Attorney’s fee orders in bankruptcy are judgments

A thanks to Alan Wenokur in Seattle for this post on another list serve:

In In re Lawson, 156 B.R. 43 (9th Cir. BAP 1993), the BAP addressed a nearly identical fact pattern.  The debtor’s counsel, Mr. Tilem and Mr. Schwartz, withdrew from a bankruptcy case and then applied for compensation.  They were awarded final attorney’s fees. The bankruptcy case was then dismissed.  Former counsel petitioned the bankruptcy court to grant them formal judgments based on their fee awards. The bankruptcy court did so. The BAP, per Judge Volinn, affirmed. The court held that orders related to final fee awards are part of the bankruptcy court’s ancillary jurisdiction that is unaffected by the dismissal of the case:

Actions are said to be ancillary to the original suit when brought in aid of an execution or to effectuate a judgment entered in the prior suit. Jones v. Nat’l Bank of Commerce, 157 F.2d 214, 215 (8th Cir. 1946). Such an action is dependent upon a judgment or a decree in the original suit which is complete and determines the rights of the parties. Id. (citations omitted.) In the present case, the fee awards granted Tilem and Schwartz are final, and the present action therefore is ancillary in nature.  In re Lawson, supra, 156 B.R. at 46.

Critically, the BAP noted that final fee awards are judgments under the Bankruptcy Rules: “Both the Tilem and Schwartz fee awards are final judgments as defined in Bankruptcy Rules 9001(7) (‘Judgment’ means any appealable order) and 9002(5) (‘Judgment’ includes any order appealable to an appellate court).” Id.  See, also, In re Yermakov, 718 F.2d 1465, 1469 (9th Cir. 1983) (fee award under § 330 constitutes a final judgment, order or decree.)

In another BAP case, In re McCowan, 296 B.R. 1 (9th Cir. BAP 2003), the panel (per Judge Perris) affirmed the bankruptcy court’s retention of jurisdiction to determine an exemption claim related to enforcement of a bankruptcy court judgment. The bankruptcy court had entered a nondischargeable judgment against the debtor. After the bankruptcy case was closed, the judgment creditor obtained a writ of execution from the bankruptcy court. The debtor asserted an exemption claim. The judgment creditor asked the bankruptcy court to rule on the exemption, and the court did so. The debtor appealed, arguing that the bankruptcy court lacked jurisdiction to enforce its own money judgments after the case is closed.

The BAP rejected the debtor’s argument, noting that the bankruptcy court had jurisdiction to enter a money judgment upon a finding of nondischargeability, and that “a federal court has ‘ancillary enforcement jurisdiction’ that is automatically available for use ‘in subsequent proceedings for the exercise of a federal court’s inherent power to enforce its judgments.’” Id. at 3, quoting Peacock v. Thomas, 516 U.S. 349, 356 (1994).

Very recently, the Ninth Circuit Court of Appeals addressed the extent of a bankruptcy court’s jurisdiction following confirmation of a Chapter 11 plan, In re Ray, 2010 U.S. App. LEXIS 21956, docket no. 09-60005 (October 25, 2010). There, the Court noted: “We have elaborated that a bankruptcy court has subject matter jurisdiction to interpret orders entered prior to dismissal of the underlying bankruptcy case, In re Franklin, 802 F.2d at 326-27, ‘and to dispose of ancillary matters such as an application for an award of attorney’s fees for services rendered in connection with the underlying action,’ Tsafaroff v. Taylor (In re Taylor), 884 F.2d 478, 481 (9th Cir. 1989).”

Alan J. Wenokur

600 Stewart St., Suite 1300
Seattle, WA  98101

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