ORDER
Before the Court is the Application of Automated Power Exchange (hereinafter “APX”) for Payment of Attorneys’ Fees and Expenses. An objection to the Application has been filed by New Power Company (hereinafter “New Power”), New Power Holdings, Inc., and TNPC Holdings, Inc. (collectively referred to herein as the “Debtors”). This matter constitutes a core proceeding over which this Court has subject matter jurisdiction. See 28 U.S.C §§ 157(b)(2)(B); 1334.
Background
On June 11, 2002, the Debtors filed voluntary petitions under Chapter 11 of the Bankruptcy Code. These cases were administratively consolidated on June 12, 2002, and an Official Committee of Unsecured Creditors (hereinafter the “Committee”) was appointed for New Power on June 18, 2002.
New Power is the operating entity through which the Debtors provided gas and electric service to customers in various states, including Georgia, Texas, Ohio, and Pennsylvania. Throughout the case, the Debtors have continued to operate as debtors-in-possession and have worked toward the liquidation of the Debtors’ assets. The asset sales, the bulk of which were concluded prior to the end of July 2002, produced funds sufficient to pay all creditors in full, with interest.
APX is an independent transaction processing service provider for wholesale electric power markets. APX and New Power were parties to a Master Service and Participation Agreement (hereinafter the “MSPA”). New Power did not assume the MSPA. Accordingly, pursuant to the Debtors’ Second Amended Plan, the MSPA was deemed rejected as of the Effective Date of the Plan, which was March 11, 2003.
Under the MSPA, APX provided scheduling services to New Power in connection with New Power’s servicing of Texas customers. The Texas market is managed and administered by the Electric Reliability Council of Texas (hereinafter “ER-COT”). Pursuant to the MSPA, APX acted as New Power’s Qualified Scheduling Entity. New Power provided data regarding its power needs to APX, which APX in turn submitted to ERCOT. ERCOT generated several successive statements regarding New Power’s use of energy and
APX contends that, following the filing of the Debtors’ bankruptcy petitions, New Power asked APX to continue to act as its scheduling coordinator throughout the time period in which New Power would be winding down its operations in Texas. At that time, New Power anticipated that its retail customers would be transferred to another service provider. This transition process was completed at the end of September 2002.
. At the time of the filing of the bankruptcy petitions, APX asserted a pre-petition claim for $2,199,565.98. APX also contends that New Power defaulted upon its post-petition obligations under the MSPA, resulting in a $1,199,090.17 administrative expense claim. APX filed one proof of claim (# 912) for the pre-petition and post-petition amounts that APX had already remitted to ERCOT on New Power’s behalf and a separate proof of claim for $1,914,017.80, which represented: 1) amounts arising from a demand by ER-COT that APX increase the amounts posted in its Margin Account; 2) additional, estimated post-petition ERCOT charges; and 3) estimated legal fees.
On March 24, 2003, the Debtors objected to the APX proof of claim, asserting that the amounts billed by ERCOT were inaccurate, and asked the Court to adjourn a hearing on the claim objection until after the ERCOT Resettlement Process had been completed. The Court set this objection for a hearing on April 25, 2003. On March 28, 2003, APX filed: 1) a motion to compel payment of the undisputed portion of its claim, or, in the alternative, to convert the Debtors’ bankruptcy cases to Chapter 7; 2) a motion for relief from the automatic stay to allow APX to setoff the cash collateral against amounts owed to APX; and 3) a response to the Debtors’ objection to its claim. On April 22, 2003, the Debtors, APX, and the Committee met to discuss a resolution of APX’s claims. On April 25, 2003, the Court approved a stipulation between APX and the Debtors. Pursuant to the stipulation, the automatic stay was lifted to allow APX to set off up to $1,535,704.99 against cash collateral, and the hearing on the Debtors’ claim objection was adjourned. Additionally, APX’s motion to compel or, in the alternative, convert the Debtors’ cases, was deemed withdrawn without prejudice.
On June 25, 2003, at the direction of and on behalf of New Power, APX requested a formal Alternative Dispute Resolution, pursuant to Part 20 of the ERCOT protocols, in order to resolve New Power’s billing dispute with ERCOT. 1 On August 6, 2003, the parties entered a Stipulation and Consent Order, under which New Power agreed to advance to APX 90% of the ERCOT charges actually paid by APX on New Power’s behalf, valid and unpaid APX fees, and post-petition interest as provided for under the Debtors’ Plan. The parties also agreed to a procedure for resolving additional disputes over future ERCOT charges. Subsequently, New Power paid APX $3.4 million in full satisfaction of its claim.
APX employed the law firms of White & Case LLP and Weizenecker, Rose, Mot-tern, and Fisher to represent it throughout
Conclusions of Law
A. Payment of Attorneys’ Fees Pursuant to Section 503(b)(8)(D)
APX first contends that it is entitled to have its legal fees and expenses reimbursed by the Debtors’ estates because it made a substantial contribution to the bankruptcy cases. As the Debtors have noted, as a general rule, each party to a litigation must pay its own fees and expenses. However, in the bankruptcy context, if a creditor or other party makes a substantial contribution to a bankruptcy case, the Code provides for payment of the party’s expenses as an administrative expense by the estate.
See
11 U.S.C. 503(b)(3)(D);
Matter of D’Lites of America, Inc.,
The Court recognizes that “the motive of the petitioner should not be a factor in determining whether a substantial contribution has been made in the bankruptcy proceeding.”
In re Celotex Corp.,
In this case, APX argues that it made a substantial contribution to the Debtors’ bankruptcy estates by helping New Power to resolve its issues with ER-COT without having to resort to costly and time-consuming litigation. APX contends
The Debtors object to the payment of fees incurred by APX on the basis that APX has failed to satisfy its burden of proving that it made a substantial contribution to these bankruptcy cases. First, the Debtors take issue with the contention that APX educated the Debtors and the Committee with regard to ERCOT and its resettlement procedures. The Debtors would instead characterize the meeting in New York as a settlement conference, at which APX made a presentation to the Committee in support of the merits of its claim. Second, the Debtors dispute APX’s contention that it voluntarily provided the Debtors with invoices to track the Debtors’ liabilities to ERCOT, as APX was obligated under the MSPA to provide the Debtors with any information transmitted by ERCOT. Further, the Debtors insist that the provision of these invoices did not result in a significant benefit to the estate because it was the Debtors’ employees who were responsible for reviewing the information. Third, the Debtors deny that APX’s use of its marketing clearing account to shield the Debtors from certain charges actually benefitted the estates. The Debtors contend that these charges would have been disputed charges that the Debtors could not have been paid any earlier.
The relatively swift resolution of the Debtors’ dispute with ERCOT would appear to have- benefitted the estates. The Court is not in a position to estimate with any certainty the amount saved by the Debtors in terms of time or money. Although it seems clear that APX participated in the process of the resettlement of the Debtors’ liabilities to ERCOT by providing certain data and invoices, the Debtors and the Committee also played substantial roles in this process. The Court has insufficient evidence in the record to find that APX’s involvement was crucial to the end result. Additionally, on the record before it, the Court cannot conclude that the Debtors would have incurred almost $100,000 in dealing with ERCOT had it not been for the assistance provided by APX.
Having reviewed the time entries submitted by APX along with its Application, the Court agrees with the Debtors that APX’s purpose in attending the April 22nd meeting was to reach a resolution of its claim. Imparting information regarding ERCOT to the Committee would appear to have been a by-product of this meeting, and the Court cannot rely upon this to justify the payment of $100,000 of fees by the estate. Similarly, the totality of the circumstances would suggest that APX’s focus throughout the case was to protect
Even if the Court were to find that the provision of data and invoices to the Debtors conferred a substantial benefit upon the estates, none of the time entries contain any references that suggest that any of the attorney time for which APX seeks reimbursement was spent in this regard. Accordingly, the Court could not conclude that the fees incurred by APX were actually and necessarily incurred in making this contribution, within the meaning of § 503(b)(3)(D). “This provision requires the bankruptcy judge to .... distinguish between expenses incurred in making a substantial contribution to the case and expenses lacking that causal connection, the latter being noncompensable.”
In re DP Partnership,
B. Payment of Attorneys’ Fees as an Administrative Expense Pursuant to Section 503(b)(1)(A)
APX next argues that its post-petition fees should be paid as an administrative expense claim, pursuant to § 503(b)(1)(A). APX contends that the Debtors encouraged APX to continue to provide services under the MSPA during the post-petition period and should, therefore, be hable for payment of any attorneys’ fees APX incurred as a result of its post-petition performance of its obligations under the MSPA. APX relies upon
In re New York Trap Rock Corp.,
In
New York Trap Rock,
the debtor operated a cement plant.
New York Trap Rock,
The contractor moved for allowance of an administrative expense claim for reimbursement of its attorneys’ fees. The court explained that the issue in the case was whether the debtor’s pre-petition obligation to indemnify the contractor for its expenses “triggered a post-petition administrative expense claim in favor of [the contractor] because of the debtor’s post-petition conduct.” Id. The court stated that “[t]o qualify as an administrative expense, the claim must satisfy section 503(b)(1)(A), which accords administrative expense status for ‘the actual, necessary costs and expenses of preserving the estate ... for services rendered after the commencement of the case.’ ” Id. (citing 11 U.S.C. §§ 503(b)(1)(A)). The court also noted that expenses will generally be entitled to priority treatment if “the right to payment arose from a post-petition transaction with the debtor estate rather than from a prepetition transaction with the debtor, and the conduct giving rise to the payment was beneficial to the estate of the debtor.” Id. The court then applied a two-prong test to determine whether the expenses were entitled to payment in accordance with § 503(b)(1)(A): “(1) the claim must arise out of a post-petition transaction between the creditor and the trustee or debtor in possession and (2) the claim is allowable only to the extent the consideration supporting the claimant’s right to payment was both supplied to and beneficial to the post-petition estate in the operation of the business.” Id.
In applying the test, the court reasoned that the pre-petition contract between the debtor and contractor obligated the debtor to indemnify the contractor for losses, but the “fact that post-petition defaults by the debtor on the assumed [subcontract] may have triggered the debtor’s prepetition obligation to indemnify [the contractor] for losses or damages does not mean that [the contractor’s] contingent claim for indemnification was elevated and transformed into a post-petition administrative claim.”
Id.
Although the court recognized that a pre-petition indemnification agreement could give rise to a contingent claim, the court concluded that the claim could not be considered to have arisen from a post-petition transaction with the debtor.
Id.
at 573 (citing
In re Hemingway Transport, Inc.,
Had the court ended its analysis at this point, the contractor would have failed the first prong of the test in that the contractor would not have established that its entitlement to payment of its legal fees arose from a post-petition transaction with the debtor. However, the court went on to explain that the fact that the debtor had assumed the subcontract and “chose to assume responsibility for continuing the construction work as a benefit to the estate and its creditors,” distinguished that case from those cases in which the pre-petition agreement to indemnify was not assumed. Because the debtor assumed the subcontract, the debtor was now responsible for payment of all of the contractor’s obligations under the subcontract. Id. Additionally, the court concluded that, under Texas agency law, the debtor was obligated to indemnify the contractor for any amounts that it actually paid towards a liability that arose from a transaction performed on the debtor’s behalf. Id. at 574. “When the debtor assumed the [subcontract] for the benefit of the estate, such post-petition assumption also incorporated the implied obligation of a principal to indemnify its agent for obligations incurred by the agent in furtherance of the assumed contract.” Id. Therefore, the obligation to indemnify was also entitled to administrative expense priority under § 503(b)(1)(A). Id. The court further explained that:
[I]t was the post-petition debtor in possession that induced [the subcontractor] to perform the services undér the [subcontract] which also gave rise to [the contractor’s] expenses for which indemnification as an administrative expense are sought. The post-petition inducement of [the subcontractor’s] services and [the contractor’s] expenses were fueled by the debtor’s assumption of the [subcontract], which is crucial to [the contractor’s] claim for administrative priority. To determine the existence of the implied indemnity obligation under the assumed contract which gave rise to the inducement, reference must be had to the applicable state law, which in this case is Texas law. A principal’s implied obligation under Texas law to indemnify its agent for expenses incurred in furtherance of the agency relationship was incorporated into the ' [subcontract] which the debtor assumed, thereby entitling [the contractor] to seek indemnification from the debtor as an administrative expense priority. The debtor could have protected itself from elevating [the contractor’s] expenses to administrative priority status by simply not assuming the [subcontract] that [the contractor] entered into with [the subcontractor]. If the debtor wished to keep [the contractor] out of the post-petition picture with respect to the original [subcontract], it need only have entered into a new contract directly with [the subcontractor], In such event, the new post-petition contract with the [subcontractor] would not have incorporated the prepetition claim and post-petition expenses associated with the [subcontract].
Id.
The reasoning and holding of
New York Trap Rock
do not support APX’s claim.
In this case, the Debtors did not assume the MSPA, and it was deemed rejected. The MSPA is the only basis under which the Debtors are even arguably obligated to pay APX’s attorneys’ fees. Assuming that the Debtors had an obligation under the MSPA to reimburse APX for attorneys’ fees, that obligation would have been a pre-petition obligation, and, as noted by the court in New York Trap Rock, the fact that the fees were incurred during the post-petition period does not elevate that obligation to the status of an administrative expense. APX can point to no post-petition transaction between the Debtors and APX that would entitle APX to payment of its attorneys’ fees. Accordingly, APX cannot meet the test applied by the court in New York Trap Rock and is not entitled to payment of its attorneys’ fees as administrative expense.
C. Collection of Postr-Petition Fees and Expenses as Part of the Unsecured Claim
Finally, APX argues that it is entitled to collect its reasonable attorneys’ fees and expenses as part of its unsecured claim because it would have been entitled to recover these fees under the MSPA had the Debtors’ bankruptcy case not intervened. In response, the Debtors argue that, unlike an oversecured creditor, an unsecured creditor is not entitled to the payment of post-petition attorneys’ fees. Alternatively, the Debtors argue that, even if the Court were to determine that an unsecured creditor can collect post-petition fees and expenses as part of its unsecured claim, APX has no contractual or statutory right to do so.
1. Whether Unsecured Creditors Are Barred from Collecting Attorneys’ Fees
A split of authority exists as to whether an unsecured creditor is entitled to payment of post-petition attorneys’ fees as part of its unsecured claim. A majority of courts have held that, unlike a secured creditor, an unsecured creditor is not entitled to collect post-petition attorneys’ fees or collection costs, notwithstanding the existence of a contractual or statutory right to do so.
See In re Hedged-Investments Associates, Inc.,
The first is the legal maxim of
“expres-sio unius est exclusio alterius,
meaning the expression of one is the exclusion of another.”
In re Pride Companies, LP,
A significant minority of courts have held that nothing in the Code prevents an unsecured creditor from asserting an unsecured claim for post-petition attorneys’ fees to which the creditor has a contractual or statutory right.
See In re United Merchants & Mfrs., Inc.,
Sections 501 and 502 govern the allowance of claims filed against the bankruptcy estate. Section § 101(5)(A) broadly defines “claim” as a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured.” 11 U.S.C. § 101(5)(A). Pursuant to § 502, when a proof of claim is filed, the claim will be deemed allowed unless a party in interest objects.
See
11 U.S.C. § 502(a). In the face of an objection, the bankruptcy court must allow the claim unless one of nine specific exceptions applies.
Id.
§ 502(b). The exception most often applicable provides that a claim shall be disallowed to the extent that “such claim is unenforceable against the debtor and property of the debtor, under any agreement or applicable law for a reason other than because such claim is contingent or unmatured.”
Id.
§ 502(b)(1). Accordingly, the fact that a claim is contingent or unmatured is not grounds to disallow a claim unless that claim is for unmatured interest.
See
11 U.S.C. § 502(b)(2);
see also In re Hemingway Transport, Inc.,
As to the majority’s reasoning that § 506(b) prohibits the collection of post-petition attorneys’ fees by undersecured creditors, this Court has previously considered this argument without actually deciding the issue. In
In re Homestead Partners, Ltd.,
The Court’s earlier analysis in Homestead Partners is consistent with the Eleventh Circuit Court of Appeals’ recent decision in In re Welzel, 275 F.8d 1308 (11th Cir.2001). In Welzel, an oversecured creditor sought payment of attorneys’ fees pursuant to § 506(b). The bankruptcy court found a portion of the fees to be unreasonable, and therefore, not payable as a secured claim under § 506(b). The debtor argued that the claim should be disallowed in its entirety, but the creditor sought payment of the fees as an unsecured claim. In analyzing the issue, the court interpreted § 506 as a provision that merely determines which claims should be entitled to receive the preferential treatment accorded secured claims, and construed § 502 as the provision that determines whether a claim should be allowed or disallowed. Id. at 1317-18. The court concluded that the failure of the claim for attorney’s fees to meet the reasonableness test of § 506(b) did not require the court to disallow the claim. It merely prevented the creditor from seeking payment of the fees from its collateral, ahead of the unsecured creditors. Accordingly, the court held that the bankruptcy court should have bifurcated the claim for statutory attorneys’ fees into secured and unsecured portions. Id.
In its analysis of the issue in
Welzel,
the court employed the same reasoning used by this Court in
Homestead Partners.
The court recognized that the determination of whether the attorneys’ fees are an allowable claim must be made with reference to § 502 and that the “entire claim to fees is allowable under § 502 as long as the exceptions in subsection (b) do not apply.”
Id.
The court concluded that, because none of the § 502(b) exceptions applied, the creditor’s “claim for its contractual attorney’s fees passes muster under § 502.” This is consistent with this Court’s assumption in
Homestead Partners
that § 506(b) does not preclude undersecured creditors from collecting contractually set attorneys’ fees as an unsecured claim. Although § 506(b) allows preferential treatment to claims for attorneys’ fees asserted by oversecured creditors, it does not necessarily follow that similar claims of unsecured creditors are not entitled to payment with less favorable treatment.
See also Blair v. Bank One, N.A.,
In further support of its conclusion that fees not entitled to secured status are still entitled to be paid as unsecured claims, the court explained that reading § 506(b) to disallow claims of secured creditors for attorneys’ fees that are found to be unreasonable would “turn a basic principle of bankruptcy law on its head.”
Welzel,
“[u]nsecured creditors would be privileged over oversecured creditors ... in the area of contractually set attorney’s fees. Not subject to § 506(b), unsecured creditors who desired to collect unreasonable contractual fees would have an allowed claim under § 502, while as oversecured creditors would have such fees disallowed entirely under § 506(b). This outcome would create an absurd result — unsecured creditors would be in a more protected position than a group of secured creditors.”
Id.
This statement indicates that the
Wel-zel
court assumed that an unsecured creditor with a contractual claim for attorneys’ fees would be entitled to payment of such fees as an unsecured claim.
See Blair v. Bank One, N.A.,
Finally, unlike the majority of courts, this Court is not persuaded that the Supreme Court’s decision in
Timbers
requires a finding that undersecured or unsecured creditors cannot assert an unsecured claim for post-petition attorneys’ fees. In
Timbers,
the Court stated that, pursuant to § 506(b), secured creditors could be paid post-petition interest only out of the “security cushion.”
Timbers,
2. Whether APX Has a Right to Payment of its Attorneys’ Fees and Costs
That being said, in order to allow APX to collect attorneys’ fees and costs as part of its unsecured claim, the Court must find that APX has either a contractual or statutory right to collect such fees. APX contends that it is entitled to fees either pursuant to the terms of the MSPA or applicable state law.
As to the MSPA, APX turns to the indemnification provision of the MSPA, which provides as follows:
To the fullest extent permitted by law, [the Debtor] shall indemnify and hold harmless APX, its Affiliates, agents, officers and employees from any and all claims and expenses incurred by them to the extent caused wholly or in part by any act or omission by [New Power], its Affiliates, agents, officers or employees, except to the extent such claim is caused by the negligence or willful misconduct of APX. [New Power’s] obligation to indemnify under this Section shall survive termination of the [MSPA], and shall not be limited in any way by amount or type of damages.
MSPA, Section 13.1. APX argues that the terms of the indemnification provision are
The Debtors do not agree that the MSPA’s indemnification provision permits reimbursement of attorneys’ fees, and take issue with the fact that the MSPA does not expressly state that attorneys’ fees are recoverable. By way of comparison, the Debtors note that the later indemnification agreement, which the parties executed pri- or to APX’s efforts to resolve the dispute with ERCOT, specifically states that the Debtors will indemnify APX for all losses, damages, costs, and expenses “(including reasonable attorneys’ fees and expenses).” Indemnity Agreement, ¶ 4. The Debtors submit that APX clearly knew how to bargain for an indemnification provision that specifically provides for reimbursement of attorneys’ fees, but did not do so in the MSPA. Further, the Debtors contend that, under California law, which is applicable to the MSPA, 3 attorneys’ fees should not be reimbursed unless the parties explicitly provide for them.
The Debtors rely upon
Continental Heller Corp. v. Amtech Mech. Servs., Inc.,
Indemnity agreements are construed under the same rules which govern the interpretation of other contracts. Accordingly, the contract must be interpreted so as to give effect to the mutual intention of the parties. (Civ.Code, § 1636.) The intention of the parties is to be ascertained from the “clear and explicit” language of the contract. (Civ. Code, §§ 1638-1639.) And, unless given some special meaning by the parties, the words of a contract are to be understood in their “ordinary and popular sense.” (Civ.Code, § 1644.) “In interpreting an express indemnity agreement, the courts look first to the words of the contract to determine the intended scope of the indemnity agreement.” (Smoketree-Lake Murray, Ltd. v. Mills Concrete Construction Co. (1991)234 Cal.App.3d 1724 , 1737[,286 Cal.Rptr. 435 ]).
Continental Heller Corp.,
In
Continental Heller Corp.,
a general contractor and subcontractor entered an agreement under which the subcontractor was to perform certain work. The agreement contained an indemnification provision. As a result of the subcontractor’s actions, the general contractor settled certain claims for damages asserted against it. The general contractor later brought a claim against the subcontractor for payment of the settlement amount, plus the costs and fees incurred in both defending against the claims and bringing the indemnification action. The issue before the court was whether the general contractor was entitled to recover the attorneys’ fees incurred in the indemnification action, or whether the indemnification provision allowed only recovery of the attorneys’ fees incurred to defend against the original claims that arose from the subcontractor’s actions.
Id.,
Like the court in
Continental Heller,
a significant number of courts have distinguished general indemnification provisions from more specific provisions that clearly address the reimbursement of fees incurred during litigation between the parties. These courts have determined that the broad language of standard indemnification provisions, although arguably broad enough to encompass attorneys’ fees as losses or damages, do not contain specific language to support a finding that the parties intended to include payment of attorneys’ fees arising from litigation between the contracting parties.
See Building Maintenance Service Co. v. AIL Systems, Inc.,
Having reviewed the indemnification language within the MSPA, the Court concludes that the provision is a standard indemnification provision that does not include language evidencing any intent between the parties to shift the payment of fees incurred by APX during litigation with the Debtors to establish APX’s claim. APX has pointed to no other provision
The Court also agrees with the Debtors that APX’s claim for fees is not supported by statute. APX argues that Texas law applies to the issue of whether APX is statutorily entitled to attorneys’ fees as the prevailing party in a contract dispute. Specifically, APX contends that Section 38.001 of the Texas Civil Practice and Remedies Code (hereinafter “Section 38.001”) entitles APX to payment of its attorneys’ fees. Pursuant to Section 38.001, a “person may recover reasonable attorney’s fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for ... an oral or written contract.” Tex. Civ. PRAC. & Rem. Code Ann. § 38.001. If Texas law is applicable, and the Court determines that APX asserted a valid claim and met the procedural requirements imposed by Section 38.001, APX would be entitled to an award of reasonable attorneys’ fees.
The Debtors argue that California law, rather than Texas law, controls this issue. Unlike Texas law, California law has no statutory provision similar to Section 38.001. Section 1021 of the California Code of Civil Procedure provides that “[e]xeept as attorney’s fees are specifically provided for by statute, the measure and mode of compensation of attorneys and counselors at law is left to the agreement, express or implied, of the parties.” Calif. Code of Crv. P. § 1021. Section 1032 also provides for a recovery of “costs” by a prevailing party.
Id.
§ 1032. However, the term “costs” includes attorneys’ fees only where attorneys’ fees are authorized by either contract, statute, or other law.
See Id.
§ 1033.5. “[Recoverable litigation costs do include attorney fees, but only when the party entitled to costs has a legal basis, independent of the cost statutes and grounded in an agreement, statute, or other law, upon which to claim recovery of attorney fees.”
Santisas v. Goodin,
Because the application of California law, as opposed to Texas law, could lead to a different result, the Court must resolve the conflict of law issue. The first step in the conflicts of law analysis is to determine whether the issue is procedural or substantive for purposes of
Erie Railroad Co. v. Tompkins,
The only argument that APX has made as to why Texas law should control this issue is that APX was merely acting as a middle man between the Debtors and ER-COT, and, therefore, the real dispute was between the Debtors and ERCOT. Accordingly, since the contract between ER-
As discussed above, under California law, APX is not entitled to reimbursement for its attorneys’ fees. However, it appears that APX may be entitled to recover its costs, pursuant to Section 1032. As noted above, California law allows for the recovery of costs by a prevailing party. A “ ‘[prevailing party’ includes the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant.” Calif. Code of Civ. P. § 1032(a)(4). In this case, APX recovered $3.4 million as a result of filing its various proofs of claim against the Debtors. The Debtors have argued that, because APX originally asserted total claims of $6.6 million, APX cannot be considered a prevailing party. APX counters that the original $6.6 million was based upon amounts that APX estimated to be due to ERCOT on the Debtors’ behalf, and that the actual amount owed was in fact the $3.4 million, which APX successfully recovered. Although APX did not recover the full amount of the $6.6 million claims originally filed, the Court finds that the recovery of $3.4 million is a sufficient recovery to support a finding that APX is a prevailing party within the meaning of Section 1032.
See Scott Co. of California v. Blount, Inc.,
Pursuant to Section 1033.5, “costs” allowable under Section 1032 include “filing, motion, and jury fees”; “[j]uror food and lodging”; “transcribing necessary depositions” and “travel expenses to attend depositions”; costs for “[s]ervice of process by a public officer, registered process server, or other means”; “[expenses of attachment including keeper’s fees”; “[p]remiums on necessary surety bonds”; “[ordinary witness fees; [flees of expert witnesses ordered by the court”; “[t]ranscripts of court proceedings ordered by the court”; “[c]ourt reporters fees as established by statute”; and “[m]odels and blowups of exhibits and photocopies of exhibits may be allowed if they were reasonably helpful to aid the trier of fact.” Calif. Code of Civ. P. § 1033.5(a). Specifically not allowed as costs are investigation expenses of preparing for trial, postage, telephone, and photocopying costs, except as
In its application, APX has sought recovery of expenses incurred in the amount of $4,068.47, which includes amounts expended for facsimiles, computer-assisted legal research, photocopies, postage, telephone calls, word processing, travel expenses, taxis, conference expenses, courier services and express mail, and filing fees of $190. There is no evidence within the record to suggest that any of the travel expenses were incurred in connection with attendance of a deposition. Other than the filing fees, which are an item that is specifically included within the definition of costs provided by Section 1033.5, none of these expenses appear to be allowable. Therefore, the Court will award APX an unsecured claim of $190 as reimbursement for its filing fees.
Conclusion
Having carefully considered the matter, the Court finds that the Application of Automated Power Exchange for Payment of Attorneys’ Fees and Expenses should be, and hereby is, DENIED in part and GRANTED in part. Automated Power Exchange shall be entitled to payment of $190.00 as an allowed unsecured claim against the Debtors’ bankruptcy estates.
IT IS SO ORDERED.
Notes
. New Power agreed to indemnify APX for any damages or losses incurred in connection with the ADR, including reasonable attorneys’ fees and expenses. Accordingly, this application does not seek payment of fees incurred in connection with the ADR.
. Even if the Court concluded that unsecured creditors may not generally seek payment of attorneys' fees as an unsecured claim, the Court would adopt, as APX urges, an exception for solvent debtors.
See In re Continental Airlines, Inc.,
. Section 8.3 of the MSPA provides that the "MSPA shall be governed by, and interpreted in accordance with, the laws of the State of California, excluding any choice of law rule that directs the application of the laws of another jurisdiction, irrespective of the places of execution or of the order in which signatures of the parties are affixed or of the place of performance.” MSPA, § 8.3 (emphasis in original). The parties appear to agree that California law is applicable to the Court’s interpretation of the MSPA.
. The Court recognizes that, under binding precedent from the United States Supreme Court and the Fifth Circuit Court of Appeals, bankruptcy courts may not always be bound to apply the conflicts principles of the forum state.
See Vanston Bondholders Protective Committee v. Green,