Delaware Judge Allows Unsecured Claim for Contractual Attorneys’ Fees

If attorneys’ fees are disallowed on undersecured claims, it follows, does it not, that contractual claims for post-petition attorneys’ fees are also disallowed on unsecured claims? Answer: No, it does not follow. Reversing the bankruptcy court, District Judge Richard G. Andrews of Delaware interpreted Travelers Casualty & Surety Co. of America v. Pacific Gas & Electric Co., 549 U.S. 443 (2007), to mean that an unsecured claim for post-petition attorneys’ fees must be allowed if the contract makes the debtor liable. Almost ancient history by now, the dispute arose in the reorganization of Tribune Media Co., which began with a chapter 11 filing in late 2008 and concluded on confirmation in 2012. The indenture for unsecured, subordinated bonds called for Tribune to reimburse the indenture trustee for expenses and attorneys’ fees incurred in collecting the debt. The claim by the indenture trustee included a claim for about $30 million in post-petition attorneys’ fees. Were it allowed, the claim for attorneys’ fees would receive a partial distribution under Tribune’s plan. The debtor objected to the claim. Bankruptcy Judge Kevin J. Carey disallowed the unsecured claims for attorneys’ fees in an opinion on Nov. 19, 2015.

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