818 F.3d 486
9th Cir.2016Background
- Gregory Bos, an employer, signed trust agreements and a promissory note personally guaranteeing payments to multiple Northern California Carpenters benefit funds; arbitration and state court judgment confirmed he owed roughly $504,282.59.
- Bos filed Chapter 7 bankruptcy and the Funds (Board of Trustees) brought an adversary proceeding seeking nondischargeability of the debt under several Bankruptcy Code provisions, including 11 U.S.C. § 523(a)(4) (fiduciary exception).
- Bankruptcy court and district court held Bos was a fiduciary under ERISA and therefore his debt was nondischargeable; Bos appealed and this Court reversed, concluding he was not an ERISA fiduciary and the debt was dischargeable.
- After prevailing on appeal, Bos sought recovery of his attorney’s fees incurred in the nondischargeability litigation under (1) California Civil Code § 1717 (reciprocal fee-shifting for actions “on a contract”) and (2) ERISA’s fee-shifting provision, 29 U.S.C. § 1132(g)(1).
- The Ninth Circuit evaluated whether the bankruptcy adversary proceeding qualified as an action “on a contract” for § 1717 and whether the proceeding was an “action under” ERISA (so as to permit fees under § 1132(g)(1)).
Issues
| Issue | Plaintiff's Argument (Bos) | Defendant's Argument (Board) | Held |
|---|---|---|---|
| Applicability of Cal. Civ. Code § 1717 | The nondischargeability action is sufficiently related to the Trust Agreements/Note to be an action “on a contract,” so Bos may recover reciprocal fees. | § 1717 does not apply because the adversary proceeding did not require adjudication of contract enforceability; litigation was collateral to the contract. | Court held § 1717 does not apply: the bankruptcy action was collateral to, not on, the contracts, so Bos cannot recover under § 1717. |
| Applicability of ERISA fee-shifting, 29 U.S.C. § 1132(g)(1) | Even though the complaint invoked the Bankruptcy Code, the litigation required interpreting ERISA terms (fiduciary), so § 1132(g)(1) permits fee recovery. | ERISA fees are available only in an “action under” ERISA; this adversary proceeding arose under the Bankruptcy Code, not ERISA. | Court held § 1132(g)(1) inapplicable: the proceeding did not “arise under” ERISA, so Bos is not eligible for ERISA fees. |
Key Cases Cited
- Bos v. Bd. of Trs., 795 F.3d 1006 (9th Cir. 2015) (underlying merits opinion concluding Bos was not an ERISA fiduciary)
- In re Penrod, 802 F.3d 1084 (9th Cir. 2015) (§ 1717 applies when bankruptcy action required determining contract enforceability)
- Santisas v. Goodin, 17 Cal.4th 599 (Cal. 1998) (§ 1717 applies to actions that contain at least one contract claim)
- In re Baroff, 105 F.3d 439 (9th Cir. 1997) (nondischargeability action is not under § 1717 when contract validity was not adjudicated)
- In re Fulwiler, 624 F.2d 908 (9th Cir. 1980) (fee-shifting statute inapplicable where note was collateral to nondischargeability proceeding)
- In re Hashemi, 104 F.3d 1122 (9th Cir. 1996) (dischargeability claim not an action on the contract when enforceability was not at issue)
- Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1 (1983) (federal law creates an ‘‘arise under’’ test: action arises under federal law only if federal law creates the cause of action or plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal law)
- Christianson v. Colt Indus. Operating Corp., 486 U.S. 800 (1988) (interpretive guide on jurisdictional scope and statutory construction)
- Holmes Group v. Vornado Air Circulation Sys., 535 U.S. 826 (2002) (emphasizes limits of expanding federal jurisdiction beyond well-pleaded-complaint rule)
- In re Hemmeter, 242 F.3d 1186 (9th Cir. 2001) (recognizing nondischargeability under § 523(a)(4) could rest on statutes other than ERISA)
- In re Davison, 289 B.R. 716 (B.A.P. 9th Cir. 2003) (construing § 1717 to exclude collateral nondischargeability proceedings)