Judgment creditor request for attorney’s fee for bankruptcy court efforts.

I found this in a tentative by the very thoughtful Judge Ernest Robles.  Can judgment creditors get attorneys fees for their efforts in bankruptcy court?  Yes, but they have to do it right.

In re Harris, 2:20-12839

B. The Attorneys’ Fees Motion is Denied

The Attorneys’ Fees Motion is denied without prejudice because the Court lacks jurisdiction to award attorneys’ fees under 42 U.S.C. § 1988 on account of the Judgment.

The Bankruptcy Court has jurisdiction over “all cases under title 11.” 28 U.S.C. § 1334(a). “Generally, in the bankruptcy context, the word ‘case’ is a term of art which refers to ‘that which is commenced by the filing of a petition; it is the “whole ball of wax,” the chapter 7, 9, 11, 12 or 13 case.’” Blevins Elec., Inc. v. First Am. Nat’l Bank (In re Blevins Elec., Inc.), 185 B.R. 250, 253 (Bankr. E.D. Tenn. 1995).

The Bankruptcy Court also has jurisdiction over “all civil proceedings arising under title 11, or arising in or related to cases under title 11.” 28 U.S.C. §1334(b). The three types of jurisdiction conferred under 28 U.S.C. §1334(b) are known as “arising under,” “arising in,” and “related to” jurisdiction. “Arising under” jurisdiction exists if “the cause of action is created by title 11.” Menk v. Lapaglia (In re Menk), 241 B.R. 896, 909 (B.A.P. 9th Cir. 1999). “Arising in” jurisdiction applies to “those administrative proceedings that, while not based on any right created by title 11, nevertheless have no existence outside bankruptcy.” Id. “Related to” jurisdiction exists if “the outcome of the proceeding could conceivably have any effect on the estate being administered in bankruptcy…. An action is related to bankruptcy if the action could alter the debtor’s rights, liabilities, options, or freedom of action (either positively or negatively) and which in any way impacts upon the handling and administration of the bankruptcy estate.” Fietz v. Great Western Savings (In re Fietz), 852 F.2d 455, 457 (9th Cir. 1988) (internal citations omitted).

The Court does not have any of the three types of jurisdiction under 28 U.S.C. § 1334(b). The Court does not have “arising under” jurisdiction because the Judgment did not result from a cause of action created by title 11. The Court does not have “arising in” jurisdiction because the Judgment results from 42 U.S.C. § 1983, and therefore is not the result of an administrative proceeding that has no existence outside of bankruptcy. The Court does not have “related to” jurisdiction because the case has been dismissed. Therefore, awarding attorneys’ fees for Holmes’ efforts to enforce the Judgment could not have any effect on the estate.

The only remaining basis for jurisdiction is 28 U.S.C. § 1334(a), which provides the Court jurisdiction over “all cases under title 11.” In its May 27, 2020 order dismissing the case, the Court retained “subject matter and personal jurisdiction over Debtor and her counsel of record, solely for the purposes of determining any motion of Ms. Holmes requesting sanctions or reimbursement of attorney’s fees against the Debtor and/or her counsel.” Dismissal Order at ¶ 3. Because the Judgment was a liability of Harris in her Chapter 11 case, it could be argued that the Court has jurisdiction to award attorneys’ fees in connection with the Judgment under 28 U.S.C. § 1334(a).

In view of the dismissal of the case, the Court declines to find that it has jurisdiction under 28 U.S.C. § 1334(a). Had the case not been dismissed, the relief sought in the Attorneys’ Fees Motion would be analogous to a motion to determine the amount of Holmes’ claim against Harris, which would be a core proceeding under 28 U.S.C. § 157(b)(2)(B). In that context, the Court might have jurisdiction to apply nonbankruptcy law to award additional fees on account of the Judgment, since the award of such fees would be related to the administration of the estate. But now that the case has been dismissed, an award of additional fees on account of the Judgment can have no effect upon the case.

The Court sees no reason why Holmes cannot apply to the District Court, which issued the Judgment, for the attorneys’ fees incurred enforcing the Judgment. In all of the cases cited by Holmes in support of the Attorneys’ Fees Motion, fees were awarded by the court that issued the judgment, not the bankruptcy court. For example, in Pinshaw v. Monk, 565 F.Supp. 44 (D. Mass. 1983), after the plaintiff incurred fees opposing the dischargeability of a judgment in bankruptcy court, the plaintiff returned to the district court that had issued the judgment to obtain an award of the fees incurred before the bankruptcy court. As noted above, the only situation in which the Court might have jurisdiction to interpret nonbankruptcy law to award fees on account of a judgment which it did not issue is if it became necessary for the Court to fix Harris’ total liability on account of the Judgment for plan confirmation purposes. That is not the case here.

Leave a Reply

two + = 6