Fee agreements between bankruptcy debtors and their counsel must often be settled in court. In which court those fee disputes can be heard is a question that is not yet settled. One court has looked to section 329 of the Bankruptcy Code for the answer. Section 329 states that if the compensation agreed upon by the debtor and attorney exceeds a reasonable value for the services rendered, “the court” may cancel the agreement or return some of the payment. In re Piccinini is the first case to hold that the phrase “the court” in section 329 confers exclusive jurisdiction to bankruptcy courts over attorney-debtor fee agreements, but the lack of legislative intent and supportive case could cause this case to be disregarded by future courts deciding the same issue.
In In re Piccinini, the Bankruptcy Court for the Eastern District of Michigan rejected arguments that state courts had concurrent jurisdiction over bankruptcy cases. Instead, the Piccinini court held section 329 of the Bankruptcy Code grants exclusive jurisdiction to bankruptcy courts to resolve fee disputes between debtors and their counsel. The court relied on the well-settled interpretation of section 523(c)(1) of the Bankruptcy Code and policy arguments supporting a similar interpretation of section 329. Piccinini stayed the state suit filed by the debtor’s original counsel for collection of his fees until the bankruptcy court resolved the section 329 motion filed by the debtor.
Part I of this memorandum discusses the statutory provisions relevant to the issue of jurisdiction and section 329. Part II of this memorandum analyzes the holding in In re Piccinini. Part III of this memorandum discusses arguments that litigants may make in future section 329 jurisdiction disputes. The memorandum concludes that In re Piccinini lacks support and that the issue of jurisdiction over section 329 fee disputes is still open for debate.