11 U.S.C. § 328 — Limitation on compensation of professional

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disqualify a person from being employed by a trustee, but if such person is employed by the trustee, the person may no longer represent the creditor in con- nection with the case.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- Page 57 TITLE 11—BANKRUPTCY § 330 penses simply because of prior representation of the debtor. SENATE REPORT NO. 95–989 This section, which is parallel to section 326, fixes the maximum compensation allowable to a professional person employed under section 327. It authorizes the trustee, with the court’s approval, to employ profes- sional persons on any reasonable terms, including on a retainer, on an hourly or on a contingent fee basis. Subsection (a) further permits the court to allow com- pensation different from the compensation provided under the trustee’s agreement if the prior agreement proves to have been improvident in light of develop- ment unanticipatable at the time of the agreement. The court’s power includes the power to increase as well as decrease the agreed upon compensation. This provision is permissive, not mandatory, and should not be used by the court if to do so would violate the code of ethics of the professional involved. Subsection (b) limits a trustee that has been author- ized to serve as his own counsel to only one fee for each service. The purpose of permitting the trustee to serve as his own counsel is to reduce costs. It is not included to provide the trustee with a bonus by permitting him to receive two fees for the same service or to avoid the maxima fixed in section 326. Thus, this subsection re- quires the court to differentiate between the trustee’s services as trustee, and his services as trustee’s coun- sel, and to fix compensation accordingly. Services that a trustee normally performs for an estate without as- sistance of counsel are to be compensated under the limits fixed in section 326. Only services that he per- forms that are normally performed by trustee’s counsel may be compensated under the maxima imposed by this section. Subsection (c) permits the court to deny compensa- tion for services and reimbursement of expenses if the professional person is not disinterested or if he rep- resents or holds an interest adverse to the estate on the matter on which he is employed. The subsection pro- vides a penalty for conflicts of interest. Editorial Notes AMENDMENTS 2005—Subsec. (a). Pub. L. 109–8 inserted ‘‘on a fixed or percentage fee basis,’’ after ‘‘hourly basis,’’. 1984—Subsec. (a). Pub. L. 98–353 substituted ‘‘not ca- pable of being anticipated’’ for ‘‘unanticipatable’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 2005 AMENDMENT Amendment by Pub. L. 109–8 effective 180 days after Apr. 20, 2005, and not applicable with respect to cases commenced under this title before such effective date, except as otherwise provided, see section 1501 of Pub. L. 109–8, set out as a note under section 101 of this title. 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. § 329. Debtor’s transactions with attorneys (a) Any attorney representing a debtor in a case under this title, or in connection with such a case, whether or not such attorney applies for compensation under this title, shall file with the court a statement of the compensation paid or agreed to be paid, if such payment or agreement was made after one year before the date of the filing of the petition, for services rendered or to be rendered in contemplation of or in connection with the case by such attorney, and the source of such compensation. (b) If such compensation exceeds the reason- able value of any such services, the court may cancel any such agreement, or order the return of any such payment, to the extent excessive, to— (1) the estate, if the property transferred— (A) would have been property of the estate; or (B) was to be paid by or on behalf of the debtor under a plan under chapter 11, 12, or 13 of this title; or (2) the entity that made such payment. (Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2564; Pub. L. 98–353, title III, § 432, July 10, 1984, 98 Stat. 370; Pub. L. 99–554, title II, § 257(c), Oct. 27, 1986, 100 Stat. 3114.) HISTORICAL AND REVISION NOTES SENATE REPORT NO. 95–989 This section, derived in large part from current Bankruptcy Act section 60d [section 96(d) of former title 11], requires the debtor’s attorney to file with the court a statement of the compensation paid or agreed to be paid to the attorney for services in contemplation of and in connection with the case, and the source of the compensation. Payments to a debtor’s attorney provide serious potential for evasion of creditor protec- tion provisions of the bankruptcy laws, and serious po- tential for overreaching by the debtor’s attorney, and should be subject to careful scrutiny. Subsection (b) permits the court to deny compensa- tion to the attorney, to cancel an agreement to pay compensation, or to order the return of compensation paid, if the compensation exceeds the reasonable value of the services provided. The return of payments al- ready made are generally to the trustee for the benefit of the estate. However, if the property would not have come into the estate in any event, the court will order it returned to the entity that made the payment. The Bankruptcy Commission recommended a provi- sion similar to this that would have also permitted an examination of the debtor’s transactions with insiders. S. 236, 94th Cong., 1st sess., sec. 4–311(b) (1975). Its exclu- sion here is to permit it to be dealt with by the Rules of Bankruptcy Procedure. It is not intended that the provision be deleted entirely, only that the flexibility of the rules is more appropriate for such evidentiary matters. Editorial Notes AMENDMENTS 1986—Subsec. (b)(1)(B). Pub. L. 99–554 inserted ref- erence to chapter 12. 1984—Subsec. (a). Pub. L. 98–353, § 432(a), substituted ‘‘or’’ for ‘‘and’’ after ‘‘in contemplation of’’. Subsec. (b)(1). Pub. L. 98–353, § 432(b), substituted ‘‘es- tate’’ for ‘‘trustee’’. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1986 AMENDMENT Amendment by Pub. L. 99–554 effective 30 days after Oct. 27, 1986, but not applicable to cases commenced under this title before that date, see section 302(a), (c)(1) 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. § 330. Compensation of officers (a)(1) After notice to the parties in interest and the United States Trustee and a hearing,