The U.S. Bankruptcy Court for the District of New Mexico in In re Hungry Horse LLC recently indicated that under certain circumstances it would approve the retention agreement of a chapter 11 debtor’s counsel, over the objection of the unsecured creditors’ committee, containing a contractual provision obligating the debtor to pay its retained counsel’s fees and costs incurred in defending its fee applications, by ruling that notwithstanding the U.S. Supreme Court’s decision in Baker Botts L.L.P. v. ASARCO LLC, which held that a law firm or other professionals retained by a debtor or appointed committee could not be awarded legal fees for work performed in defending their fee application, that the contract exception to the American Rule remains viable in bankruptcy cases, and that ASARCO does not foreclose bankruptcy courts from approving fee-defense provisions in retention agreements as a “reasonable term and condition” under § 328(a).

In 2015, the plaintiff, a credit card debt-holder in default, commenced Katherine Evans v. Portfolio Recovery Assocs. L.L.C. in the U.S. District Court for the Northern District of Illinois against the defendant, a collection agency. The plaintiff alleged that the defendant violated the Fair Debt Collection Practices Act (FDCPA). The defendant had sent collection letters to the plaintiff, advising that a debt of $1,297.87 was due. The plaintiff’s counsel had sent a response, advising that the plaintiff was unable to pay and that the debt amount was inaccurate. The defendant then reported the debt to Experian, but failed to advise Experian that the plaintiff had contested the debt. The plaintiff sued under § 1692e(8), which provides that it is a violation to communicate “to any person credit information that is known or that should be known to be false, including the failure to communicate that a disputed debt is disputed.”