Document Type
Research Memorandum
Publication Date
2023
Abstract
(Excerpt)
In the Southern District of New York, the retention of claims agents is governed by the judicial procedure set forth in section 156(c) of title 28 of the United States Code, for cases under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) that involve 250 or more creditors and equity holders. When a claims agent is retained under section 156(c), the claims agent is acting in the same capacity as the clerk and the services are “limited in scope to those duties that would be performed by a Clerk of Court with respect to providing notice and processing claims (such as maintaining a claims register).” In a chapter 11 case, a clerk may only charge fees pursuant 28 U.S.C. § 1930 or obtain fees from the debtor’s estate.
In In re Madison Square Boys and Girls Club, Inc., the Southern District of New York held that a claims agent retained under section 156(c) cannot have for-profit agreements, with third parties, for fees that a clerk of the court could not charge. The court determined that when a claims agent is retained under section 156(c), the agent is subject to the same constraints as the clerk. Ultimately, a claims agent cannot charge fees that a clerk cannot charge and perform activities the clerk cannot perform.
This article examines the constraints on claims agents that are retained under section 156(c) and the fees a claims agent can charge. Part I focuses on the differentiation between claims agents that are retained under section 156(c) and those retained pursuant to 327(a) of the Bankruptcy Code. Part II examines the fees that a claims agent retained under section 156(c) is allowed charge.