as passed by the House and the Senate amendment. The provision states that former representation of a creditor, whether secured or unsecured, will not auto- matically disqualify a person from being employed by a trustee, but if such person is employed by the trustee, the person may no longer represent the creditor in con- nection with the case. Section 327(f) prevents an examiner from being em- ployed by the trustee. SENATE REPORT NO. 95–989 This section authorizes the trustee, subject to the court’s approval, to employ professional persons, such as attorneys, accountants, appraisers, and auctioneers, to represent or perform services for the estate. The trustee may employ only disinterested persons that do not hold or represent an interest adverse to the estate. Subsection (b) is an exception, and authorizes the trustee to retain or replace professional persons that the debtor has employed if necessary in the operation of the debtor’s business. Subsection (c) provides a professional person is not disqualified for employment solely because of the per- son’s prior employment by or representation of a se- cured or unsecured creditor. Subsection (d) permits the court to authorize the trustee, if qualified to act as his own counsel or ac- countant. Subsection (e) permits the trustee, subject to the court’s approval, to employ for a specified special pur- pose an attorney that has represented the debtor, if such employment is in the best interest of the estate and if the attorney does not hold or represent an inter- est adverse to the debtor of the estate with respect to the matter on which he is to be employed. This sub- section does not authorize the employment of the debt- or’s attorney to represent the estate generally or to represent the trustee in the conduct of the bankruptcy case. The subsection will most likely be used when the debtor is involved in complex litigation, and changing attorneys in the middle of the case after the bank- ruptcy case has commenced would be detrimental to the progress of that other litigation. HOUSE REPORT NO. 95–595 Subsection (c) is an additional exception. The trustee may employ as his counsel a nondisinterested person if the only reason that the attorney is not disinterested is because of his representation of an unsecured cred- itor. Editorial Notes AMENDMENTS 1986—Subsec. (b). Pub. L. 99–554, § 257(e)(1), which di- rected the insertion of ‘‘, 1202,’’ after ‘‘section 721,’’ was executed by making the insertion after ‘‘section 721’’ to reflect the probable intent of Congress. Subsec. (c). Pub. L. 99–554, § 257(e)(2), which directed the insertion of ‘‘, 12,’’ after ‘‘section 7,’’ was executed by making the insertion after ‘‘chapter 7’’ to reflect the probable intent of Congress. Pub. L. 99–554, § 210, inserted ‘‘or the United States trustee’’ after ‘‘another creditor’’. 1984—Subsec. (c). Pub. L. 98–353 substituted ‘‘In a case under chapter 7 or 11 of this title, a person is not dis- qualified for employment under this section solely be- cause of such person’s employment by or representa- tion of a creditor, unless there is objection by another creditor, in which case the court shall disapprove such employment if there is an actual conflict of interest.’’ for ‘‘In a case under chapter 7 or 11 of this title, a per- son is not disqualified for employment under this sec- tion solely because of such person’s employment by or representation of a creditor, but may not, while em- ployed by the trustee, represent, in connection with the case, a creditor.’’ Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1986 AMENDMENT Effective date and applicability of amendment by sec- tion 210 of Pub. L. 99–554 dependent upon the judicial district involved, see section 302(d), (e) of Pub. L. 99–554, set out as a note under section 581 of Title 28, Judiciary and Judicial Procedure. Amendment by section 257 of Pub. L. 99–554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see sec- tion 302(a), (c)(1) of Pub. L. 99–554. EFFECTIVE DATE OF 1984 AMENDMENT Amendment by Pub. L. 98–353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98–353, set out as a note under section 101 of this title. § 328. Limitation on compensation of professional persons (a) The trustee, or a committee appointed under section 1102 of this title, with the court’s approval, may employ or authorize the employ- ment of a professional person under section 327 or 1103 of this title, as the case may be, on any reasonable terms and conditions of employment, including on a retainer, on an hourly basis, on a fixed or percentage fee basis, or on a contingent fee basis. Notwithstanding such terms and con- ditions, the court may allow compensation dif- ferent from the compensation provided under such terms and conditions after the conclusion of such employment, if such terms and condi- tions prove to have been improvident in light of developments not capable of being anticipated at the time of the fixing of such terms and con- ditions. (b) If the court has authorized a trustee to serve as an attorney or accountant for the es- tate under section 327(d) of this title, the court may allow compensation for the trustee’s serv- ices as such attorney or accountant only to the extent that the trustee performed services as at- torney or accountant for the estate and not for performance of any of the trustee’s duties that are generally performed by a trustee without the assistance of an attorney or accountant for the estate. (c) Except as provided in section 327(c), 327(e), or 1107(b) of this title, the court may deny allow- ance of compensation for services and reim- bursement of expenses of a professional person employed under section 327 or 1103 of this title if, at any time during such professional person’s employment under section 327 or 1103 of this title, such professional person is not a disin- terested person, or represents or holds an inter- est adverse to the interest of the estate with re- spect to the matter on which such professional person is employed. (Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2563; Pub. L. 98–353, title III, § 431, July 10, 1984, 98 Stat. 370; Pub. L. 109–8, title XII, § 1206, Apr. 20, 2005, 119 Stat. 194.) HISTORICAL AND REVISION NOTES LEGISLATIVE STATEMENTS Section 328(c) adopts a technical amendment con- tained in the Senate amendment indicating that an at- torney for the debtor in possession is not disqualified for compensation for services and reimbursement of ex-