in re: seyed shahram hosseini, 9th cir. bap (2013)

7/25/2019 In re: Seyed Shahram Hosseini, 9th Cir. BAP (2013)

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UNITED STATES BANKRUPTCY APPELLATE PANEL

OF THE NINTH CIRCUIT

I n r e: ) BAP No. CC- 12- 1516- DKi Ta)

SEYED SHAHRAM HOSSEI NI , ) Bk. No. SV 10- 66228- WA)

Debt or . ) Adv. No. SV 10- 01385- WA______________________________)

)SEYED SHAHRAM HOSSEI NI , )

)Appel l ant , )

)v. ) O P I N I O N

)KEY BANK, N. A. , )

)Appel l ee. )

______________________________)

Ar gued and Submi t t edat Pasadena, Cal i f orni a on November 21, 2013

Fi l ed - December 19, 2013Or der ed Publ i shed - J anuar y 6, 2014

Appeal f r om t he Uni t ed St at es Bankrupt cy Cour tf or t he Cent r al Di str i ct of Cal i f or ni a

Hon. Wi l l i am V. Al t enber ger , Bankrupt cy J udge, Pr esi di ng.

Appear ances: Deni se M. Fi t zpat r i ck, Esq. f or Appel l ant , SeyedShahr am Hossei ni ; and Hol l y J . Nol an, Esq. f or Appel l ee, KeyBank, N. A.

Bef ore: DUNN, KI RSCHER, and TAYLOR, Bankr upt cy J udges.

FILED

JAN 06 2014

SUSAN M. SPRAUL, CLERKU.S. BKCY. APP. PANELOF THE NINTH CIRCUIT


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1 Unl ess ot her wi se i ndi cat ed, al l chapt er and sect i onr ef er ences ar e t o t he f eder al Bankrupt cy Code, 11 U. S. C. 101-1532, and al l Rul e r ef er ences are t o t he Feder al Rul es ofBankr upt cy Procedur e, Rul es 1001- 9037. The Federal Rul es ofCi vi l Pr ocedur e ar e r ef er r ed t o as Ci vi l Rul es.

The Local Bankr upt cy Rul es f or t he Uni t ed St at es Bankr upt cyCour t f or t he Cent r al Di st r i ct of Cal i f or ni a ar e r ef er r ed t o asLBR.

2

DUNN, Bankrupt cy J udge:

The debtor , Seyed Shahr am Hossei ni , appeal s t he bankrupt cy

cour t s order 1) denyi ng hi s mot i on f or at t or ney s f ees and 2)

al l owi ng onl y cost s f or ser vi ce of pr ocess r equest ed i n hi s bi l l

of cost s. 1 We AFFI RM.

FACTS

Pr epet i t i on, t he debt or obt ai ned a t ot al of $280, 046. 34 i n

st udent l oans ( st udent l oan debt ) f r om Key Bank, N. A. ( Key

Bank) t o f und hi s medi cal school educat i on. Despi t e sever al

at t empt s, he was unabl e t o pass t he medi cal l i censi ng exam. The

debt or di d not become a physi ci an, as he had hoped, but i nst ead

became a ni ght secur i t y guard ear ni ng onl y $13. 50 per hour . He

al so was beset wi t h var i ous physi cal and ment al ai l ment s,

i ncl udi ng di abet es and depr essi on.

The debtor f i l ed a chapter 7 bankrupt cy pet i t i on on May 24,

2010. He i ni t i at ed an adver sar y pr oceedi ng t o di schar ge t he

st udent l oan debt under 523( a) ( 8) . Two years af t er Key Bankf i l ed i t s answer i n t he adver sary pr oceedi ng, t he bankrupt cy

cour t hel d a t r i al . I t gr ant ed j udgment i n t he debt or s f avor ,

di schar gi ng hi s ent i r e st udent l oan debt t o Key Bank ( Di schar ge

Or der ) .


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2 The debt or i ni t i al l y sought $6, 210. 39 i n cost s.

3 Ms. Fi t zpat r i ck empl oyed Mr . Mur r ay as a consul t ant t ohel p her dur i ng t r i al . She f i l ed a not i ce of associ at i on ofcounsel on J ul y 17, 2012, i ndi cat i ng t hat Mr . Mur r ar y was co-counsel i n t he adver sary pr oceedi ng. Accor di ng t o Ms.Fi t zpat r i ck, Mr . Mur r ay di d t he or al ar gument s at t r i al .

The bankrupt cy cour t deter mi ned t hat Mr . Mur r ay was not aconsul t ant but an at t or ney as he [ had] t r i ed t he case. Tr . ofSept ember 10, 2012 Hr g, 29: 4. The bankr upt cy cour t t heref oref ound t hat t he $2, 500 consul t ant f ee f or Mr . Mur r ay act ual l y

( cont i nued. . . )

3

Shor t l y af t er t he bankrupt cy cour t ent er ed t he Di schar ge

Or der , t he debt or f i l ed a bi l l of cost s ( Cost Bi l l ) seeki ng a

t ot al of $4, 960. 39 i n expenses i ncur r ed by hi s at t or ney, Deni se

Fi t zpat r i ck, i n t he adver sar y pr oceedi ng. 2 Al ong wi t h t he Cost

Bi l l , he submi t t ed a decl ar at i on by Ms. Fi t zpat r i ck ( Cost Bi l l

Decl ar at i on) , whi ch i ncl uded an i t emi zat i on of each cost sought

t o be r ecover ed by hi m ( Cost Bi l l I t emi zat i on) .

Accor di ng t o t he Cost Bi l l I t emi zat i on, t he debt or sought

$101. 20 f or copyi ng and pr i nt i ng (most l y f or document s served

el ect r oni cal l y) , $20. 90 f or f axi ng ( al l f or evi dent i ar y document s

f r om t he debt or t o Ms. Fi t zpat r i ck) , $107. 74 f or ser vi ce of

pr ocess ( post age f or servi ce of summons, st at us r epor t s and

ot her document s mai l ed by Ms. Fi t zpat r i ck) , and $4, 730. 55 f or

mi scel l aneous cost s ( consi st i ng of messenger ser vi ce f ees, onl i ne

sof t war e pur chases, exhi bi t pr epar at i on cost s, t r anspor t at i on

cost s f or Ms. Fi t zpat r i ck s meet i ngs wi t h co- counsel and/ or t he

debt or , r esear ch and document r et r i eval cost s, phone char ges

f or a st at us conf er ence t hr ough Cour t Cal l , a $2, 500 consul t antf ee t o Char l es Mur r ay3 ( Mur r ay consul t at i on f ee) , and a $500


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3( . . . cont i nued)was an at t or ney s f ee t o be i ncl uded i n t he At t or ney Fee Mot i on.

4 Ms. Fi t zpat r i ck f ai l ed t o appear at t he t r i al set f or

Apr i l 25, 2012. She had Mr . Vega speci al l y appear t o r epr esentt he debt or i n her st ead. I t seems t hat t he $500 f ee t o Mr . Vegawas f or hi s speci al appear ance at t he Apr i l 25, 2012 hear i ng.

5 I n her decl ar at i on f i l ed i n suppor t of t he At t or ney Fee

Mot i on ( At t or ney Fee Decl ar at i on) , Ms. Fi t zpat r i ck cl ai med t hatshe spent a t ot al of 316. 29 hour s l i t i gat i ng t he adver sar ypr oceedi ng. She at t ached t o her decl ar at i on an at t or ney t i mel og t hat descr i bed t he var i ous t asks she per f or med, t he t i mespent on each t ask and t he amount due.

6 The debt or al so r ef er enced LBR 7054- 1( g) ( 1) , whi ch al l owsa pr evai l i ng par t y t o f i l e a mot i on f or an awar d of at t or ney sf ees where such f ees may be awarded, wi t hi n 30 days af t er ent r yof j udgment .

LBR 7054- 1( g) pr ovi des:( 1) I f not pr evi ousl y det er mi ned at t r i al or ot her hear i ng,

a part y seeki ng an award of at t orneys f ees where suchf ees may be awarded must f i l e and ser ve a mot i on notl at er t han 30 days af t er t he ent r y of j udgment or ot herf i nal or der , unl ess other wi se or der ed by the cour t .


4

f ee t o Hector Vega f or [ consul t at i on] and appear ance necessar y

t o obt ai n t r i al cont i nuance and pr event di smi ssal ) . 4

The debtor al so f i l ed a mot i on f or al l owance of at t or ney s

f ees ( At t or ney Fee Mot i on) , seeki ng a t ot al of $110, 701. 50 f or

r easonabl e and necessar y f ees i ncur r ed [ by Ms. Fi t zpat r i ck] i n

[ t he adver sary pr oceedi ng] . 5

I n suppor t of t he At t or ney Fee Mot i on, t he debt or r el i ed on

a pr ovi si on ( f ee pr ovi si on) i n t he pr omi ssor y not e f or t he

st udent l oans ( pr omi ssory not e) , whi ch he cl ai med aut hor i zed

hi m t o seek at t or ney s f ees as t he pr evai l i ng par t y i n t he

adver sar y pr oceedi ng. 6 The f ee pr ovi si on st at ed:


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6( . . . cont i nued)( 2) The requi r ement s of LBR 9013- 1 t hr ough LBR 9013- 4 appl y

t o a mot i on f or at t or neys f ees under t hi s r ul e.

7 Ci vi l Code 1717 pr ovi des, i n r el evant par t :

( a) I n any act i on on a cont r act , wher e t he cont r actspeci f i cal l y pr ovi des t hat at t or ney s f ees and cost s,whi ch ar e i ncur r ed t o enf or ce t hat cont r act , shal l beawar ded ei t her t o one of t he par t i es or t o t hepr evai l i ng par t y, t hen t he par t y who i s det er mi ned t obe t he par t y pr evai l i ng on t he cont r act , whet her he orshe i s t he par t y speci f i ed i n t he cont r act or not ,

shal l be ent i t l ed t o r easonabl e at t or ney s f ees i naddi t i on t o ot her cost s.

Wher e a cont r act pr ovi des f or at t or ney s f ees, as setf or t h above, t hat pr ovi si on shal l be const r ued asappl yi ng t o t he ent i r e cont r act , unl ess each par t y wasr epr esent ed by counsel i n t he negot i at i on and execut i onof t he cont r act , and t he f act of t hat r epr esent at i on i sspeci f i ed i n t he cont r act .

Reasonabl e at t or ney s f ees shal l be f i xed by t he cour t ,

and shal l be an el ement of t he cost s of sui t .

At t or ney s f ees pr ovi ded f or by thi s sect i on shal l notbe subj ect t o wai ver by t he par t i es t o any cont r actwhi ch i s ent er ed i nt o af t er t he ef f ect i ve dat e of t hi ssect i on. Any pr ovi si on i n any such cont r act whi chpr ovi des f or a wai ver of at t or ney s f ees i s voi d.

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When and as per mi t t ed by appl i cabl e l aw, I [ t hebor r ower ] agr ee t o pay your [ t he l ender ] r easonabl eamount s, i ncl udi ng r easonabl e at t or ney s f ees f or anyat t or ney who i s not your r egul ar l y sal ar i ed empl oyee andcour t and ot her col l ect i on cost s, t hat you i ncur i nenf or ci ng t he t er ms of t he [ pr omi ssor y] Not e i f I am i ndef aul t .

He f ur t her r el i ed on Cal i f or ni a Ci vi l Code ( Ci vi l Code)

1717, ar gui ng t hat Ci vi l Code 1717 r ei nf or ced t he f ee

pr ovi si on t hr ough r eci pr oci t y. 7 Accor di ng t o t he debt or , Ci vi l

Code 1717 r equi r es payment of at t or ney f ees t o pr evai l i ng


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par t i es when at t or ney f ees are af f or ded t o any cont r act i ng

par t y.

Key Bank opposed t he Cost Bi l l , cont endi ng that t he debt or

coul d not r ecover cer t ai n cost s because t hey wer e not al l owed

under LBR 7054- 1. Speci f i cal l y, i t opposed t he debt or s r equest

f or r ecover y of cost s f or ever y copy ever made i n t he adver sary

pr oceedi ng because LBR 7054- 1 al l owed r ecover y of cost s of copi es

of document s admi t t ed i nt o evi dence onl y i f t he or i gi nal

document s wer e not avai l abl e. I t f ur t her opposed r ecover y f or

post age, Cour t Cal l char ges, f ax char ges, messenger and del i ver y

char ges, sof t war e cost s, t r anspor t at i on cost s, PACER r esear ch

charges and the Mur r ay consul t at i on f ee because LBR 7054- 1 di d

not i ncl ude such expenses as r ecover abl e cost s.

Key Bank al so opposed t he At t orney Fee Mot i on, argui ng that

t her e was no st at ut or y basi s f or an awar d of at t or ney s f ees

under 523( a) ( 8) as r equi r ed under t he Amer i can Rul e.

Key Bank al so cont ended t hat t he f ee pr ovi si on onl y appl i ed

t o act i ons seeki ng t o enf or ce t he t er ms of t he pr omi ssory not e.Her e, t he debt or had i ni t i at ed t he adver sary pr oceedi ng t o

di schar ge hi s st udent l oan debt under 523( a) ( 8) , not t o enf or ce

t he pr omi ssor y not e s t er ms. The debt or t her ef or e coul d not seek

at t or ney s f ees because he pr evai l ed on a cl ai m t o r el i eve

hi msel f f r om hi s debt s under f eder al l aw, not on a Key Bank cl ai m

t o r ecover f ol l owi ng a def aul t under t he pr omi ssor y not e.

Key Bank f ur t her asser t ed t hat Ci vi l Code 1717 di d notappl y because the pr omi ssor y not e cont ai ned a pr ovi si on st at i ng

t hat Ohi o l aw, not Cal i f or ni a l aw, gover ned t he pr evai l i ng

par t y s r ecover y of at t or ney s f ees ( gover ni ng l aw pr ovi si on) .


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Speci f i cal l y, t he gover ni ng l aw pr ovi si on st at ed:

I under st and and agr ee t hat ( i ) you ar e l ocat ed i nOhi o, ( i i ) t hat t hi s Not e wi l l be ent er ed i nt o i n Ohi oand ( i i i ) t hat your deci si on on whet her t o l end memoney wi l l be made i n Ohi o. CONSEQUENTLY, THEPROVI SI ONS OF THI S NOTE WI LL BE GOVERNED BY FEDERAL

LAWS AND THE LAWS OF THE STATE OF OHI O, WI THOUT REGARDTO CONFLI CT OF LAWRULES. I agr ee t hat any sui t Ibr i ng agai nst you ( or agai nst any subsequent hol der oft hi s Note) must be br ought i n a cour t of competentj ur i sdi ct i on i n t he county i n whi ch you mai ntai n your( or t he count y i n whi ch the subsequent hol der mai nt ai nsi t s) pr i nci pal pl ace of busi ness.

On Sept ember 10, 2012, t he bankr upt cy cour t hel d a hear i ng

on t he Cost Bi l l and t he At t orney Fee Mot i on.

Af t er hear i ng extensi ve ar gument f r om counsel , t he

bankrupt cy cour t f i r st addr essed t he Cost Bi l l . The bankrupt cy

cour t agr eed wi t h Key Bank t hat LBR 7054- 1 al l owed f or t he

r ecover y of f i l i ng f ees and cer t ai n of t he ser vi ce of pr ocess

f ees, but not f or t he ot her f ees r equest ed by the debt or .

The bankrupt cy cour t t hen t urned t o t he At t or ney Fee Mot i on.

I t began by recogni zi ng t hat , under t he Amer i can Rul e, a

pr evai l i ng par t y may not r ecover at t or ney s f ees unl ess t her e wasa st at ut e or a cont r act aut hor i zi ng such r ecover y. The

bankr upt cy cour t acknowl edged t hat t he f ee pr ovi si on al l owed Key

Bank to r ecover any at t or ney s f ees i ncur r ed i n enf or ci ng t he

t er ms of t he pr omi ssor y not e i f t he debt or def aul t ed. I t al so

acknowl edged t hat Ci vi l Code 1717 pr ovi ded t hat , i n any act i on

on a cont r act wher e t he cont r act speci f i cal l y pr ovi ded f or t he

r ecover y of at t or ney s f ees i ncur r ed by t he pr evai l i ng par t y t oenf or ce t he cont r act , t he pr evai l i ng par t y was ent i t l ed t o

r ecover r easonabl e at t or ney s f ees. The bankrupt cy cour t not ed

t hat Key Bank di d not di sput e t hat i f i t coul d r ecover at t or ney s


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8 The bankr upt cy cour t al so obser ved:

No mat t er how you l ook at t hi s or how you cut i t ,[ t he amount was] way t oo much i n t he way of at t orney sf ees i n a case f or har dshi p, t o have hi s st udent l oansdecl ar ed t o be a har dshi p, and t her ef or e,di schar geabl e.

I t s ei t her a case of over - l awyer i ng, or a casewhere the l awyer was not f ami l i ar wi t h bankr upt cy l awor bankrupt cy t r i al s, because ther e s no way that a

t wo- hour t r i al or t hr ee- hour t r i al , shoul d r equi r epr epar at i on t i me and t r i al t i me that t ot al s $125, 000.

Tr . of Sept ember 10, 2012 Hr g, 30: 23- 25, 31: 1- 6.

9 Al t hough i t al l owed t he debt or t o r ecover f i l i ng f ees and( cont i nued. . . )

8

f ees as t he pr evai l i ng par t y, t he debt or al so coul d r ecover

at t or ney s f ees i f he wer e t he pr evai l i ng par t y. 8

The bankrupt cy cour t ul t i mat el y deci ded t hat t he debtor was

not ent i t l ed t o r ecover at t or ney s f ees under t he Amer i can Rul e.

I n maki ng i t s det er mi nat i on, t he bankrupt cy cour t f ocused on t he

pur pose of t he adver sary pr oceedi ng. I t emphasi zed t hat t he

debt or i ni t i at ed t he adver sar y pr oceedi ng t o di schar ge hi s

st udent l oan debt t o Key Bank, not t o enf or ce the t er ms of t he

pr omi ssory note or cont est t he amount of t he debt t o Key Bank.

Because t he sol e l egal basi s f or r ecover y of at t or ney s f ees di d

not appl y i . e. , t he f ee pr ovi si on t he bankrupt cy cour t deni ed

t he At t orney Fee Mot i on.

On Sept ember 26, 2012, t he bankr upt cy court ent ered an order

on bot h t he Cost Bi l l and t he At t or ney Fee Mot i on ( Cost and Fee

Or der ) . I n t he Cost and Fee Or der , t he bankrupt cy cour t al l owed

t he debt or $10. 82 i n cost s f or servi ce of pr ocess but deni ed al l

ot her cost s. 9 I t deni ed t he At t or ney Fee Mot i on i n i t s ent i r et y.


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9( . . . cont i nued)cost s f or ser vi ce of pr ocess, t he bankrupt cy cour t not ed t hat t hedebt or was not r equi r ed t o pay t he f i l i ng f ee f or t he adver sar ypr oceedi ng. I t t her ef or e det er mi ned t he amount f or f i l i ng f eest o be zer o.

9

The debtor t i mel y appeal ed t he Cost and Fee Or der .

JURISDICTION

The bankrupt cy cour t had j ur i sdi ct i on under 28 U. S. C.

1334 and 157( b) ( 2) ( I ) . We have j ur i sdi ct i on under 28 U. S. C.

158.

ISSUES

( 1) Di d t he bankr upt cy cour t abuse i t s di scr et i on i n

al l owi ng $10. 82 i n cost s f or ser vi ce of pr ocess onl y?

( 2) Di d t he bankr upt cy cour t abuse i t s di scr et i on i n

denyi ng t he At t or ney Fee Mot i on i n i t s ent i r et y?

STANDARDS OF REVIEW

We r evi ew a bankrupt cy cour t s r ef usal t o awar d at t or ney s

f ees f or an abuse of di scr et i on. Renf r ow v. Dr aper , 232 F. 3d

688, 693 ( 9t h Ci r . 2000) ; Di nan v. Fry ( I n r e Di nan) , 448 B. R.

775, 783 ( 9t h Ci r . BAP 2011) . We al so r evi ew a bankr upt cy

cour t s al l owance or di sal l owance of cost s f or abuse of

di scr et i on. Kal i t t a Ai r LLC v. Cent . Tex. Ai r bor ne Sys. I nc. ,

- - - F. 3d - - - , 2013 WL 6670795 at *2 (9t h Ci r . 2013) ; Young v.Avi va Gel at o, I nc. ( I n r e Avi va Gel at o, I nc. ) , 94 B. R. 622, 624

( 9t h Ci r . BAP 1988) , af f d, 930 F. 2d 26 ( 9t h Ci r . 1991) ( t abl e) .

We al so r evi ew i t s r ul i ngs r egar di ng t he l ocal r ul es f or abuse of

di scr et i on. Kal i t t a Ai r LLC, 2013 WL 6670795 at *2.

We appl y a t wo- par t t est t o det er mi ne obj ect i vel y whet her

t he bankrupt cy cour t abused i t s di scr et i on. Uni t ed St at es v.


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Hi nkson, 585 F. 3d 1247, 1261- 62 ( 9t h Ci r . 2009) ( en banc) . Fi r st ,

we det ermi ne de novo whether t he bankr upt cy cour t i dent i f i ed t he

cor r ect l egal r ul e t o appl y t o t he r el i ef r equest ed. I d.

Second, we exami ne t he bankrupt cy cour t s f act ual f i ndi ngs under

t he cl ear l y er r oneous st andar d. I d. at 1262 & n. 20. A

bankr upt cy cour t abuses i t s di scret i on i f i t appl i ed t he wr ong

l egal st andar d or i t s f actual f i ndi ngs wer e i l l ogi cal ,

i mpl ausi bl e or wi t hout suppor t i n t he r ecor d. Tr af f i cSchool . com,

I nc. v. Edr i ver I nc. , 653 F. 3d 820, 832 ( 9t h Ci r . 2011) .

We r evi ew de novo t he bankr upt cy cour t s deci si on t o deny

at t or ney s f ees under st at e l aw. See Di nan, 448 B. R. at 783

( ci t i ng Ber t ol a v. N. Wi s. Pr oduce Co. , I nc. ( I n r e Ber t ol a) , 317

B. R. 95, 99 ( 9t h Ci r . BAP 2004) ) .

We may af f i r m on any gr ound suppor t ed by t he r ecor d. Shanks

v. Dr essel , 540 F. 3d 1082, 1086 ( 9t h Ci r . 2008) .

DISCUSSION

A. Cost Bi l l

Rul e 7054( b) pr ovi des i n r el evant par t : The cour t may al l owcost s t o t he pr evai l i ng par t y except when a st at ut e of t he Uni t ed

St at es or t hese r ul es ot her wi se pr ovi des. Rul e 7054( b) ar i ses

f r om Ci vi l Rul e 54( d) ( 1) , whi ch pr ovi des i n r el evant par t :

Unl ess a f eder al st at ut e, t hese r ul es, or a cour t or der pr ovi des

ot her wi se, cost s ot her t han at t or ney s f ees shoul d be al l owed

t o t he pr evai l i ng par t y.

Ci vi l Rul e 54( d) ( 1) appear s mandat or y i n nat ur e, as i tst at es t hat cost s shoul d be al l owed, unl ess i t or f eder al

st at ut e or r ul e ot her wi se di r ect s. See 10 Col l i er on Bankrupt cy

7054. 05 (Al an N. Resni ck & Henr y J . Sommer, eds. , 16t h ed. r ev.


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2013) ( [ A] l t hough ul t i mat el y l eavi ng t he quest i on of cost s t o t he

di scret i on of t he cour t , [ Ci vi l Rul e 54( d) ] pr ovi des t hat t he

cour t shoul d al l ow cost s t o t he pr evai l i ng par t y unl ess i t , a

f eder al st at ut e or a Ci vi l Rul e ot her wi se di r ect s. ) ( her ei naf t er

r ef er r ed t o as Col l i er on Bankr upt cy) . Nonet hel ess, Ci vi l Rul e

54( d) ( 1) gener al l y gr ant s a f eder al cour t di scret i on t o r ef use t o

t ax cost s i n t he pr evai l i ng par t y s f avor . Cr awf or d Fi t t i ng Co.

v. J . T. Gi bbons, I nc. , 482 U. S. 437, 442 ( 1987) .

On t he ot her hand, Rul e 7054( b) i s per mi ssi ve i n nat ur e, as

i t st at es t hat t he bankrupt cy cour t may al l ow cost s. ( Emphasi s

added. ) See I n r e Avi va Gel at o, I nc. , 94 B. R. at 624 ( Al t hough

[ Ci vi l ] Rul e 54( d) appear s t o be mor e mandat or y i n nat ur e than

[ Rul e] 7054( b) , t he Ni nt h Ci r cui t has consi st ent l y recogni zed

t hat t he t r i al cour t has di scr et i on as t o what cost s t o

al l ow. ) ( ci t at i on omi t t ed) . See al so 10 Col l i er on Bankr upt cy

7054. 05. Al t hough i t has br oad di scr et i on i n det er mi ni ng

whet her t o deny cost s, t he bankrupt cy cour t must st at e i t s

r easons f or denyi ng t hem. I n r e Avi va Gel at o, I nc. , 94 B. R. at624.

The debtor cont ends t hat t he bankrupt cy cour t er r ed i n

l i mi t i ng r ecover abl e cost s t o those l i st ed i n t he Cour t Manual

pur suant t o LBR 7054- 1( d) . I nst ead, accor di ng t o t he debt or , t he

bankr upt cy cour t shoul d have r ef erenced 28 U. S. C. 1920, whi ch

per mi t s r ecover y of r easonabl e out - of - pocket expenses t ypi cal l y

char ged t o cl i ent s by t hei r at t or neys.We decl i ne t o consi der t he debt or s ar gument r egardi ng 28

U. S. C. 1920, as he di d not r ai se i t bef or e t he bankrupt cy


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10 Mor eover , consi der i ng 28 U. S. C. 1920, t he Ni nt hCi r cui t r ecent l y hel d t hat t he bet t er cour se i s t o hew cl osel yt o t he st at ut e s l anguage, scheme and cont ext , r ecogni zi ng t hat 1920 i s nar r ow, l i mi t ed and modest i n scope. Kal i t t a Ai r LLC, -- - - F. 3d - - - - , 2013 WL 6670795 at *3 ( ci t i ng Tani guchi v. KanPaci f i c Sai pan, Lt d. , 132 S. Ct . 1997, 2006 ( 2012) ) .

12

cour t . 10 See Enewal l y v. Wash. Mut . Bank ( I n r e Enewal l y) , 368

F. 3d 1165, 1173 ( 9t h Ci r . 2004) ( As a gener al r ul e, i ssues not

pr esent ed t o t he t r i al cour t cannot gener al l y be r ai sed f or t he

f i r st t i me on appeal , unl ess one of t he f our r ecogni zed

except i ons appl y. ) ( quot i ng Uni t ed St at es v. Fl or es- Payon, 942

F. 2d 556, 558 ( 9t h Ci r . 1991) ( i nt er nal quot at i on mar ks omi t t ed) ) .

As f or t he bankrupt cy cour t s r el i ance on LBR 7054- 1, we

concl ude t her e was no er r or . The gener al r ul e i s t hat t he

bankrupt cy cour t s aut hor i t y t o tax a cost must come f r om a

f eder al st at ut e or r ul e of cour t , or i n t he cust om, pr act i ce and

usage appl i cabl e i n a par t i cul ar di st r i ct , and i n some i nst ances

by t he exer ci se of t he cour t s gener al equi t abl e di scret i on. 10

Col l i er on Bankrupt cy 7054. 05. Accor di ng t o LBR 1001- 1( b) ( 2) ,

t he Local Bankrupt cy Rul es appl y t o al l bankrupt cy cases and

pr oceedi ngs . . . pendi ng i n t he Uni t ed St at es Bankrupt cy Cour t

f or t he Cent r al Di str i ct of Cal i f or ni a.

Her e, t he bankrupt cy cour t s aut hor i t y t o al l ow or deny

costs arose f rom t he l ocal rul es of i t s di s tr i ct . I t t heref orecoul d al l ow such cost s wi t hi n t he par amet er s of t he l ocal r ul es

speci f i cal l y, t hose cost s l i st ed i n t he Cour t Manual pur suant t o

LBR 7054- 1( d) .

LBR 7054- 1 pr ovi des, i n r el evant par t :

a. Who May Be Awar ded Cost s. When cost s ar e al l owedby t he FRBP or ot her appl i cabl e l aw, t he cour t may


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awar d cost s t o t he pr evai l i ng par t y. No cost swi l l be al l owed unl ess a par t y qual i f i es as, or i sdet er mi ned by the cour t t o be, t he pr evai l i ngpar t y under t hi s rul e. Counsel ar e advi sed t or evi ew 28 U. S. C. 1927 r egar di ng counsel sl i abi l i t y f or excessi ve costs.

. . . .

d. I t ems Taxabl e as Costs . A l i s t of t he i t emst axabl e as cost s i s cont ai ned i n t he Cour t Manualavai l abl e f r om t he cl er k and on t he cour t swebsi t e.

. . . .

Sect i on 2. 8 of t he Cour t Manual f or t he Uni t ed St at es

Bankr upt cy Cour t f or t he Cent r al Di st r i ct of Cal i f or ni a pr ovi des,

i n r el evant par t :

2. 8 Mi scel l aneous

. . .

( d) Bi l l of Costs [ LBR 7054- 1] .

A bi l l of costs f i l ed el ect r oni cal l y or non-el ect r oni cal l y must compl y wi t h LBR 7054- 1.The prevai l i ng par t y who i s awar ded cost smust f i l e and ser ve a bi l l of cost s not l at ert han 30 days af t er ent r y of j udgment . Eachi t em cl ai med must be set f or t h separ at el y i nt he bi l l of costs .

( e) I t ems Taxabl e as Cost s. Pur suant t o LBR7054- 1, t he f ol l owi ng i t ems are t axabl e ascosts:(1) Fi l i ng Fees. The cl erk s f i l i ng f ees;( 2) Fees f or Ser vi ce of Pr ocess. Fees f or

servi ce of pr ocess ( whet her served byt he Uni t ed St at es Mar shal or i n anyot her manner aut hor i zed by FRBP 7004) ;

( 3) Uni t ed St at es Mar shal s Fees. Fees oft he Uni t ed St at es Mar shal col l ected and t axedas cost s pur suant t o 28 U. S. C. 1921;

( 4) Cl erk s Fees . Fees f or cer t i f i cat i on of document s necessar y f or pr epar at i on f or

a hear i ng or t r i al ; and( 5) Tr anscr i pt s and Di gi t al Recor di ngs. Thecost s of t he or i gi nal and one copy ofal l or any par t of a t r i al t r anscr i pt ,dai l y t r anscr i pt , or a t r anscr i pt ofmat t er s occur r i ng bef or e or af t er t r i al ,i f r equest ed by t he cour t or pr epar edpur suant t o st i pul at i on. The cost of a


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di gi t al r ecor di ng, i f r equest ed by thecour t or obt ai ned pur suant t ost i pul at i on.

( 6) Depos i t i ons . Costs i ncurr ed i nconnect i on wi t h t aki ng deposi t i ons,i ncl udi ng:. . .

( 7) Wi t ness Fees. Fees pai d t o wi t nesses. . .

( 8) I nt erpret er s and Trans l at or s Fees.Fees pai d t o i nt er pr et er s andt r ans l ator s . . .

( 9) Docket Fees. Docket f ees as pr ovi ded by28 U. S. C. 1923.

( 10) Cer t i f i cat i on, Exempl i cat i on, andRepr oduct i on of Document s. Documentpr epar at i on cost s, i ncl udi ng:( A) The cost of copi es of an exhi bi t

at t ached t o a document necessar i l yf i l ed and ser ved;

( B) The cost of copi es of a documentadmi t t ed i nt o evi dence when t heor i gi nal i s not avai l abl e or t hecopy i s subst i t ut ed f or t heor i gi nal at t he r equest of anopposi ng part y;

(C) Fees f or an of f i ci al cer t i f i cat i onof pr oof r espect i ng t he non-exi st ence of a document or r ecor d;

( D) Pat ent Of f i ce char ges f or t hepat ent f i l e wr apper s and pr i or ar tpat ent s necessar y t o t hepr osecut i on or def ense of apr oceedi ng i nvol vi ng a pat ent ;

( E) Not ar y f ees i ncur r ed i n not ar i z i nga document when t he cost of t hedocument i s t axabl e; and

( F) Fees f or necessary cert i f i cat i on orexempl i cat i on of any document .. . .

( 12) Ot her Cost s. Upon or der of t he cour t ,addi t i onal i t ems, i ncl udi ng t hef ol l owi ng, may be t axed as cost s:( A) Summar i es, comput at i ons, pol l s,

sur veys, st at i st i cal compar i sons,maps, char t s, di agr ams, and ot hervi sual ai ds r easonabl y necessary t oassi st t he cour t or j ur y i n

under st andi ng t he i ssues at t het r i al ;( B) Phot ogr aphs, i f admi t t ed i n

evi dence or at t ached t o document snecessar i l y f i l ed and served upont he opposi ng par t y; and

( C) The cost of model s i f or der ed byt he cour t i n advance of or dur i ngt r i al .

. . . .


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Revi ewi ng t he Cost Bi l l I t emi zat i on, we concl ude that onl y

one of t he r equest ed cost s t he cer t i f i ed mai l post age f or

servi ce of t he al i as summons and not i ce of t he st at us conf er ence

was r ecoverabl e under LBR 7054- 1( d) .

Ms. Fi t zpat r i ck l i st ed cost s f or pr i nt i ng st at us r epor t s,

summons, or der s, not i ces, r esponses t o i nt er r ogat or i es,

st i pul at i ons, br i ef s, decl ar at i ons and exhi bi t l i st s, none of

whi ch qual i f y as document pr epar at i on cost s under Sect i on

2. 8( e) ( 10) of t he Cour t Manual . She al so l i st ed cost s f or

numer ous f axes f r om t he debt or , expl ai ni ng that t hese f axes wer e

evi dent i ar y document s. Ms. Fi t zpat r i ck f ai l ed t o speci f y t hese

evi dent i ar y document s and t o expl ai n t hei r pur pose. Gi ven her

l ack of expl anat i on, we onl y can assume t hat she pr i nt ed

document s and had document s f axed t o her f or her conveni ence or

her r ecor ds. See, e. g. , Fressel l v. AT&T Tech. , I nc. , 103 F. R. D.

111, 116 (N. D. Ga. 1984) ( denyi ng successf ul def endant s r equest

f or phot ocopyi ng char ges f or t he conveni ence, pr epar at i on,

r esear ch, or r ecor ds of counsel under 28 U. S. C. 1920) .She al so l i st ed post age f or t he ser vi ce of var i ous

document s. Sect i on 2. 8( e) ( 2) of t he Cour t Manual al l ows f or t he

r ecover y of post age f ees f or document s served i n t he manner

r equi r ed by Rul e 7004. Ms. Fi t zpat r i ck i ncl uded post age, not

onl y f or t he al i as summons, but f or schedul i ng or der s, r esponses

t o i nt er r ogat or i es, stat us repor t s, t r i al br i ef s and

st i pul at i ons. Rul e 7004 onl y r equi r es a par t i cul ar manner ofser vi ce f or t he summons and compl ai nt s. See 10 Col l i er on

Bankr upt cy 7004. 01. The other post age cost s are not covered

under Sect i on 2. 8( e) ( 2) of t he Cour t Manual .


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11 The debt or chal l enges t he bankrupt cy cour t s rul i ng onsever al gr ounds, whi ch we ve di st i l l ed down t o t wo.

Fi r st , he ar gues t hat t he bankrupt cy cour t unf ai r l y ander r oneousl y r el i ed on Kr asi nski v. Gol dst ei n ( I n r e Gol dst ei n) ,2011 WL 3608243 ( Bankr . D. Ar i z. 2011) , an unpubl i shed deci si on.Accor di ng t o t he debt or , t he bankrupt cy cour t deni ed t he At t or neyFee Mot i on based on t he r easoni ng set f or t h i n t he Gol dst ei ndeci si on. The debt or cl ai ms t hat he coul d not ef f ect i vel y r ef ut et he reasoni ng i n t he Gol dst ei n deci si on because he coul d notobt ai n a copy of t he Gol dst ei n deci si on. He f ur t her asser t s t hatGol dst ei n was l egal l y and f act ual l y di st i ngui shabl e f r om t heunder l yi ng mat t er .

Cont r ar y to t he debt or s asser t i on, t he bankrupt cy cour t di dnot r el y on t he Gol dst ei n deci si on i n denyi ng t he At t or ney FeeMot i on. Because Key Bank ci t ed t he Gol dst ei n deci si on, t hebankrupt cy cour t bel i eved i t [ was] goi ng t o have t o r ead t hi sGol dst ei n opi ni on. Tr . of Sept ember 10, 2012 Hr g, 27: 16- 17.Upon r eadi ng i t , t he bankrupt cy cour t acknowl edged t hat i n t hi scase, we have a l i t t l e sl i ght l y di f f er ent si t uat i on [ t han t hat i nt he Gol dst ei n deci si on] . Tr . of Sept ember 10, 2012 Hr g, 34: 1-2. The bankrupt cy cour t t ook car e t o di st i ngui sh t he i nst antmat t er f r om Gol dst ei n, st r essi ng t hat Key Bank di d not sue [ t hedebt or ] . I t was [ t he debt or ] who sought t o have t he debt

decl ar ed [ di schar geabl e] . Ther e was no di sput e under t hecont r act as t o whet her he owed any sums or not . The di sput e waswhet her t hi s shoul d be di schar ged as a har dshi p debt or not . Tr . of Sept ember 10, 2012 Hr g, 34: 3- 8.

Second, t he debt or cont ends t hat t he bankrupt cy cour t shoul dhave al l owed hi s at t or ney s f ees i n f ul l unl ess Key Bank


16

Ms. Fi t zpat r i ck f ur t her l i st ed var i ous mi scel l aneous cost s,

such as t el ephone char ges, messenger servi ces, t r anspor t at i on,

onl i ne sof t war e pur chases, r esear ch and document r et r i eval

char ges and f ees f or t wo at t orneys. Agai n, none of t hese cost s

ar e l i st ed i n Sect i on 2. 8( e) of t he Cour t Manual .

Based on t he f oregoi ng, we concl ude that t he bankr upt cy

cour t di d not abuse i t s di scr et i on i n denyi ng al l but t he ser vi ce

cost s r equest ed i n t he Cost Bi l l .

B. At t orney s Fee Mot i on11


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11( . . . cont i nued)demonst r ated, t hr ough evi dence, t hat t hey were unr easonabl e.However , t he bankr upt cy cour t woul d not get t o reasonabl eness,unl ess i t f i r st det er mi ned t hat t her e was a st at ut or y orcont r act ual basi s f or an awar d of f ees.

12 The debt or al so r el i es on Ci vi l Code 1021 i n suppor tof hi s ar gument . Because t he debt or di d not r ai se Ci vi l Code 1021 as an i ssue bef or e the bankrupt cy cour t , we decl i ne toaddr ess i t her e. See Enewal l y, 368 F. 3d at 1173.

13 The debt or al so cl ai ms t hat t he bankrupt cy cour tacknowl edged t he appl i cabi l i t y of Ci vi l Code 1717 butmi sappl i ed i t .

At t he hear i ng, t he bankrupt cy cour t ment i oned t hat t hedebt or r el i ed on Ci vi l Code 1717. I t al so st at ed t hat i t hadt he Cal i f or ni a st at ut e t hat says, okay, what s good f or t hegoose i s good f or t he gander , so to speak. Tr . of Sept ember 12,2012 Hr g, 32: 18- 20.

Gi ven t he bankrupt cy cour t s r easoni ng as st at ed on t her ecor d at t he hear i ng, we do not bel i eve t hat t he bankrupt cycour t appl i ed Ci vi l Code 1717 at al l . The bankrupt cy cour t

deni ed t he At t or ney Fee Mot i on because t he l egal basi s f orr ecover y of at t or ney s f ees, t he f ee pr ovi si on, di d not appl y ast he adver sar y pr oceedi ng ar ose f r om a f eder al cl ai m ( i . e. , 523( a) ( 8) ) , not a cont r act cl ai m.

Mor eover , Cal i f or ni a cour t s uni f or ml y have r ul ed t hat Ci vi lCode 1717 i s t o be nar r owl y appl i ed, and i s avai l abl e t o apar t y onl y i f t he di sput e i nvol ves l i t i gat i on of a cont r actcl ai m. Sant i sas v. Goodi n, 17 Cal . 4t h 599 ( Cal . 1998)( [ S] ect i on 1717 appl i es onl y t o at t or ney f ees i ncur r ed t ol i t i gat e cont r act cl ai ms. ) . The BAP pr evi ousl y has rel i ed uponSant i sas on t hi s speci f i c i ssue. Redwood Theat er s, I nc. v.

Davi son ( I n r e Davi son) , 289 B. R. 716, 723 ( 9t h Ci r . BAP2003) ( [ W] e wi l l f ol l ow [ t he Sant i sas] hol di ng and nar r owl y appl y[ Ci vi l Code] 1717 and appr ove at t or ney s f ees onl y i f t heact i on i nvol ves a cont r act cl ai m. ) . Based on Cal i f or ni acont r ol l i ng l aw and BAP aut hor i t y, we have hel d t hat Ci vi l Code 1717 onl y can be appl i ed t o at t or ney s f ees di sput es based on


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On appeal , t he debt or mai nl y cont ends t hat t he bankr upt cy

cour t er r ed i n denyi ng t he At t or ney Fee Mot i on by i gnor i ng Ci vi l

Code 1717. 12 He i nsi st s t hat Ci vi l Code 1717 appl i es. 13


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13( . . . cont i nued)cont r act cl ai ms. Hami l t on v. Char al ambous ( I n r e Char al ambous) ,2013 WL 3369299 at *5 ( 9t h Ci r . BAP 2013) . We f ol l ow t hathol di ng her e.

14 I n cont r ast , 523( d) pr ovi des:

I f a cr edi t or r equest s a det er mi nat i on ofdi schar geabi l i t y of a consumer debt under subsect i on[ 523( a) ( 2) ] , and such debt i s di schar ged, t he cour tshal l gr ant j udgment i n f avor of t he debt or f or t hecost s of , and a r easonabl e at t or ney s f ee f or , t hepr oceedi ng i f t he cour t f i nds t hat t he posi t i on of t hecredi t or was not subst ant i al l y j ust i f i ed, except t hatt he cour t shal l not awar d such cost s and f ees i f

speci al ci r cumst ances woul d make t he award unj ust .

Accordi ngl y, i t appear s t hat Congr ess consi der ed when i twoul d be appr opr i at e t o awar d cost s and at t or ney s f ees t o apr evai l i ng debt or i n di schar geabi l i t y l i t i gat i on and di d notexpr essl y al l ow f or an awar d of f ees t o t he pr evai l i ng debt or i n 523( a) ( 8) adver sary pr oceedi ngs.

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We di sagr ee. Ther e si mpl y i s no st at ut or y or cont r act ual

basi s al l owi ng t he debt or t o r ecover hi s at t or ney s f ees her e.

Or di nar i l y, under t he Amer i can Rul e, a pr evai l i ng par t y may not

r ecover at t or ney s f ees except as pr ovi ded f or by cont r act or by

st at ut e. Tr avel er s Cas. & Sur . Co. of Am. v. Pac. Gas & El ec. ,

Co. , 549 U. S. 443, 448 ( 2007) ; Di nan, 448 B. R. at 784.

No gener al r i ght t o r ecover at t or ney s f ees exi st s under t he

Bankrupt cy Code. Di nan, 448 B. R. at 784. Al so, not hi ng i n

523( a) ( 8) aut hor i zes a debt or t o r ecover at t or ney s f ees when

he or she pr evai l s i n di schar gi ng hi s or her st udent l oan debt . 14

I nt er est i ngl y, Ohi o l aw has est abl i shed t hat a cont r act ual

pr ovi si on al l owi ng f or t he r ecover y of at t or ney s f ees t o enf or ce

a def aul t ed debt obl i gat i on i s unenf or ceabl e as agai nst publ i c


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15 Accordi ng t o t he Ohi o Supr eme Cour t , al t hough Ohi ogener al l y f ol l ows t he Amer i can Rul e, at t or ney s f ees may beawar ded when a st at ut e or an enf or ceabl e cont r act speci f i cal l ypr ovi des f or t he l osi ng par t y t o pay the pr evai l i ng par t y sat t or ney f ees . . . or when t he pr evai l i ng par t y demonst r at es badf ai t h on t he par t of t he unsuccessf ul l i t i gant . . . . Wi l bor nv. Bank One Cor p. , 121 Ohi o St . 3d 546, 548 ( Ohi o 2009) ( ci t at i ons

omi t t ed) . Cont r act s pr ovi di ng f or payment of at t or ney s f eesare gener al l y enf or ceabl e and not voi d as agai nst publ i cpol i cy, so l ong as t he par t i es t o t he cont r act ent er ed i nt o i tf r eel y ( i . e. , equal bar gai ni ng power was pr esent and no i ndi ci aof compul si on or dur ess were pr esent ) and t he f ees awarded weref ai r , j ust and r easonabl e. I d. at 548- 49.

However , cont r act s f or t he payment of at t orney f ees upont he def aul t of a debt obl i gat i on ar e voi d and unenf or ceabl e. I d. at 549. I t i s t he set t l ed l aw of t hi s st at e t hatst i pul at i ons i ncor por at ed i n pr omi ssory not es f or t he payment ofat t or ney f ees, i f t he pr i nci pal and i nt er est be not pai d at

mat ur i t y, ar e cont r ar y t o publ i c pol i cy and voi d. I d. ( quot i ngLeavans v. Ohi o Nat l Bank, 50 Ohi o St . 591 ( Ohi o1893) ( addr essi ng f or ecl osur e act i ons) ) . That i s, a pr ovi si on i na mort gage or pr omi ssory note t hat awards at t orney f ees upon t heenf or cement of t he l ender s r i ght s when t he bor r ower def aul t s,such as a f or ecl osure act i on t hat has pr oceeded t o j udgment , i sunenf or ceabl e. I d. at 550.

19

pol i cy. 15 See Si mons v. Hi gher Educ. Ass i st ance Found. , 119 B. R.

589, 593- 94 (Bankr . S. D. Ohi o 1990) ( denyi ng a st udent l oan

l ender s r equest f or at t or ney s f ees i ncur r ed i n l i t i gat i ng a

debt or s 523( a) ( 8) cl ai m because, i n Ohi o, st i pul at i ons i n

pr omi ssor y not es provi di ng f or t he payment of at t or ney s f ees,

ar i si ng i n connect i on wi t h t he f ai l ur e t o pay t he pr i nci pal and

i nt er est bal ance at mat ur i t y, ar e cont r ar y t o publ i c pol i cy and

ar e voi d, and [ n] o pr ovi si on exi st s f or t he gr ant i ng of

at t or neys f ees i n pr oceedi ngs brought pur suant t o 11 U. S. C.

523( a) ( 8) ( B) . ) ( ci t at i on omi t t ed) . See al so McLeod v.

Di ver si f i ed Col l ect i on Ser vs. ( I n r e McLeod) , 176 B. R. 455, 458

( Bankr . N. D. Ohi o 1994) ( quot i ng Si mons, 119 B. R. at 593- 94) .


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Mor eover , as t he bankrupt cy cour t poi nt ed out , t he f ee

pr ovi si on di d not come i nt o pl ay her e. The f ee pr ovi si on

speci f i cal l y st at es t hat Key Bank has t he r i ght t o r ecover

at t or ney s f ees i ncur r ed i n enf or ci ng t he pr omi ssory not e s

t er ms. However , t he debt or had i ni t i at ed t he adver sary

pr oceedi ng under 523( a) ( 8) t o di schar ge t he st udent l oan debt ,

not t o cont est i t s t er ms or amount . As t he bankr upt cy cour t

expl ai ned, t he adver sary pr oceedi ng was not a cont r act di sput e

ar i si ng out of t he bor r owi ng on t he [ pr omi ssory] not e, but an

act i on br ought by the Debt or t o have t he debt decl ared

[ di schar ged] . Tr . of Sept ember 10, 2012 Hr g, 34: 12- 13, 34: 11-

12.

Nei t her f eder al nor Ohi o or Cal i f or ni a l aw aut hor i zes t he

debt or t o r ecover t he at t or ney s f ees he i ncur r ed i n di schar gi ng

hi s st udent l oan debt under 523( a) ( 8) . Mor eover , t he f ee

pr ovi si on di d not come i nt o ef f ect as t he t hr ust of t he adver sar y

pr oceedi ng was t o di schar ge a st udent l oan debt , not t o enf or ce

t he pr omi ssor y not e s t er ms. Because t he debt or has no st at ut or yor cont r act ual basi s on whi ch t o r ecover at t or ney s f ees, t he

bankrupt cy cour t di d not abuse i t s di scr et i on i n denyi ng t he

At t orney Fee Mot i on.

CONCLUSION

For t he f or egoi ng r easons, we concl ude that t he bankrupt cy

cour t di d not abuse i t s di scr et i on i n al l owi ng r ecover y of onl y

t he debt or s servi ce cost s and i n denyi ng r ecover y of t hedebt or s at t or ney s f ees. We AFFI RM.

in re: seyed shahram hosseini, 9th cir. bap (2013)

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