Hosseini v. Key Bank, N.A. (In Re Hosseini)
504 B.R. 558
9th Cir. BAP2013Background
- Debtor Hosseini obtained about $280,046.34 in student loans from Key Bank prepetition to fund medical school.
- He did not become a physician, working as a night security guard earning $13.50/hour, and suffered diabetes and depression.
- Hosseini filed a Chapter 7 petition on May 24, 2010 and pursued a 523(a)(8) discharge adversary proceeding.
- The bankruptcy court held a trial and discharged the entire student loan debt to Key Bank.
- Hosseini filed a Cost Bill seeking $4,960.39 in attorney’s expenses and an Attorney Fee Motion seeking $110,701.50 based on a fee provision and California Civil Code § 1717.
- Key Bank opposed costs outside LBR 7054-1 and argued no statutory/contractual basis for attorney’s fees; also argued the fee provision applies to enforcing the note, not to 523(a)(8) relief, and that governing law (Ohio) limits § 1717 applicability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the cost award was correct. | Hosseini argues broader costs were recoverable. | Key Bank argues only items listed in LBR 7054-1 are recoverable. | Affirmed: only service of process costs recoverable; other costs denied. |
| Whether the attorney’s fees motion was erroneously denied. | Hosseini relied on the fee provision and Civil Code § 1717 to recover fees. | Key Bank argued no statutory/contractual basis for fees; 523(a)(8) relief not a contract dispute; § 1717 not applicable. | Affirmed: no statutory or contractual basis to recover attorney’s fees; American Rule remains. |
Key Cases Cited
- Santisas v. Goodin, 951 P.2d 399 (Cal. 1998) (section 1717 applies only to contract claims)
- In re Aviva Gelato, Inc., 94 B.R. 624 (9th Cir. BAP 1988) (bankruptcy costs/fees framework in BAP context)
- In re Dinan, 448 B.R. 775 (9th Cir. BAP 2011) (two-step abuse of discretion standard; state-law interface for fees)
- Travelers Cas. & Sur. Co. v. Pac. Gas & Elec. Co., 549 U.S. 443 (2007) (American Rule and fee-shifting foundations)
- Shanks v. Dressel, 540 F.3d 1082 (9th Cir. 2008) (standard of review and discretionary cost rulings)
- United States v. Hinkson, 585 F.3d 1247 (9th Cir. 2009) (two-step de novo/legal-rule identification and factual review)