609 B.R. 530
Bankr. D. Idaho2019Background
- Debtor Wells A. Wyatt organized Wyatt Livestock, Inc. in 2007 and filed Chapter 7 on November 3, 2017; major creditor was Banner Bank (Plaintiff).
- Banner Bank filed an adversary complaint (six counts) under §§ 727 and 523 on February 14, 2018 seeking denial of discharge and nondischargeability of certain debts.
- Court granted summary judgment to Wyatt on Counts I and III (§§ 727(a)(2), (a)(4)); Counts II, IV, V, VI proceeded to trial; claims as to a related entity (Feeding) were withdrawn.
- After a four-day trial, the Court on August 21, 2019 denied relief on § 727(a)(5) but granted relief under § 727(a)(3) (denial of discharge for failure to keep/preserve adequate records).
- Banner Bank moved for costs and $138,985 in attorneys’ fees under Idaho Code § 12-120(3) and a guaranty; the clerk taxed costs at $6,103.41 (disallowing $40 messenger fee).
- The Court denied Banner Bank’s request for prevailing-party attorneys’ fees in the § 727 action and awarded costs of $6,103.41 (denying the $40 item).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether prevailing-party attorneys’ fees are recoverable for winning a § 727(a)(3) discharge-denial action (under Idaho Code § 12-120(3) or the guaranty) | Fees are recoverable because the litigation related to a commercial transaction/guaranty and § 12-120(3) permits fees in commercial actions | No statutory or Rule-based basis to award fees in § 727 actions; § 727 is not a contract action and benefits all creditors, so contract fee clauses/statutes don’t apply | Denied. § 727 and the Rules do not provide for prevailing-party fees; Idaho statute/contract fee clauses cannot be imported to award fees in a § 727 discharge action |
| Whether costs are taxable under LBR 7054.1 and which items are allowed | Bank sought $6,143.41 in costs (including $40 messenger service) as prevailing party under LBR 7054.1 | Objected to items not authorized by LBR; clerk should disallow unlisted items without prior court approval | Granted in part. Clerk taxed $6,103.41 allowed under LBR 7054.1(c)(1)-(7); $40 messenger service disallowed for lack of prior court approval; no motion to retax filed |
Key Cases Cited
- Heritage Ford v. Baroff, 105 F.3d 439 (9th Cir. 1997) (no general right to attorney fees under the Bankruptcy Code)
- Travelers Cas. & Sur. Co. of Am. v. Pac. Gas & Elec. Co., 549 U.S. 443 (U.S. 2007) (state-law fee provisions may create postpetition claims against the estate)
- Cohen v. de la Cruz, 523 U.S. 213 (U.S. 1998) (nondischargeability under § 523(a)(2) can include state-law attorneys’ fees)
- AT&T Universal Card Servs. v. Pham, 250 B.R. 93 (9th Cir. BAP 2000) (creditor may recover contractual fees in nondischargeability proceedings if recoverable in non‑bankruptcy court)
- Tuloil, Inc. v. Shahid, 254 B.R. 40 (10th Cir. BAP 2000) (declining to extend fee awards in § 523 cases to § 727 actions)