Reimagining 'Reasonableness' Under Section 330(a) in a World of Technology, Data, and Artificial Intelligence

Abstract

In this paper, we discuss the purpose of Section 330 of the Bankruptcy Code (11 U.S.C. sec. 330), arguing that the “reasonableness of fees" analysis now needs to evolve by taking into account how modern day technology -- specifically, artificial intelligence -- has changed how professional services should be delivered and priced. Too many bankruptcy practitioners continue to do things the old way when it comes to a Section 330 evaluation of reasonableness of fees. Data insights can and should replace gut hunches when fees are being evaluated under Section 330. Sensationalized media reports of runaway professional fees in Chapter 11 cases have the ability to undermine the public’s faith and trust in the bankruptcy process because of a (mis)perception that Chapter 11 proceedings are little more than a feeding frenzy for bankruptcy professionals. The paper is intended to make bankruptcy professionals and bankruptcy courts reflect upon whether the legacy Section 330 analysis makes sense, given how AI is changing legal practice. Nobody in the bankruptcy industry benefits when professional services are overpriced or delivered inefficiently. If technology and data analytics are available to make the process better and more efficient, bankruptcy professionals should use them, and bankruptcy judges should ask "why not?" when "why not?" is appropriate.

Keywords: bankruptcy, bankruptcy ethics, legal ethics, reasonableness of fees, legal fees, artificial intelligence

JEL Classification: K00, K10, K19, K2, K20, K22, K29, K3, K30, K35, K39, K4, K40, K41