In September, the Ninth Circuit held that the Equal Access to Justice Act does not allow debtors to recover attorneys’ fees for reversing the bankruptcy court’s sua sponte denial of confirmation of a chapter 13 plan. In re Sisk, 973 F.3d 945 (9th Cir. 2020), as amended (Sept. 24, 2020). To read ABI’s report on Sisk, click here.
In an opinion on January 25, Bankruptcy Judge Arthur I. Harris of Cleveland went a step beyond the Ninth Circuit by ruling that proceedings in a bankruptcy case, other than an adversary proceeding, do not qualify as “civil actions” allowing the debtor to recover attorneys’ fees from the U.S. Trustee under the EAJA, 28 U.S.C. § 2412.
In the case before Judge Harris, the debtor had filed a chapter 7 petition claiming her debts were primarily non-consumer and that her income was too low for her to be forced into chapter 13.
The U.S. Trustee filed a timely motion to dismiss for “abuse” under Section 707(b).
Complex litigation ensued, including two motions for summary judgment by the debtor. While the second was pending, the U.S. Trustee withdrew the motion to dismiss, having become aware of facts making the motion “unwarranted.”
A month later, the debtor filed a motion to recover her attorneys’ fees from the government, claiming she was the “prevailing party” under the EAJA.
After extensive briefing, Judge Harris handed down his 57-page decision, which exhausts virtually every argument for and against a debtor’s ability to recover attorneys’ fees under the EAJA in a contested matter.
The outcome, of course, turned on Section 2412(b), which provides that “a court may award reasonable fees and expenses of attorneys . . . to the prevailing party in any civil action brought by or against the United States or any agency or any official of the United States acting in his or her official capacity in any court having jurisdiction of such action.”
For Judge Harris, the question was whether the contested matter over “abuse” qualified as a “civil action.” Because he concluded it did not, Judge Harris did not reach other potential issues under the EAJA, such as whether the debtor was the prevailing party.
The statute does not define “civil action,” leaving Judge Harris with the difficult question of definition. The problem was compounded, he said, because “there appear to be no published cases from the Sixth Circuit or other courts of appeals that have analyzed whether bankruptcy cases or disputes within bankruptcy cases other than adversary proceedings fall within the scope of the term ‘civil action’ under the EAJA.”
Judge Harris decided that it was “plausible” to interpret “civil action” to mean a proceeding like a lawsuit commenced under the Federal Rules of Civil Procedure by the filing of a summons and complaint. Of course, bankruptcy cases have neither plaintiffs nor defendants and are not initiated by the filing of a complaint.
Similarly, Judge Harris said it was not “clear how one would translate ‘prevailing party’ in a bankruptcy case when there is no plaintiff or defendant.” Ultimately, he decided that “a number of factors suggest that, aside from adversary proceedings, the scope of Congress’s waiver of sovereign immunity in the EAJA in 1980 does not extend to ‘prevailing parties,’ however they might be defined, in bankruptcy cases.”
Although it was nonetheless “plausible” that “civil action” could include bankruptcies, Judge Harris felt constrained by “Supreme Court precedent[, which] requires that waivers of sovereign immunity be strictly construed.”
Judge Harris therefore took “the interpretation most favorable to the United States” and decided that the contested matter over “abuse” was not a “civil action” giving the debtor a right to recover attorneys’ fees.
Judge Harris concluded the opinion by saying he would certify an appeal directly to the Sixth Circuit, given the lack of a “controlling decision” from the Sixth Circuit or the Supreme Court. Also, he said that the decision did not decide whether an adversary proceeding qualifies as a “civil action.”
In September, the Ninth Circuit held that the Equal Access to Justice Act does not allow debtors to recover attorneys’ fees for reversing the bankruptcy court’s sua sponte denial of confirmation of a chapter 13 plan. In re Sisk, 973 F.3d 945 (9th Cir. 2020), as amended (Sept. 24, 2020). To read ABI’s report on Sisk, click here.
In an opinion on January 25, Bankruptcy Judge Arthur I. Harris of Cleveland went a step beyond the Ninth Circuit by ruling that proceedings in a bankruptcy case, other than an adversary proceeding, do not qualify as “civil actions” allowing the debtor to recover attorneys’ fees from the U.S. Trustee under the EAJA, 28 U.S.C. § 2412.
In the case before Judge Harris, the debtor had filed a chapter 7 petition claiming her debts were primarily non-consumer and that her income was too low for her to be forced into chapter 13.
The U.S. Trustee filed a timely motion to dismiss for “abuse” under Section 707(b).