Picerne Construction Corp. v. Castellino Villas, A. K. F. LLC (In Re Castellino Villas, A. K. F. LLC), 836 F.3d 1028

Castellino hired Picerne to build an apartment complex under a contract that included a prevailing-party attorneys’ fees clause.
Picerne sued prepetition in state court to foreclose a mechanic’s lien; the case proceeded through arbitration and judicial confirmation in July 2009.
Castellino filed Chapter 11 the same day the arbitration award was confirmed; the bankruptcy plan was later confirmed after a settlement with Picerne that preserved the state-court lien litigation.
The state court ultimately found Picerne’s lien valid and awarded a money judgment; Picerne sought attorneys’ fees but the state court deferred, citing the bankruptcy order.
Picerne asked the bankruptcy court to authorize post-confirmation attorneys’ fees; the bankruptcy and district courts concluded the fees claim was a prepetition contingent claim discharged by confirmation.
The Ninth Circuit affirmed, holding Picerne’s attorneys’ fees claim arose prepetition and thus was discharged despite fees being incurred after confirmation.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether attorneys’ fees incurred after plan confirmation are discharged when the right to fees arose prepetition	Picerne: fees were incurred post-confirmation and Ybarra/Siegel allow recovery because debtor returned to litigation	Castellino: fees were contingent prepetition under the contract and therefore discharged by confirmation	Held: Discharged—prepetition contingent claim for fees was within parties’ fair contemplation and therefore discharged
Whether debtor’s post-discharge litigation activity constituted a "return to the fray" to avoid discharge	Picerne: Castellino took affirmative post-confirmation steps (motions, discovery) amounting to returning to the fray	Castellino: All post-confirmation activity was continuation of prepetition litigation required by the settlement and plan	Held: Not a "return to the fray"—this was continued prepetition litigation contemplated by the parties
Whether settlement releases preserved post-confirmation fee claims	Picerne: releases covered only existing claims, not future fees incurred after approval	Castellino: the settlement and plan modification, plus broad release language, foreclosed the fee claim	Held: Court resolved case on fair-contemplation ground and did not decide release issue

Siegel v. Federal Home Loan Mortgage Corp., 143 F.3d 525 (9th Cir. 1998) (post-discharge fees not discharged when debtor voluntarily returned to litigation)
In re Ybarra, 424 F.3d 1018 (9th Cir. 2005) (post-petition fee awards not discharged where debtor took affirmative steps to revive or commence new litigation)
In re SNTL Corp., 571 F.3d 826 (9th Cir. 2009) (federal law governs when a claim arises for bankruptcy purposes; prepetition contingent fee rights can constitute claims)
In re Fostvedt, 823 F.2d 305 (9th Cir. 1987) (definition of contingent and unliquidated claims)
In re Jensen, 995 F.2d 925 (9th Cir. 1993) (fair-contemplation test for when a claim arises in bankruptcy)