By: Julia M. Wei, Esq.
Generally, a prevailing party (the winner) will not recover attorneys’s fees and costs unless authorized by statute or by contract. In the bankruptcy context of non-dischargeability actions, the Supreme Court case of Cohen v. de la Cruz addresses the issue of attorney’s fees. In summary, the test under Cohen is whether the party would have been able to recover attorney’s fees under state or federal (non-bk) law.
Cohen interpreted USC 523(a)(2)(A), 523 (a)(1)(B)(a)(4), (a)(6), and (a)(9) as clear examples where damages including attorney’s fees would be non-dischargeable.
In the recent case of In Re: Dinan, creditor Fry had loaned the Dinans $165k that they later failed to repay. When the Dinans filed for bankruptcy, Fry sought non-dischargeability of the debt under 523 (a)(14) on the grounds that the money he lent the borrowers had been applied to pay their taxes.
After prevailing, his attorney then brought a motion seeking to recover $55k in attorney’s fees. The bankruptcy court rather whimsically granted $2k.
Up on appeal, the Ninth Circuit Bankruptcy Appellate Panel concluded that Fry was entitled to have the attorney’s fees also survive Dinans’ dischargeability and sent the matter back down to the lower court to more reasonably determine the amount of attorneys’ fees awarded. [In re: Dinan 9th Cir. Bap, May 12, 2011.]