CALIFORNIA ATTORNEY'S FEES

Bankruptcy, Sanctions: Ex-Partners In State Court Lawsuit Against Debtor With A Discharge Injunction Properly Not Sanctioned For Contempt Fees When They Had An Objective Belief The Debtor Had Returned To The Partnership State Court Dispute

Ninth Circuit Came To The Same Result, Even Under An Objective Standard Although SCOTUS Sent The Case Back Based On Denying Contempt Fees Under A Less Stringent Good Faith Belief Standard.

            On April 28, 2020, we posted on In re Taggart, a Ninth Circuit decision where two ex-partners in state court litigation against a debtor obtaining a discharge injunction were not hit with contempt fees when they took certain actions with a good faith belief that the debtor had re-entered into the state court fray—with the federal appeals court reversing a contrary lower court ruling.  SCOTUS, in Taggart v. Lorenzen, 139 S.Ct. 1795, 1799 (2019), vacated that prior Ninth Circuit decision and remanded after determining that an objective, rather than subjective, standard is more appropriate in determining whether the ex-partner creditors could be held in civil contempt for violating the bankruptcy discharge injunction.  On remand, in Taggart v. Lorenzen, No. 16-35402 (9^th Cir. Nov. 24, 2020) (published), the Ninth Circuit came to the same result based on applying the higher objective standard to the creditors’ conduct and knowledge of events. 

Bankruptcy: The Ninth Circuit Denies 28 U.S.C. § 2412(d)(1)(A) Recovery Of Attorney Fees To Debtors Who Successfully Appealed Denials Of Their Chapter 13 Bankruptcy Plans

A Bankruptcy Court Does Not Fall Within The Definition Of “United States” Under The Equal Access to Justice Act, And An Uncontested Bankruptcy Case Does Not Constitute A Civil Action Brought By Or Against The United States.

            Four separate debtors, in four separate actions, successfully appealed to the 9^th Circuit after their unopposed Chapter 13 plans were denied by the lower bankruptcy court and Bankruptcy Appellate Panel (“BAP”) due to their estimated, rather than fixed, plan durations.  Afterward, each debtor moved against the bankruptcy court and BAP under the Equal Access to Justice Act (“EAJA”), 28 U.S. Code § 2412 – seeking to recover the attorney fees they incurred.

            The EAJA, under 28 U.S.C. § 2412(d)(1)(A), provides that “[A] court shall award to a prevailing party . . . fees and other expenses . . . incurred by that party in any civil action . . . including proceedings for judicial review of agency action, brought by or against the United States . . . unless the court finds that the position of the United States was substantially justified or that special circumstances make an award unjust.”

            Due to the similar circumstances underlying the four fee requests, the 9^th Circuit considered them together in In re: Nanette Sisk, Case Nos. 18-17445 et al. (9^th Cir. September 1, 2020) (published).  While the 9^th Circuit acknowledged that Debtors’ counsel spent considerable time and resources pursuing the successful appeals, it nonetheless denied debtors’ applications for fees.

            Because the EAJA provides separate definitions for “court” and “United States,” a bankruptcy court does not fall within the EAJA’s definition of “United States,” and uncontested bankruptcy cases do not constitute “civil action[s] brought by or against the United States” within the meaning of the EAJA.  “[B]ecause the EAJA is a limited waiver of the government’s sovereign immunity, it must be strictly construed in favor of maintaining immunity not specifically and clearly waived.”  Kreines v. United States, 33 F.3d 1105, 1109 (9th Cir. 1994).

Bankruptcy: Reasonable Costs Of Disciplinary Proceedings Imposed On California Lawyer Were Nondischargeable; However, Discovery Sanctions Payable To A Party Were Dischargeable

End Result Was $18,714 Was Nondischargeable, But $5,738 Was Dischargeable.

            In In re Albert-Sheridan (Albert-Sheridan v. California State Bar), No. 19-60023 (9^th Cir. June 10, 2020) (published), a disciplined California lawyer was ordered by the State Bar to pay $18,714 in costs for the disciplinary proceeding and to pay a client’s opponent $5,738 in discovery sanctions as conditions to lifting her suspension.  Lawyer filed a Chapter 13 bankruptcy, later converted to a Chapter 7, trying to discharge all of the costs and discovery sanctions.  The bankruptcy court said “no,” but the Ninth Circuit said “no” and “yes.”  With respect to the State Bar disciplinary costs, those were nondischargeable.  But, a different result as to the discovery sanctions:  in a first impression issue, the federal appellate court determined they were dischargeable in light of the fact they were not payable to a governmental entity. 

Bankruptcy, In The News . . . . Four Outside Bankruptcy Law Firms Seeking Approval Of $84 Million In Fees Since PG&E’s January 2019 Bankruptcy Filings

Filings Also Show Hourly Rates Being Claimed.

            As reported by NALTA in an April 2, 2019 post, four outside bankruptcy firms have requested approval of around $84 million in fees for work on Pacific Gas & Electric Company’s bankruptcy case, which was filed in January of this year. Based on its summary of public court filings, NALTA reports that Cravath attorneys are charging at rates of $415 to $1,500 per hour; Weil attorneys charge $560 to $1,600 per hour; Jenner & Block attorneys charge PG&E at hourly rates ranging from $400 to $982; and Keller & Benvenutti attorneys are charging at $400 to $800 per hour.

Bankruptcy, Substantiation Of Reasonableness Of Fees: Debtor Is Entitled To Attorney’s Fees And Costs For Challenging A Willful Automatic Stay Order On Appeal

Debtor Also Properly Allocated Fees To Work On Appeal, Such That A Procedural Basis For Denying Fees And Costs Was Infirm.

            In In re Schwartz-Tallard, 803 F.3d 1095, 1101 (9th Cir. 2015) (en banc) [discussed in our April 17, 2014 post], the Ninth Circuit earlier held that 11 U.S.C. § 362(a) authorizes the court to award reasonable attorney’s fees and costs incurred on appeal to a debtor defending a willful automatic stay violation judgment pursuant to § 362(k). This same circuit court of appeals, in Easley v. Collection Service of Nevada, No. 17-16506 (9^th Cir. Dec. 20, 2018) (published) has now extended that logic and fees/costs entitlement to encompass the situation where a debtor successfully challenges an initial award pursuant to § 362(k) on appeal. Furthermore, it rejected a district judge’s sustaining of a procedural objection that the debtor did not properly segregate work just on appeal, with the record showing it was an abuse of discretion to so conclude based on the substantiating time entries and accompanying memorandum of points and authorities.