Brazilian Superior Court of Justice (STJ) validates 30% attorney fees in a bankruptcy case

  • 25/04/2024

The 3rd Panel of the Brazilian Superior Court of Justice (STJ) validated the payment of 30% of attorney fees to a law firm that carried out the search and freezing of assets abroad of businessman Daniel Birmann, a partner in the company Sam Indústrias, which went bankrupt in 2008. It was the first time that STJ judged the matter.

The businessman wanted to reduce the percentage to 10%, but the majority of the justices dismissed the appeal, i.e. did not analyze the merits. As the bankruptcy has liabilities of around R$600 million (a figure still under discussion), the law firm will win at least R$180 million. This figure could be even higher depending on the amount of assets collected.

According to sources connected to the case, the investigations to find the partner’s assets took place in three different countries, including tax havens, and around R$1 billion in Birmann’s assets have already been frozen. Before that, in more than ten years of legal proceedings, the assets had not been located, as they were hidden in offshore companies and in the names of third parties abroad.

The contract was entered into by Duarte e Forssell Advogados, a law firm specialized in searching for misappropriated assets, and the bankruptcy estate, at the suggestion of the judicial administrator at the time – Carlos Magno, Nery e Medeiros Sociedade de Advogados, in 2018. In November 2023, the judicial administrator in the case changed to Preserva Ação, the same as Americanas. 

In practice, the justices upheld the previous decision of the Court of Appeals of Rio de Janeiro (TJ-RJ) that validated the hiring of the firm. In addition to the judge, the Public Prosecutor’s Office had also given a favorable opinion, as had the creditors (Special Appeal 1967252).

Justice Ricardo Villas Bôas Cueva, who had the winning vote in this case, considered that, as the fees had not previously been questioned in the case, they could not be addressed in an appeal to the STJ. However, the judge also commented a little on the merits, considering that the bankruptcy court, after hearing the Public Prosecutor’s Office, authorized the hiring of the services by the bankruptcy estate, represented by the judicial administrator.

Also according to Cueva, the specificity of the service hired by the bankrupt estate was considered by the local Court when authorizing the choice for an ad exitum remuneration. Therefore, the criteria for the judicial administrator’s fees (according to Law No. 11.101, of 2005) do not apply to the case. As these are contractual legal fees, stipulated by the parties, it would also not be necessary to follow the limits of the Civil Procedure Code on the setting of attorney’s fees awards.

Justices Moura Ribeiro and Nancy Andrighi concurred with Cueva’s understanding. Justice Marco Aurélio Bellizze did not participate. The rapporteur, Humberto Martins, who accepted the businessman’s argument to reduce the fees to 10% because he felt that 30% would be an “abusive” amount, dissented from the majority. The trial took place on April 16.

Daniel Carnio Costa, a professor at the Pontifical Catholic University of São Paulo (PUC-SP), says that, as well as the STJ not being able to reinterpret private contracts, it cannot re-analyze evidences. “To know if the remuneration was too much or too little, you have to know the work that was done, and it is not allowed to re-analyze evidences”, says Carnio, citing Precedents 5 and 7 of the STJ.

In the lawyer’s view, if the vote of the rapporteur, Justice Humberto Martins, were to prevail, there would be a lot of legal uncertainty in the market. “It would have very negative repercussions for the world, which would have the view that contracts are not respected in Brazil”, he says.

Angela Cignachi, a lawyer who works in higher courts, says that the 3rd Panel’s decision “benefits the smooth running of bankruptcy proceedings”. “We had a bankruptcy decreed for more than ten years that had no assets to honor the payment of creditors. It was only by hiring the firm that we were able to recover the assets”, she says.

She also draws attention to the type of contract, which only makes it possible to receive contractual attorney’s fees on the amount recovered on behalf of the bankrupt estate. “If nothing was found, nothing would be owed. The law firm took the risk and bore all the costs.”

Experts say that although there is no legal provision on remuneration, market practice is to charge 30% in this type of contract. Internationally, it can be as high as 40%. “If the case lasts a long time, I think 30% is reasonable. But if it’s settled in a year, 30% is a lot, because law firms abroad earn on an hourly basis, so the longer it takes, the more they’ve spent”, says one bankruptcy judicial administrator.

In the case of Sam Indústrias, he adds, “the absurdity is that the bankrupt was appealing against someone who was investigating him, which may connote that he doesn’t want to be investigated”.