In re Babcock & Wilcox Co., __ F.3d __, 2008 WL 1902216 (5th Cir. 2008)

Brief Summary
The Fifth Circuit held that the bankruptcy and district courts did not abuse their discretion by reducing a law firm’s hourly rates for travel time by 50 percent.

Complete Summary
Law firm Caplin & Drysdale was appointed as national counsel in bankruptcy proceedings in connection with the debtor’s asbestos liability. Caplin & Drysdale, which operated out of New York and Washington, D.C., sought reimbursement for attorney travel time at the attorneys’ full hourly rates. The trustee objected. Following a hearing on the issue, the bankruptcy court awarded Caplin & Drysdale fees at 50 percent of the full hourly rate for non-working travel time. On appeal, the district court, and ultimately the Fifth Circuit, upheld the bankruptcy court.

The Fifth Circuit reviewed the award on an abuse of discretion standard. Given that the relevant legal standard under 11 U.S.C. § 330(a) allows the court to award “reasonable compensation” based, inter alia, on “customary compensation charged by comparably skilled practitioners[,]” the bankruptcy court’s otherwise broad discretion was mainly limited by Caplin & Drysdale’s ability to establish that its billing was “customary.” In re Babcock & Wilcox at *2.

Caplin & Drysdale failed to meet its burden because it did not identify other firms with comparable billing practices. Although one Caplin & Drysdale partner testified that his old firm had billed in the same manner as recently as 1986, the court held this evidence outdated. Finally, and perhaps most harmful to Caplin & Drysdale’s argument, other firms involved in the same proceeding had accepted a 50 percent rate for non-working travel.

The court found further support in case law. A Fifth Circuit case interpreting a different statute (the Voting Rights Act) had previously held that discounting rates for non-working travel was not an abuse of discretion. Other jurisdictions have interpreted the bankruptcy statute to allow similar discounting for non-working travel time.

Significance of Opinion
Given that some courts have awarded full hourly rates for travel time, this opinion demonstrates the importance of a firm’s proof, the choice of forum and the breadth of judicial discretion.

This alert has been prepared by Hinshaw & Culbertson LLP to provide information on recent legal developments of interest to our readers. It is not intended to provide legal advice for a specific situation or to create an attorney-client relationship.

Save the Date!!! for the 8th Annual Legal Malpractice & Risk Management Conference

March 4-6, 2009
The Westin Chicago River North Hotel
320 North Dearborn
Chicago, Illinois

Register Now for the Eighth Annual Legal Malpractice & Risk Management Conference and receive a 10% Early Bird Discount before December 1, 2008

Attend the industry's premier annual event focused on current and important developments in the law and litigation of malpractice claims, legal malpractice insurance and risk management strategies. Each conference panel examines recent case law and significant developments throughout the last year. One and one-half days will be devoted to legal malpractice (March 4-5), and one and one-half days will be devoted to risk management (March 5-6). The conference will be held in Chicago at The Westin Chicago River North Hotel.

Earn up to 13.75 hours of CLE credit including up to 5.50 ethics credit!

Conference Topics

Legal Malpractice Sessions (March 4-5)

• Guess Where You Are Being Sued – Bankruptcy Court
• Developments Concerning the Litigation Attorney – Jurisdiction, Ethics Rules and Admission of Fault
• Expert Witnesses – Selecting the Expert and Structuring the Interview
• Insurance Law – Prior Knowledge and Additional Negligence Claims
• Statutory Causes of Action – Consumer Protection Statutes
• Developments in Disciplinary Defense
• Stump the Panel

Legal Malpractice/Risk Management Cross-Over Sessions (March 5)

• Patent Law – Jurisdiction and Loss Measurement
• The Insurance Marketplace and Considerations
• Reducing Loss – Self-Help, Mitigation and Protection

Risk Management Sessions (March 5-6)

• The General Counsel Forum
• Plaintiff’s Perspective – Red Flags and Criteria Used in Selecting Cases
• Risk Management and Electronic Advertising – Websites and E-mail
• Grab and Leave Cases - How to Protect the Firm When People Leave
• On Horizon - Subprime, MJP and Alternative Billing

Registration Fees

$1,300 for the Entire Conference - March 4-6
$925 for the Legal Malpractice Sessions Only - March 4-5
$925 for the Risk Management Sessions Only - March 5-6

Discounts (only one discount per person)
Returning registrants receive 5% off the conference price
Multiple registrants receive 15% off when another colleague from the same company registers (one full paid registrant required)
Early birds receive 10% until December 1, 2008

For more information, please visit www.LMRM.com or click here to Register Online Now!

To speak with the Conference Planner, Katherine McCormack, please call 312-704-3329.