U.S. Bankruptcy Court, WDNY — Disgorgement of Legal Fees: In re RAMA Group of Companies, Inc.

U.S. Bankruptcy Court, WDNY

Disgorgement of Legal Fees

Compensatory Sanctions

In re RAMA Group of Companies, Inc.
00-12654 K
Judge Bucki

Background: In a Chapter 11 proceeding, a law firm and three of its partners moved to dismiss a motion filed by the Official Committee of Unsecured Creditors to compel a disgorgement of legal fees and the imposition of compensatory sanctions. At issue was the applicability of a general release, limitations on the review of fees for pre-petition services, and whether a court may reconsider a prior interim allowance for post-petition services.

Ruling: The Bankruptcy Court granted the motion to dismiss the award for compensatory sanctions. The court found that the partners had entered into a settlement agreement with respect to two prior proceedings which released the law firm from any liability. With respect to the disgorgement, the court found that the interim allowances were paid directly to counsel and that only the corporation was responsible for disgorgement. An evidentiary hearing was set on the issue of disgorgement.

Donald P. Sheldon, attorney for Committee of Unsecured Creditors; Michael R. Wolford, Elizabeth A. Wolford and James A. Hobbs of the Wolford Law Firm for Hurwitz & Fine, Lawrence C. Franco, Roger L. Ross and Robert P. Fine