12 Jun Attorneys Fees & a Level Playing Field
The Supreme Court decided a case from the 9th Circuit Chapter 11 case of PGE, the big state power company, that has encouraging possibilities for debtors in bankruptcy.
The court struck down a long standing 9th Circuit authority providing that attorneys fees in matters that strictly involved bankruptcy questions were not recoverable in bankruptcy court. The exception to that old rule was the oversecured creditor, usually the mortgage lender, who was entitled to attorneys fees under a separate provision of the Bankruptcy Code.
The result was that even when the debtor was the prevailing party in a dispute in the bankruptcy court, the court would not award fees to the debtor even though the underlying contract provided that the prevailing party could recover their costs.
The realities of life and litigation in the bankruptcy court then made it difficult for debtors to fund fights against creditors who almost always have deeper pockets.
The Traveler’s decision found that there was no basis for a distinction between state law matters and strictly bankruptcy matters when it came to awarding attorneys fees. Judge Leslie Tchaikovsky in Oakland applied Travelers to permit the award of attorneys fees to a creditor in a dispute tried in bankruptcy court. Next step: apply Travelers to award attorneys fees to debtors who prevail in claims objection or bogus relief from stay motions in bankruptcy court.
Cathy Moran, Esq.
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