11 U.S.C. §330(a); Allowance and Disgorgement of Fees
In re Westwood Community Two Association, Inc., 2006 U.S.App. Lexis (11th Cir. April 12, 2006).
After ruling that the Trustee did not have the power to levy a special assessment against non-debtor homeowners to satisfy claims against the debtor, the Bankruptcy Court denied fees and orderd disgorgement of interim fees. The District Court affirmed and the law firm appealed.
The Circuit affirmed, holding that the law firm had no right to retain fees derived from the improper assessment and not from estate property. The law firm assumed the risk of non-payment or disgorgement of fees if the estate turned out to be insolvent. The law firm’s argument that the Bankruptcy Court did not have jurisdiction to order disgorgement was meritless, as was the argument that disgorgement constituted an improper restitution award to the homeowners.