Readers can glean all kinds of information about a federal judge’s personality by the opinions that she writes. Before reading the Dec. 11 decision in ASARCO, et al. v. Barclays Capital, who would have guessed that 5th U.S. Circuit Court of Appeals Judge Jennifer Walker Elrod was a motor head?
The case involves a Chapter 11 bankruptcy proceeding. The 5th Circuit was asked to determine whether a Southern District of Texas bankruptcy court erred in awarding a $975,000 fee enhancement to Barclays Capital pursuant to 11 U.S.C. §328(a).
According to the decision, ASARCO hired Barclays for professional assistance in the mining company’s bankruptcy proceedings. After the bankruptcy court approved the bankruptcy plan, Barclays argued that it needed a $975,000 fee enhancement because additional services provided by the investment bankers were “incapable of anticipation.” That’s a necessary prerequisite for a court to approve a fee enhancement under Bankruptcy Code §328(a). ASARCO opposed the fee enhancement and appealed to the 5th Circuit when the district court awarded the enhancement.
In her decision, Elrod decided to use a muscle-car analogy to describe Barclay’s initial assessment that ASARCO would make a quick trip through Chapter 11 bankruptcy, which didn’t happen.
“To analogize, Barclays apparently thought it had a dusty, yet functional, Corvette on its hands. Although it needed a little polish, this Corvette was poised for a speedy trip into and out of Chapter 11 with the help of an experienced driver, i.e., Barclays,” Elrod wrote. “Once in the driver’s seat, however, Barclays realized that the Corvette needed far more than a car wash. The dust was nothing compared to the disarray that it discovered ‘under the hood.’ ”
Barclays should have been aware the bankruptcy would be complicated at the time it signed an engagement letter with ASARCO: The company was in the midst of a labor strike and faced “billions of dollars” in environmental and asbestos liability, notes the opinion.
“Thus, Barclays was capable of anticipating that its plans for a quick pit-stop reorganization could be slowed by the problems of which it was aware . . .” Elrod concluded in her opinion, reversing the bankruptcy court's fee enhancement award.
Marty L. Brimmage, a partner in Dallas’ Akin Gump Straus Hauer & Feld who represents ASARCO, is pleased with the decision.
“Building on Judge Elrod’s Corvette analogy: A sophisticated car collector knows exactly what it is buying, and Barclays knew from the beginning that this was going to be a complex Chapter 11 bankruptcy; therefore Barclays should be bound to the compensation it agreed to and as approved under §328 of the Bankruptcy Code,” Brimmage says.
Jorge Lazalde, ASARCO’s executive vice president – legal, also is pleased with the decision, which he describes as “the Court’s decision to reject the last pieces of Barclays’ attempt to get almost $10 million in additional compensation over and above the millions Barclays was paid as part of the compensation it agreed to.”
Kevin Terrazas, an associate with Austin’s Yetter Coleman who represents Barclays, declines comment.
--- John Council