Alerts

Investment Bank's Advisory Fee Properly Calculated Under Reasonableness Standard

August 6, 2007

The U.S. Court of Appeals for the Eleventh Circuit held on July 26, 2007, that a bankruptcy court properly calculated an investment bank's advisory fee under a reasonableness standard. In re Citation Corp., ___ F.3d ___ 2007 WL 2128165 (July 26, 2007). Rejecting the advisor's argument that a bankruptcy court may not "calculate … a lodestar fee as part of a reasonableness review … for the services of an investment bank, which has historically charged a fixed percentage fee," the court also ordered the bankruptcy court to determine whether the advisor failed to disclose potential conflicts, possibly requiring an appropriate penalty. Id., at 3, 6.