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Facts: Post-petition, an adversary proceeding (the "AP") was filed relating to a sale of certain of the debtor's assets. The debtor's bankruptcy counsel entered into negotiations to hire Riker, Danzig, Scherer, Hyland & Perretti, LLP ("Riker") to represent the debtor in the AP. The negotiations resulted in a contingency fee proposal that was memorialized in an October 2000 letter from Riker to the debtor and the debtor requested the bankruptcy court's approval to retain Riker under §§§ 327 and 328 of the Bankruptcy Code. At a November 14, 2000 hearing before the bankruptcy court, Riker agreed to amend the terms of the contingency fee; the parties orally provided the court with the revisions at the November 14 hearing, which the judge approved. The day after the hearing, the new terms were documented in another letter from Riker to the debtor's bankruptcy counsel (the "Rothschild Letter"). On November 16, 2000, the court entered the retention order. The order did not specifically cite § 328 but the order authorized the debtor to hire Riker in connection with the AP and said that "all compensation 'shall be fixed upon further application of this Court and shall be in accordance with the within application and the letter of James S. Rothschild, Jr., Esq., dated November 15, 2000..." The AP was not resolved quickly and Riker ultimately submitted a fee request for $2,320,959.02 plus expenses. Although the bankruptcy court found that Riker had been retained under §that there were four events that were incapable of being anticipated and, for those reasons, the court was authorized to, and did, lower the fee award. The district court agreed that Riker had been retained under § 328 but reversed and remanded on the issue as to whether certain facts were incapable of being anticipated.
Issues: (1) Whether Riker was hired pursuant to § 328 of the Bankruptcy Code. In other words, "[h]ow does a court determine whether a bankruptcy court has 'pre-approved' a debtor's retention of a professional pursuant to 11 U.S.C. § 328(a)?" (2) "Whether there exist any grounds for disturbing the court's section 328(a) pre-approval."
Rules: "Where the court pre-approves the terms and conditions of the retention under section 328(a), its power to amend those terms is severely constrained. It may only 'allow compensation different from the compensation provided under such terms and conditions after the conclusion of such employment, if 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." (1) "Pre-approval of a fee agreement under 11 U.S.C. § 328(a) depends on the totality of the circumstances, including whether the professional's application, or the court's order, reference section 328(a), and whether the court evaluated the propriety of the fee arrangement before granting final, and not merely preliminary, approval." (2) "Section 328(a) requires 'the bankruptcy court... [to] determine[] whether developments, which made the approved fee plan improvident, had been incapable of anticipation at the time the award was approved." Simply showing that something had not been anticipated is insufficient, that thing must be incapable of being anticipated for the standard to be met.
Holding: Affirmed. The bankruptcy was correct in finding that Riker was retained under § 328 but was wrong in finding that certain events were incapable of being anticipated.
Reasoning: During the retention hearing, the bankruptcy court made several comments suggesting that Riker's approval was made under section 328(a). Additionally, the debtor's application to employ Riker specifically invoked § 328(a), which was incorporated into the retention order. As for the second issue, the ultimately divergent positions in the AP of the Committee and the debtor (represented by Riker) were certainly capable of being anticipated because a certain amount of antagonism and animosity between a creditor and a debtor can be
