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Bankruptcy Court Denies German Law Firm’s Motion for Summary Judgment on Liquidating Trustee’s Objection to Firm’s Claim for Attorney Fees

By Charlene D. Davis

On January 12, 2015, Judge Kevin Gross of the United States Bankruptcy Court for the District of Delaware entered an order and opinion in In re Solar Trust of America, LLC et al. denying a motion for summary judgment filed by Krammer Jahn Rechtsanwait PartG mpB (the “Firm”).  The motion sought allowance of the Firm’s claim for attorneys’ fees in a contested matter initiated by the objection of the Liquidating Trustee of Solar Trust of America, LLC (the “Debtors” or “STA”) to the Firm’s claim.  The Court held that, as a matter of law, the fees to which the Firm is entitled are to be measured by the reasonableness standard of 11 U.S.C section 502(b)(4), not in accordance with the German statutory scheme for calculating attorneys’ fees.  As a consequence, genuine issues of material fact precluded summary judgment.

By way of background, the Debtors filed Chapter 11 petitions on April 2, 2012 (the “Petition Date”).  Prior to the bankruptcy cases, a former CEO of the Debtors sued STA in Germany.  The Firm successfully defended the lawsuit and was paid for services rendered in the lawsuit.  The former CEO appealed and some three months after the Petition Date, a German court of appeals issued a decision dismissing the CEO’s claim and determining that the amount in controversy, which under German law is the basis for a fee award, was much higher (by 600%) than the lower court had found.  The Firm then filed a proof of claim in the Debtors’ case seeking the additional fees.

In denying summary judgment, the Court concluded that: 1) the German court of appeals decision, which served as the basis for calculating the fees under German law, was void because it violated the automatic stay; 2) the claim for attorneys’ fees based on services provided to the Debtors has to be determined under the reasonableness standard of 502(b)(4) of the Bankruptcy Code, not according to German law; 3) the Rooker-Feldman doctrine does not apply to foreign court decisions; and 4) although the interest of comity requires deference to decisions by competent international courts, a bankruptcy court cannot ignore its own responsibility to review the reasonableness of attorneys’ fees which directly affect the bankruptcy case.

A copy of the opinion can be found here.

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