In a state where an award of attorneys’ fees is reciprocal in an action on a contract, the prevailing party is not entitled to attorneys’ fees in a dischargeability suit if the court wasn’t required to rule on the enforceability of the contract, the Ninth Circuit said.
California is one of about a dozen states with a statute that makes a unilateral contractual obligation to pay attorneys’ fees reciprocal in an action on a contract.
A bank brought a dischargeability action against an individual debtor. The bankruptcy court denied the debtor’s first motion for summary judgment, where the debtor argued that the contract was not enforceable as a matter of contract interpretation.
The debtor won a later motion to dismiss based on tort, where the bankruptcy court saw no reason to rule on the enforceability of the contract.
The contract called for the loser to pay the prevailing party’s attorneys’ fees. The California statute makes fee-shifting reciprocal in an action on a contract.
The bankruptcy court awarded fees to the debtor as the prevailing party. The district court reversed, and the debtor appealed to the circuit.
In the nonprecedential, per curiam opinion on May 6, the appeals court cited the California Supreme Court for holding that the reciprocity statute only applies to fees incurred in litigating contract issues if the suit involves both contract and tort claims.
More to the point, the Ninth Circuit had previously held that fee-shifting only applies if the court “needed” to determine the enforceability of the contract in ruling on dischargeability. See Ford v. Baroff (In re Baroff), 105 F.3d 439, 442 (9th Cir. 1997). In other words, a dischargeability suit is not an action on a contract if the court is not required to decide whether the contract is enforceable.
In the case on appeal, the Ninth Circuit said that the bankruptcy court had denied summary judgment based on the enforceability of the contract. Later, the appeals court said, the bankruptcy court “disposed of the case on other grounds based in tort, obviating the need to resolve any contract-based defenses.”
Therefore, the circuit said, an “interpretation of the agreement was not necessary for [the debtor] to prevail, and he did not prevail ‘on a contract’ within the common-sense construction of the statute.”
The debtor was not entitled to attorneys’ fees, the circuit held, because the bankruptcy court made “no ruling, concerning either a legal question or factual dispute, that prevented the enforcement of any term of the agreement. Thus, the proceedings were not an ‘action on a contract.’”
In a state where an award of attorneys’ fees is reciprocal in an action on a contract, the prevailing party is not entitled to attorneys’ fees in a dischargeability suit if the court wasn’t required to rule on the enforceability of the contract, the Ninth Circuit said.
California is one of about a dozen states with a statute that makes a unilateral contractual obligation to pay attorneys’ fees reciprocal in an action on a contract.
A bank brought a dischargeability action against an individual debtor. The bankruptcy court denied the debtor’s first motion for summary judgment, where the debtor argued that the contract was not enforceable as a matter of contract interpretation.
The debtor won a later motion to dismiss based on tort, where the bankruptcy court saw no reason to rule on the enforceability of the contract.
The contract called for the loser to pay the prevailing party’s attorneys’ fees. The California statute makes fee-shifting reciprocal in an action on a contract.
The bankruptcy court awarded fees to the debtor as the prevailing party. The district court reversed, and the debtor appealed to the circuit.