Blank Rome has added another attorney to their team representing the Chapter 11 Trustee Edward Cahn,
Regina Stango Kelbon. I'm not positive, but I think, from reading her impressive bio, that one of her bankruptcy law specialities is the part of Bankruptcy Code, Section 330, on professionals getting paid reasonably for their work in helping a debtor in Chapter 11.
Here's the docket entry:
As you may have noticed, her bio mentions that she contributed a chapter to the book,
Bankruptcy Reform 2005: Expert Analyses Examining and Predicting the Impact on the Commercial Practitioner, Amendments to Section 330 of the Code (2005). The last part isn't part of the title, so I am guessing that may be the chapter she wrote. Here's the relevant part of the bio:
12/16/2009 - 993 - Motion to Appear pro hac vice (Regina Stango Kelbon, Esquire). Receipt Number 155693, Filed by Edward N. Cahn, Chapter 11 Trustee for The SCO Group, Inc., et al.. (Fatell, Bonnie) (Entered: 12/16/2009)
Chambers USA ranks Ms. Kelbon as a leader in the fields of bankruptcy and restructuring. Chambers notes that she: "is a highly talented attorney with a growing reputation for Chapter 11 reorganizations and litigation, and notable restructuring expertise." In addition, Ms. Kelbon has received the highest possible rating from Martindale-Hubbell.
I know. Lots of keywords just pop right off the page, don't they? She does litigation. She is keyed in to ... um... fraud and abuse and "unconventional bankruptcy problems." Well. Welcome to the SCO universe.
Ms. Kelbon is a former president and current board member of the Consumer Bankruptcy Assistance Project for the Eastern District of Pennsylvania; co-chair of the ABA's Business Bankruptcy Subcommitee on Corporate Governance; former vice chair of the ABA’s Business Bankruptcy Subcommittees on Bankruptcy Claims, Fraud, and Abuse of Bankruptcy Process, Mass-Torts and Environmental Law, and Unconventional Bankruptcy Problems.
Ms. Kelbon is a contributing author to Bankruptcy Reform 2005: Expert Analyses Examining and Predicting the Impact on the Commercial Practitioner, Amendments to Section 330 of the Code (2005).
Here's what Section 330 of the Code is about, namely the rules about paying firms like Blank Rome, I think, and other professionals, like the Ocean Park folks:
11 U.S.C. § 330 : US Code - Section 330: Compensation of officers It goes on with more details, but that's the context. It's (a)(2) that one would worry about, I assume. Here's an article by a law firm, Pepper Hamilton, which discusses a case where professionals thought they were going to get millions in success fees, but the judge didn't go along with it, on the grounds that it was not reasonable under 330.
Sec. 330. Compensation of officers
(a)(1) After notice to the parties in interest and the United States
Trustee and a hearing, and subject to sections 326, 328, and 329, the
court may award to a trustee, an examiner, a professional person
employed under section 327 or 1103--
(A) reasonable compensation for actual, necessary services
rendered by the trustee, examiner, professional person, or attorney
and by any paraprofessional person employed by any such person; and
(2) The court may, on its own motion or on the motion of the United
States Trustee, the United States Trustee for the District or Region,
the trustee for the estate, or any other party in interest, award
compensation that is less than the amount of compensation that is
(B) reimbursement for actual, necessary expenses.
Like that would ever happen in Delaware. Not. In fact, here's a case in Delaware where a bankruptcy court judge's refusal to authorize payment was reversed on the grounds he should have calculated the 328 standard (improvident) and the 330 (reasonable) differently:
Section 330(a) of the Bankruptcy Code allows a court to award less than the total amount of compensation requested by a professional for work performed in connection with a bankruptcy proceeding. 11 U.S.C. § 330(a)(2). In determining the appropriate amount of compensation under § 330(a), a court must conduct an analysis based on reasonableness. 11 U.S.C. § 330(a)(3). However, once the Bankruptcy Court has determined that the terms and conditions of a professional's compensation are reasonable, it may thereafter reduce that compensation only if it determines, under § 328(a), that "such terms and conditions prove to have been improvident in light of developments not capable of being anticipated at the time of the fixing of such terms and conditions." In re Federal Mogul-Global Inc., 348 F.3d 390, 397 (3d Cir. 2003). In Delaware, love finds a way. It's how they roll.
Here, the Bankruptcy Court, in the Retention Order, had determined that the terms of the Engagement Letter were reasonable, including the term that fixed Houlihan's monthly fee at $175,000. Therefore, in reviewing Houlihan's final fee application, the Bankruptcy Court was constrained to apply only the legal standard of § 328(a). The Court concludes that, to the extent that the Bankruptcy Court based its decision to reduce Houlihan's monthly fee on a reasonableness analysis under § 330(a), it applied an improper legal standard and thus, abused its discretion.
This isn't the first time Section 330 vs. 328 has come into our coverage of the SCO bankruptcy. If you recall, the U.S. Trustee objected to Boies Schiller's fees being under the 328 standard and thought they should be under 330 instead:
Fees Need to Be Subject to Review Under Standard Employed in 11 U.S.C. § 330(a) Eventually, if I recall correctly, they split the fees into two types, some under each standard:
9. The fees payable to BSF (including fees payable pursuant to a Litigation Recovery or a Transaction Recovery) need to be subject to review by this Court under the standard set forth in 11 U.S.C. § 330. More specifically, the compensation terms of the October 31, 2004 engagement letter should not be "pre-approved" under the standard identified in 11 U.S.C. § 328(a).
ORDERED that pursuant to section 327(e) of the Bankruptcy Code, the Debtors are authorized to employ and retain BSF as special counsel, effective nunc pro tunc to the Petition Date, on the terms set forth in the Application and the Declaration; provided, however, that any compensation payable to BSF shall be subject to review under 11 U.S.C. § 328 with respect to (i) any Litigation Recoveries and/or (ii) any Transaction Recoveries where International Business Machines ("IBM") or Novell, Inc. ("Novell") is a direct party to the Transaction; provided further, that compensation payable to BSF for (i) Transaction Recoveries where entities other than IBM and/or Novell are direct parties to the Transaction; and (ii) the hourly rate services referenced in paragraph 14 of the Application shall be subject to review under 11 U.S.C. § 330; .... I believe, from what was said at the hearing about all this, that this means that any recovery from SUSE, for example, would be under 330, but if IBM in some alternate universe suddenly paid SCO to leave it alone, it would be 328.
And here's an older article, Emerging Chapter 11 Issues in Bankruptcy Administration, written in 2002 by Joseph A. Guzinski, then
Acting General Counsel for the
Executive Office for United States Trustees, explaining some of the complexities that face firms like Blank Rome when they hire financial experts, as well as issues the experts have to deal with. For example, what happens if the Chapter 11 reorganization effort fails, and a creditor sues the experts, saying they gave bad advice and that's why the company ended up in Chapter 7?
Of course, adding her to the team now doesn't necessarily mean anything except that she is a whiz at bankruptcy law, and Edward Cahn is not a fool. He naturally wants to get this right, and so would you if you were dealing with the particular cast of characters in the SCO universe. Not to mention the ex-SCO universe, with its pointed threats of a shareholder lawsuit.
If you threaten a lawyer with litigation, they will generally get lawyered up. They don't wait to see if you really mean it, but they'll assume you do and they will be planning their moves very carefully from that moment on, because they intend to win.
Update: And the order has been signed:
Also, here's Ms. Kelbon's Martindale lawyer profile, and as you can see she is rated very highly. Her peer review rating is also stellar, 5 out of 5, and they have stated that she
"Meets Very High Criteria of General Ethical Standards". She has been in practice for 24 years.
12/17/2009 - 994 - Order Granting Motion for Admission pro hac vice of Regina Stango Kelbon (Related Doc # 993 ) Order Signed on 12/17/2009. (LC) (Entered: 12/17/2009)