DVI Receivables XIV, LLC v. Maury Rosenberg
779 F.3d 1254
11th Cir.2015Background
- Rosenberg guaranteed lease obligations to Lyon (servicer/agent) in a 2005 limited guaranty; the DVI Entities were special-purpose securitization vehicles and did not sign that settlement. Lyon later obtained a Pennsylvania judgment against Rosenberg.
- In November 2008 Jane Fox (Lyon’s Director of Operations) signed and filed an involuntary Chapter 7 petition nominally in the names of six DVI Entities; evidence showed Lyon controlled and actually caused the filing. Five DVI Entities had been administratively dissolved at the petition date.
- The bankruptcy court dismissed the involuntary petition with prejudice in 2009, finding the DVI Entities lacked standing (the guaranty ran to Lyon) and alternatively applying judicial estoppel; the dismissal was later affirmed on appeal.
- Rosenberg brought an adversary proceeding under 11 U.S.C. § 303(i) seeking (1) costs and reasonable attorneys’ fees under § 303(i)(1) and (2) damages (including punitive) under § 303(i)(2). The bad-faith damages claims were withdrawn for jury trial; fee claims remained in the bankruptcy court.
- The bankruptcy court awarded Rosenberg about $1.03 million in fees and ~$39,000 in costs against the DVI Entities and Lyon jointly and severally, covering: (1) fees to obtain dismissal; (2) appellate fees; (3) fees-on-fees; and (4) fees to prosecute bad-faith damages claims. The district court affirmed.
- On appeal, the Eleventh Circuit affirmed awards for categories (1)–(3), vacated the portion of the award attributable solely to category (4) as premature, and remanded to segregate and reconsider fees tied only to prosecuting § 303(i)(2) damage claims.
Issues
| Issue | Plaintiff's Argument (Rosenberg) | Defendant's Argument (Appellants) | Held |
|---|---|---|---|
| Whether § 303(i)(1) authorizes appellate fees incurred defending a dismissal on appeal | § 303(i)(1) authorizes reasonable attorneys’ fees tied to a dismissal and thus includes appellate fees to defend that dismissal | § 303(i)(1) does not authorize appellate fees; only appellate courts (via Rule 38) can award appellate fees | Court: § 303(i)(1) may include appellate fees; bankruptcy court may award them (affirmed) |
| Whether fees incurred to prosecute bad-faith damages under § 303(i)(2) are recoverable under § 303(i)(1) | § 303(i)(1) should cover all phases of a § 303 action once petition is dismissed, including fees to litigate § 303(i)(2) claims | Such fees are distinct and not recoverable under § 303(i)(1) | Court: § 303(i)(1) may cover fees to prosecute § 303(i)(2) claims, but awarding fees before conclusion of bad-faith proceedings was premature; vacated that portion and remanded |
| Whether the bankruptcy court could award fees (fees-on-fees) for pursuing the fee claims themselves | Fees-on-fees are recoverable as part of reasonable fees under § 303(i)(1) | Objected to extent and timing | Court: fees-on-fees are allowable and bankruptcy court may award them (affirmed) |
| Whether Lyon (not named as a petitioner) can be held liable as a "petitioner" under § 303(i) | Rosenberg: Lyon was the de facto petitioner (Fox acted for Lyon; Lyon caused the filing) | Appellants: Only nominal petitioning creditors (DVI Entities) are petitioners under § 303(i) | Court: Factbound finding that Lyon, through Fox, was the effective petitioner; Lyon properly held liable (affirmed) |
Key Cases Cited
- Brown v. Gore (In re Brown), 742 F.3d 1309 (11th Cir. 2014) (standard of review in bankruptcy appeals)
- Higgins v. Vortex Fishing Sys., Inc., 379 F.3d 701 (9th Cir. 2004) (held § 303(i)(1) does not authorize appellate fees)
- In re S. Cal. Sunbelt Developers, Inc., 608 F.3d 456 (9th Cir. 2010) (presumptive rule that fee award under § 303(i)(1) encompasses all phases, including § 303(i)(2) proceedings)
- Cooter & Gell v. Hartmarx Corp., 496 U.S. 384 (1990) (discusses limits on sanctions statutes awarding appellate fees)
- Bus. Guides, Inc. v. Chromatic Commc'ns Enters., Inc., 498 U.S. 533 (1991) (distinction between fee-shifting statutes and sanctions)
- State of California Emp’t Dev. Dep’t v. Taxel (In re Del Mission Ltd.), 98 F.3d 1147 (9th Cir. 1996) (appellate fees in bankruptcy context and Rule 38 discussion)