Lamie v. United States Trustee
540 U.S. 526 (2004)
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Rule of Law:
Under the plain meaning of 11 U.S.C. § 330(a)(1), a bankruptcy court may not award compensation from the bankruptcy estate to a debtor's attorney for services rendered in a Chapter 7 proceeding unless that attorney was employed by the trustee with court approval under 11 U.S.C. § 327.
Facts:
- Equipment Services, Inc. (ESI) retained petitioner, an attorney, to file for Chapter 11 bankruptcy.
- During the Chapter 11 proceeding, petitioner was employed with court approval under § 327 as counsel for ESI, which was acting as the debtor-in-possession.
- The United States Trustee's motion to convert the case from a Chapter 11 reorganization to a Chapter 7 liquidation was granted by the court.
- Upon conversion to Chapter 7, a trustee was appointed, which terminated ESI's status as debtor-in-possession and petitioner's § 327 employment.
- After the conversion, petitioner continued to provide legal services to the debtor, ESI, without being employed by the newly appointed Chapter 7 trustee.
- These post-conversion services included preparing reports, amending asset schedules, and appearing at a hearing.
Procedural Posture:
- Petitioner, an attorney, filed a fee application in the U.S. Bankruptcy Court for the Western District of Virginia for post-conversion services rendered to the debtor.
- The United States Trustee objected to the application.
- The Bankruptcy Court denied the fee application, holding that § 330(a)(1) does not authorize payment unless the attorney is appointed under § 327.
- Petitioner appealed to the U.S. District Court for the Western District of Virginia, which affirmed the Bankruptcy Court's decision.
- Petitioner, as appellant, appealed to the U.S. Court of Appeals for the Fourth Circuit, with the U.S. Trustee as appellee; the court affirmed the lower courts' rulings.
- The U.S. Supreme Court granted petitioner's writ of certiorari.
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Issue:
Does § 330(a)(1) of the Bankruptcy Code authorize a bankruptcy court to award compensation from the estate to an attorney who provided services to a Chapter 7 debtor, but was not appointed by the trustee under § 327?
Opinions:
Majority - Justice Kennedy
No. Section 330(a)(1) of the Bankruptcy Code does not authorize compensation awards from the bankruptcy estate to a debtor's attorney unless that attorney is employed as authorized by § 327. The starting point for statutory interpretation is the existing text, and when that language is plain, the court must enforce it according to its terms unless the result is absurd. Although the 1994 amendment that deleted 'or to the debtor’s attorney' created grammatical awkwardness and potential surplusage, it does not render the statute ambiguous. The text plainly lists only three categories of persons eligible for compensation: a trustee, an examiner, or a professional person employed under § 327. An attorney not employed under § 327 does not fall into any of these categories. The court will not rewrite a statute to correct a perceived drafting error by Congress, as doing so would be an enlargement of the statute, not a construction of it.
Concurring - Justice Stevens
Yes, the judgment is correct, but the analysis should consider legislative history when a scrivener's error is plausible. An examination of the legislative history reveals that the National Association of Consumer Bankruptcy Attorneys (NACBA) notified Congress of the 'apparently inadvertent removal of debtors’ attorneys' from the list of compensable persons. However, the NACBA then stated that it did 'not oppose' the passage of the amendment. This evidence confirms that Congress was made aware of the change and its effect, yet proceeded to enact the statute as written. Therefore, the majority's plain text reading is correct, not because legislative history is irrelevant, but because in this case, it supports the statutory text.
Analysis:
This decision firmly entrenches the 'plain meaning' rule of statutory interpretation, establishing that courts should not look to legislative history to create ambiguity where the text, despite grammatical flaws, has a clear meaning. It prioritizes the enacted text over perceived congressional intent, placing the responsibility on Congress to correct its own drafting errors. For bankruptcy practice, the ruling significantly impacts compensation for debtors' attorneys in Chapter 7 cases, forcing them to secure retainers before filing or obtain employment from the trustee for any post-petition work they wish to have compensated by the estate.
