Publications

Court Insulates Lender's Collateral from Professional Fee Surcharge

September 2007
Pratt's Journal of Bankruptcy Law

A lender recently avoided a surcharge against its collateral for legal fees. U.S. Bankruptcy Judge Arthur N. Votolato of the District of Rhode Island handed the lender the important victory after an earlier trial, in In re California Webbing Industries, Inc. In a detailed 22- page opinion, Judge Votolato held that the lender never consented to the use of its collateral to pay the fees of counsel for a Chapter 11 debtor and the creditors’ committee in its failed reorganization case. Moreover, the court found that, based on the facts adduced at trial, the professionals had waived any right to surcharge the lender’s collateral.