Editor’s Note:  Our great friends at BankBryanCave, one of the top blogs out there for banking, regulatory, financial institution M&A, and related banking matters, allowed us to cross-post this compelling post on the impact of  the Supreme Court’s denial of cert of the 2nd Circuit’s decision in Madden.  We think this is pretty important stuff, especially for parties in the consumer debt secondary market.  

In a blow to banks and the marketplace lending industry, on June 27, 2016, the U.S. Supreme Court denied the petition by Midland Funding to hear the case Midland Funding, LLC v. Madden (No. 15-610).  That case involves a debt-collection firm that bought charged-off credit card debt from a national bank.  The borrower’s legal team argued that a buyer of the debt was subject to New York interest rate caps even though the seller of the debt, a national bank, was exempt from those state law rate caps due

Either from our prior posts here and here, or from the great posts from Stone and Baxter’s Plan Proponent blog or from Bracewell’s Basis Points blog, we all know the Supreme Court’s holding in ASARCO[1]/: a strict interpretation of Section 330(a) of the Bankruptcy Code[2]/ allows professionals to charge for the preparation of a fee application per Section 330(a)(6).  But as there is no express statutory authority to charge the estate for defense of a fee application, the “American rule” prevails, requiring professionals to bear their own defense costs if a third party objects to the fees.[3]/

The cases following Asarco have all been sad days for bankruptcy professionals.  As we have written, the Delaware Bankruptcy Court has rejected all arguments that Section 328 of the Bankruptcy Code, which allows the Court to approve reasonable contractual terms, could allow a contractual term

You may recall the holding and analysis of ASARCO [1]/ from Jay’s previous post, here. At bottom, ASARCO  followed a strict interpretation of Section 330(a) of the Bankruptcy Code,[2]/ holding that professionals are allowed to charge certain fees for the preparation  of a fee application per Section 330(a)(6). But as there is no express statutory authority to charge the estate for defense  of a fee application, the “American rule” prevails, requiring professionals to bear their own defense costs if a third party objects to the fees.[3]/

The efforts to get around ASARCO  are well underway, primarily in the venue of the Delaware Bankruptcy Court. So far, the score is ASARCO  (two wins), to frustrated estate professionals (zero). And, even as your authors were writing this post, there is another means underway, using the “upcharge” principal – the hourly rates will be $x if