On April 9, 2015, in In re Woerner,the US Court of Appeals for the Fifth Circuit overturned its attorney's fee standard previously articulated in Pro-Snax Distributors, Inc. (157 F.3d 414 (5th Cir. 1998)) and joined the US Courts of Appeal for the Second, Third, and Ninth Circuits in prescribing a prospective, "reasonable at the time" standard for the award of attorney’s fees in a Chapter 11 bankruptcy proceeding (No. 13-50075, (5th Cir. Apr. 9, 2015)).

Appellant Barron & Newburger (B&N), a law firm, represented Debtor Clifford Woerner in his Chapter 11 bankruptcy. Upon termination of B&N's services, the firm filed an application for fees, the substantial majority of which were disallowed by the bankruptcy court. Citing the Fifth Circuit's ruling in Pro-Snax, the bankruptcy court explained that, for a service to be compensable under 11 U.S.C. § 330, fee applicants must prove that the service resulted in an "identifiable, tangible, and material benefit to the bankruptcy estate." As much of B&N's billed time was for legal services that ultimately proved unsuccessful, the bankruptcy court determined that an identifiable benefit to the estate had not been proven with regard to those fees. The district court affirmed and B&N appealed. The Fifth Circuit granted rehearing en banc to reexamine its decision in Pro-Snax.

The Fifth Circuit considered the statutory text, legislative history and application of 11 U.S.C. § 330 in other circuits in arriving at its decision to overrule Pro-Snax. The court concluded that 11 U.S.C. § 330 embraces the "reasonable at the time" standard for attorney compensation endorsed by the Second, Third, and Ninth Circuits.

Under this framework, if a fee applicant establishes that its services were "necessary to the administration" of a bankruptcy case or "reasonably likely to benefit" the bankruptcy estate at the time at which they were rendered, then the services are compensable. In assessing the likelihood that legal services would benefit the estate under the new prospective standard, courts should consider, among other factors:

The court vacated the award of attorney's fees and remanded the matter for the bankruptcy court to evaluate whether B&N is entitled to fees under the newly announced standard.

Whether the legal services provided were ultimately successful is relevant to, but not dispositive of, an award of attorney's fees. The Fifth Circuit acknowledged that 11 U.S.C. § 330 explicitly contemplates compensation for attorneys whose services were reasonable when rendered but which ultimately may fail to produce an actual, material benefit. What matters is that, prospectively, the choice to pursue a course of action was reasonable.