Attorney’s fees for enforcing judgments

Can a judgment creditor get attorneys fees for its efforts in collecting the judgment?  No – unless the fees are “authorized” by contract, statute or law.”  If there is a “contract, statute or law,” can the creditor get fees for fighting with the debtor in bankruptcy court?  Probably yes if “the underlying judgment includes an award of attorneys’ fees.”

CCP 685.040.  The judgment creditor is entitled to the reasonable and necessary costs of enforcing a judgment. Attorney’s fees incurred in enforcing a judgment are not included in costs collectible under this title unless otherwise provided by law.  Attorney’s fees incurred in enforcing a judgment are included as costs collectible under this title if the underlying judgment includes an award of attorney’s fees to the judgment creditor pursuant to subparagraph (A) of paragraph (10) of subdivision (a) of Section 1033.5.

CCP 1033.5. (a) The following items are allowable as costs under Section 1032:

(10) Attorney’s fees, when authorized by any of the following:

(A) Contract.

(B) Statute.

(C) Law.

So opposing the discharge, opposing claimed exemptions, motions for relief?  See BAP decision in In re Gilman – here.

Join the 2019-2020 James T. King Southern California Bankruptcy Inn of Court

Email from Tamar Terzian

Your 2019-2020 Executive Board:

Tamar Terzian, President
Hon. Scott Clarkson, Program Moderator
Lucy Mavyan, President Elect
Nancy Zamora, Vice President
Stella Havkin, Secretary
Jeff Hagen, Treasurer

A message from our President:

As incoming President of the James T. King Southern California Bankruptcy Inn of Court, I am very excited to announce a few changes for the upcoming membership year.  Bankruptcy Judge Scott Clarkson, will be this year’s Program Moderator. We are enthusiastic to have his wealth of knowledge and experience as we dive into complex topics this year.  Our topics will mostly focus on Chapter 11 matters, Chapter 12 and Healthcare Cases. We have great venues this year as we will kick off the year at Judge Robles’s home, then the California Club, the Jonathan Club, Chapter 7 Trustee Wes Avery’s home and my home.  We are proud of the current and past members that attend each year and ask that you please join early. We also encourage you to bring a guest or two!  – Tamar Terzian Read more…

California Court of Appeals rules that settlement agreement included an unenforceable penalty

Red & White Distribution v. Osteroid Enterprises, 2019 WL 3759458 (Aug 2019)

Issue:  Did the settlement agreement here include an unenforceable penalty for non-payment of the settlement amount?

Holding: Yes.

A lender, Osteriod, sued a borrower, R&W.  The borrower cross-complained.  “The parties then settled all claims for $2.1 million pursuant to a ‘Payment Agreement.’”  They also executed a “stipulation for entry of judgment” which provided “in the event of a default on the payment plan, R&W is ‘liable to pay $2,800,000 to the Osteroid Parties, plus interest… reduced by any payments [made].’”  R&W defaulted and Osteriod sought and obtained a default judgment for $3.6 million.

The court of appeals reversed as to the amount holding that the additional sum of $700,000 upon default was an unenforceable penalty under Civil Code section 1671 and the Supreme Court of California case of Ridgley v. Topa Thrift & Loan Assn. 17 Cal.4th 970 (1998).  “In this case, the stipulated judgment for $2.8 million bears no reasonable relationship to the range of actual damages the parties could have anticipated from a breach of the agreement to settle the dispute for $2.1 million.  “[D]amages for the withholding of money are easily determinable—i.e., interest at prevailing rates ….”  “The judgment, however, provided for interest at the legal rate from the date of the execution of the stipulated judgment, attorneys’ fees to enforce the judgment, plus $700,000 more than the parties agreed to in their settlement agreement. This additional $700,000 was an unenforceable penalty.”

The court makes an important comment at the end:

“Had the parties intended to settle for $2.8 million, but apply a discount for timely payments, they could have done so expressly. The parties could have, but did not, include terms in the agreement stating R&W is liable to pay the Osteroid Parties $2.8 million, but so long as all payments are timely made in accordance with the payment schedule, the amount due shall be discounted to $2.1 million.”

This issue was previously discussed on this blog here.

Happy Birthday Jim King

Jim KingThe picture is Jim King at a cdcbaa program.  Gone four and a half years now.  We still miss him.  Happy Birthday Jim.  You can read his oral history here.  My favorite part is when he was telling about being in a group that got sworn in at the Supreme Court and meeting briefly with Justice Alito afterwards.

“I told [Alito] the story about having read all of his decisions and having had – my friend having seen his comment during the Marrama argument and then finally seeing his dissent.  And I told him, ‘I gotta tell you, from a consumer bankruptcy attorney standpoint, you got it, you really understood it.  You got the issue, you understood it, and I think you got it right.  And I want to thank you.’”

“And he said to me, this little shit from Glendale, California, ‘Oh my gosh, counsel, you made my day.’  Well, I’ll tell you, that ran a chill up and down my spine, brought tears to my eyes.  For a Supreme Court justice to say that to me, pretty good.”

Bankruptcy Appeals – BAP or District Court?

The Ninth Circuit 2018 Annual Report tells us that last year there were 277 appeals from bankruptcy courts in the Central District of California.  Total appeals in the 9th Cir were 623 so we are almost half.  Of the 277 in the Central District, 131 were to the BAP and 146 to the district courts.

Every appeals program I have been to since forever spends a healthy amount of time discussing which court is “better” for the appeal – the BAP or the district court.

Here is my take on how to decide which court to appeal in:

  • If the issue is truly a bankruptcy issue, it is rarely better to appeal to the district court.  Plans and confirmation, the automatic stay and preferences befuddle most district court judges and their clerks.  One district court judge told me that he is mystified that anyone would want him to resolve a bankruptcy issue.
  • If there is BAP precedence against you, the BAP is bound by its prior rulings so you might as well go to the district court which is not bound by BAP rulings in other cases.
  • If you suspect that the matter is going to go  to the 9th Circuit irrespective of the result at the first level of appeal, go to the BAP.  It will recognize the issue and explain it to the 9th Circuit for you.
  • The BAP is ruling pretty quickly these days.  You can expect a resolution within 3-4-5 months.  The district court in my experience takes a lot longer.
  • The BAP will almost always allow oral argument.  The district court rarely does (in my experience).
  • If the matter is really heavy duty state court -non-bankruptcy court – litigation, the district court might be better.  For example, claims objections based on state law.  The district court is likely more familiar and comfortable with non-bankruptcy litigation issues.

The idea that one court or the other will “rubber stamp” the bankruptcy court is ridiculous and insulting to the judges.

Bankruptcy filings creeping up – Central District of California

Total bankruptcy petitions filed in the central district in July, 2019 was 3,269, up from 3,057 last year, a 7% increase, and 2,967 last month for a 10% increase.

2019 2018 2017 2016 2015 2014
Jan 2,745 2,741 2,839 2,872 3,364 4,704
Feb 2,754 2,708 2,795 3,299 3,829 4,574
March 3,481 3,363 3,782 3,923 4,496 5,430
April 3,631 3,277 3,209 3,584 4,486 5,364
May 3,347 3,226 3,384 3,484 3,971 5,500
June 2,967 2,981 3,252 3,545 3,966 4,386
July 3,269 3,057 2,953 3,239 3,731 4,701
Aug 3,337 3,387 3,543 3,544 4,540
Sept 2,772 3,071 3,168 3,493 4,317
Oct 3,259 3,170 3,235 3,751 4,554
Nov 2,821 3,004 3,025 3,531 3,642
Dec 2,419 2,416 2,902 2,718 3,733
Total 22,194 35,961 37,262 39,819 44,880 55,445

Filings by chapter for the year are:

Non-Comm’l Commercial Chapter 7 Chapter 13 Chapter 11
20,196 1,809 17,245 4,545 215
91% 8% 78% 20% 1%

 

cdcbaa 6th Annual JIm King Program – September 7, 2019

Saturday, September 7, 2019

Southwestern Law School, 3050 Wilshire Boulevard, Los Angeles, CA 90010

11:00 a.m. to 1:00 p.m.

Sixth Annual James T. King Bankruptcy Symposium

Supreme Court: In re Taggart, Discharge Violations

SPEAKERS:

Daniel L. Geyser, Dallas, Texas
Prof. Dan Bussel, University of California, Los Angeles, School of Law
M. Jonathan Hayes, Resnik Hayes Moradi, LLP

Dan Geyser argued the Taggart case before the Supreme Court in April, 2019 and of course obtained a badly needed reversal of the Ninth Circuit opinion. In fact, Dan argued four cases this year in front of the Supreme Court! He is a graduate of Harvard Law School and a very entertaining speaker.

Dan has argued the following cases before the Supreme Court:

  • Taggart v. Lorenzen (creditor’s “good faith” does not preclude liability for discharge violations – reversing the Ninth Circuit).
  • Obduskey v. McCarthy & Holthus LLP (non-judicial foreclosures not covered by the Fair Debt Collection Practices Act).
  • U.S. Bank Nat’l Ass’n v. The Village at Lakeridge, LLC, (appellate standard of review in the “non-statutory insider” context).

His major cases at the circuit court of appeals level:

  • Garfield v. Ocwen Loan Servicing, LLC (Bankruptcy Code does not broadly repeal the Fair Debt Collection Practices Act in the discharge context). 811 F.3d 86 (2d Cir. 2016).
  • America’s Servicing Co. v. Schwartz-Tallard (In re Schwartz-Tallard) (attorney’s fees proper for prosecuting violations of the automatic stay – convincing the en banc court to overturn past circuit authority).

Prof. Dan Bussell teaches Bankruptcy and Contracts among other subjects at UCLA Law School. He is also a partner at Klee, Tuchin, Bogdanof & Stern LLP. Prof. Bussel received his law degree from Stanford Law School and clerked for Justice Sandra Day O’Connor after that. Published opinions in which Prof. Bussel served as appellate counsel include Stern v. Marshall (US Supreme Court); In re Penrod (US Supreme Court (on cert.) and 9th Cir.); Continental Insurance Co. v. Thorpe Insulation Co. (9th Cir. and US Supreme Court (on cert.)); and Motor Vehicle Insurance Co. v. Thorpe Insulation Co. (9th Cir.).

This will be an very entertaining discussion about the Supreme Court, the Ninth Circuit Court of Appeals, and Taggart, the discharge injunction, violations of the automatic stay and perhaps some predictions about where the court and the law is going.

 

9th Circuit en banc statistics

The 9th Circuit Annual Report for 2018 has some pretty interesting statistics.  One is that there were 955 petitions for rehearing en banc last year.  Of those, 17 were “called” for a vote.  Of those, 8 petitions were granted and 9 denied.  So 8 out of 955.

The way it works is that the petition for rehearing en banc is sent to all 27 “regular” or “active” 9th Circuit judges.  The “senior” status judges do not get to vote.  Any one of the 27 regular status judges can call for a vote.  If none makes the call, the petition is denied.  Once a judge makes the call, the 27 vote for rehearing and it takes a majority to grant the petition.  I’m not sure of the timing, i.e., how long it is before the petition is denied because there was no call.

The en banc panel is 11 judges consisting of the Chief Judge and 10 other judges chosen at random.  It hears oral argument and rules.  It affirms or reverses the three judge panel that it is reviewing.  A nice summary of the rules is here. 

Why en banc?  I think sometimes there is a sense that the three judge panel got it wrong.  But more often and usually, the three judge panel was bound by a prior 9th Circuit ruling that was wrong or needed to be better explained or modified.

Justice Elena Kagan comments at the 9th Circuit Judicial Conf

Elana KagenI had such a great time again at the 9th Circuit Judicial Conference last week in Spokane.  Plus I got to wander around my old alma mater Gonzaga University.

Justice Kagan attended the final get-together of the conference on the grounds of Gonzaga Law School.  I got to take the picture and shake her hand!  She is such a regular person with endless patience meeting and having her picture taken with everyone.  The last program of the conference the next day was an interview with her.  She made three particular comments that I thought were pretty interesting:

1.  During the almost two years when there were only eight of them, they really worked harder on the 4-4 votes.  They really didn’t want to rule 4-4.  I think most of us know that.  But she said that    typically with nine justices, they vote at the conference and at the end of the vote, someone wins.  The natural tendency is to move on.  But when the vote was 4-4, they would continue talking about it, sometimes for a long time, what can we do, how can we find a way to rule rather than just say we’re stuck?  She chuckled and said often the way out was to limit the scope of the ruling which may have been to a point that the ruling wasn’t terribly useful but at least it was a ruling.

2.  Justice Kagan was a law clerk for Justice Thurgood Marshall.  She loves the man.  He told the clerks countless stories.  She said she thinks he is the greatest litigator of the 20th century.  He argued probably 15 times before the Supreme Court.  But she added that there were times when he would argue before the Supremes and two days later do a trial in Mississippi.  He had a lot of experience in every venue and love to tell about it.

3.  Justice Kagan was asked whether she agreed with the perception that there is a growing “supreme court bar,” i.e., a fairly small group of lawyers focusing on the Supreme Court.  If so, is that good?  She said that the concept is generally right and that it is good for the court.  That is because those lawyers know what to expect, what the court wants, how to talk to the court, get intimidated a little less, and the court therefore trusts them a little more going into oral argument.  She commented that sometimes there are attorneys arguing before them that they wish had gone to one of the specialists.

BAP affirms award of attorneys fees to debtor after defense of 523(a)(2) action

This is pretty interesting and very surprising.  It seems to me to make the whole “is this an action on a contract” issue go away, as long at there is some relevant contract with an attorney’s fees provision.

Asphalt Professionals, Inc. v. Davis (In re Davis), (unpublished) 1:10-bk-17214-VK (9th Cir. BAP  July, 2019)

Issue:    Did the bankruptcy court properly award attorneys fees to the debtor after ruling in debtor’s favor in a 523(a)(2) action?

Holding:   Yes.  Even though the 523 action was not “on the contract,” fees are still appropriate under CCP 1021 which “permits recovery of attorney’s fees by agreement, for tort as well as contract actions.”   Further, CCP 1032(b) gives the prevailing party “costs” which include “Attorney’s fees, when authorized by . . . Contract.” CCP 1033.5(a)(10).

Judge Victoria Kaufman, Central District of California

Faris, Lafferty, Kurtz

The creditor here sued the debtor and certain of his corporations for breach of contract, alter ego and fraud.  The state court gave the creditor judgment against the corporate entities for breach of contract and against the debtor based on alter ego.  It did not rule (apparently) on the fraud.  Judgment was $3 million for breach of contract which included $1.5 million for fees.  During these proceedings, the debtor filed chapter 7.  The creditor filed a non-dischargeability complaint alleging fraud and also sought denial of the discharge.  After trial, the bankruptcy court ruled for the debtor which was affirmed by the BAP.  The bankruptcy court then awarded attorneys fees to the debtor for approximately $100,000.  The court ruled that CA CCP 1717 did not apply because the action in bankruptcy court was not “on the contract.”  She found however that CA CCP 1021 “permits recovery of attorney’s fees by agreement, for tort as well as contract actions.”   Further, CCP 1032(b) provides “a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.”  Finally, “Costs” include “Attorney’s fees, when authorized by . . . Contract.” CCP 1033.5(a)(10).

The BAP affirmed.  Citing the California Supreme Court: Read more…