V. M. v. S. S. (In re S. S.)V. M. v. S. S. (In re S. S.)
OPINION
This matter requires the court to determine whether a New Jersey statute which allows for an award of attorney’s fees in a paternity suit may form the basis for an award of counsel fees in a nondischarge-ability action brought under 11 U.S.C. § 523. Because the American Rule in federal litigation prohibits the award of counsel fees except in certain narrow circumstances, the court concludes that the New Jersey statute does not allow the award of counsel fees in a nondischargeability action. The court in its discretion under Fed. R. BankrP. 7054(b) orders the debtor to pay the plaintiffs costs in the adversary proceeding in the amount of $503.26.
This court has jurisdiction under 28 U.S.C. § 1334(b)
FACTS
The facts of the underlying case are set forth in the October 8, 1997 decision of the Superior Court of New Jersey, Appellate Division (“Appellate Division”). V.M. (“Vincent”) and S.S. (“debtor” or “Sara”) had an intimate relationship but never married. Sara advised Vincent that she was pregnant with his child. On October 15, 1987 Sara, then receiving Aid to Families with Dependent Children, filed a form affidavit with the Ocean County Board of Social Services. In the affidavit Sara declared that she had not had sexual intercourse with any male except Vincent for 45 days before and 45 days after the probable date of conception. An order for paternity and child support was entered against Vincent on or about February 2,1988.
After having paid child support for several years, Vincent filed an action to reopen the issue of filiation. The court ordered a Human Leukocyte Antigen (“HLA”) test which statistically eliminated Vincent as the father of the child. Nevertheless, the Chancery Division ordered that Vincent’s child support obligation continue. He appealed. In an unpublished opinion the Appellate Division ruled that Sara had committed fraud on the court
We agree that this sworn statement, which is obviously false, is a fraud on the court. Sara could reasonably have been mistaken or in doubt about who her daughter’s father was. But it is not credible that she was unaware of the falsity of her statement that she did not have sexual relations with anyone other than Vincent for forty-five days before and forty-five days after [the child’s] conception.
S.S. v. V.M., No. A-901-96T3, slip op. at 9 (App.Div., October 8, 1997). The Appellate Division vacated the orders for paternity and child support. Pursuant to N.J. Stat. Ann. § 9:17-54 (“The Parentage Act”) and N.J. R. 4:42-9(a)(l), Vincent was awarded counsel fees and costs of $12,759.19 incurred in overturning orders for paternity and child support obtained by fraud.
When Vincent filed an application for wage garnishment to collect his judgment, the debtor filed a petition in bankruptcy under Chapter 7. Vincent filed an adversary complaint to determine that the judgment is nondischargeable under 11 U.S.C. § 523(a)(2), § 523(a)(4), § 523(a)(5) and § 523(a)(6).
During trial, the debtor’s counsel conceded that the determination by the Appellate Division that the debtor had committed fraud on the court binds the bankruptcy court. This court found, consistently with Cohen v. de la Cruz,
Plaintiff first requested counsel fees and costs for pursuing the nondischargeability action in the Proposed Findings of Fact and Conclusions of Law filed three days before trial. He did not request them in the adversary complaint. At trial the plaintiff reiterated his request for counsel fees in the nondischargeability action citing In re Scannell,
DISCUSSION
The creditor failed to comply with the procedural requirements of Fed. R. Bankr.P. 7008(b) for applying for counsel fees.
Fed. R. BankrP. 7008(b) compels a party who requests counsel fees in an adversary proceeding to plead the request:
Rule 7008. General Rules of Pleading.
(b) Attorney’s Fees. A request for an award of attorneys’ fees shall be pleaded as a claim in a complaint, cross-claim, third-party complaint, answer, or reply as may be appropriate.
Fed.R.CivP. 9(g), which is incorporated into the bankruptcy rules through Fed. R.
The plaintiff failed to ask for counsel fees in the adversary complaint as required by Fed. R. BaNkrP. 7008(b). The plaintiff requested counsel fees for the first time in his Proposed Findings of Fact and Conclusions of Law which he filed three days prior to trial. As the plaintiff has failed to plead his request for attorney’s fees as a claim in his adversary complaint as required by Fed. R. BanicR.P. 7008(b), his application for attorney’s fees is denied. In re Odom,
Even if the plaintiff had requested counsel fees properly, the American Rule bars his recovery of counsel fees under the circumstances of this case.
The plaintiff argues that, because the underlying paternity suit is governed by New Jersey law, he may rely upon New Jersey Court Rule N.J. R. 4:42-9(a)(l)
9:17-54. Costs and fees.
The court may order reasonable fees of counsel, experts and the child’s guardian ad litem, and other costs of the action and pre-trial proceedings, including blood or genetic tests, to be paid by the parties in proportions and at times determined by the court.
N.J. Stat. Ann. § 9:17-54.
The American Rule states that the prevailing party is not entitled to at-
In Federal court attorney’s fees may be awarded only under one of the following exceptions: (1) a contract provides for payment of attorney’s fees; (2) a statute provides an allowance of attorney’s fees; (3) a recovered fund or property confers a “common benefit,” as in a class action suit; (4) a party willfully disobeys a court order; or (5) a court finds that the losing party has acted “ ‘in bad faith, vexatiously, wantonly or for oppressive reasons.’ ” Cityside Archives, Ltd. v. New York City Health and Hosp. Corp.,
When applying the statutory exception (2) to the American Rule, the court examines whether the right that is vindicated in the bankruptcy proceeding arises under state law or under federal law. The court distinguishes carefully between the law that generates the underlying debt and the law that governs the bankruptcy proceeding. Actions in bankruptcy court on debts which arise under a state statute do not automatically support an award of counsel fees in bankruptcy court. In re Fobian,
Determining whether the right vindicated in the bankruptcy proceeding arises under federal law or state law is straightforward. In re Seaway Exp. Corp.,
The statutory exception to the American Rule does not apply to allow the Court to invoke the Parentage Age, N.J. Stat. Ann. § 9:17-54, or New Jersey’s Rules of Court to award counsel fees in the creditor’s nondischargeability action.
Under the analysis for the statutory exception to the American Rule, the bankruptcy court cannot award attorney fees based on the Parentage Act. The plaintiffs nondischargeability action was not governed by the Parentage Act and did not address the enforcement or vindication of a right generated by the Parentage Act. The issue before the court in the plaintiffs adversary complaint was the nondischargeability of the debtor’s debt under 11 U.S.C. § 523. Because the right vindicated in bankruptcy court arose as a federal claim under 11 U.S.C. § 523 and not as a state claim under N.J. Stat Ann. § 9:17-54, the statutory exception to the American Rule does not apply to allow the court to invoke the Parentage Act to award the plaintiff counsel fees for the adversary proceeding. For the same reason New Jersey’s Rules of Court cannot serve as a basis for awarding counsel fees.
This result is consistent with In re Barbre,
The court in Barbre declined to apply In re Scannell,
The plaintiff cites In re Cohen,
The courts in Cohen focused upon the nondischargeability of punitive damages authorized by state statute. The bankruptcy court in In re Cohen,
The district court, court of appeals and Supreme Court affirmed the principle that noncompensatory (punitive), statutory damages are nondischargeable under 11 U.S.C. § 523(a)(2). Cohen,
The plaintiff cites In re MacDonald,
Costs may be awarded under Fed. R. Bankr.P. 7054(b).
The court in its discretion may award costs in an adversary proceeding.
Rule 7054. Judgments; Costs.
(b) Costs. The court may allow costs to the prevailing party except when a statute of the United States or these rules otherwise provides.
Fed. R. BankrP. 7054(b). Fed.R.Civ.P. 54(d), that makes the award of costs to the prevailing party mandatory in other federal cases, is not incorporated into Fed. R. BankrP. 7054. In re Celotex Corp.,
The Third Circuit has not fully addressed the award of costs under Fed. R. BankrP. 7054(b) in a published opinion. In In re Gioioso,
Although the courts within the Third Circuit have not yet addressed a 7054(b) award of costs in a published opinion, we note that courts elsewhere have denied costs because of a complete absence of bad faith or frivolity ... because of a prevailing party’s unnecessary multiplication of proceedings ... or because the party seeking costs was not technically a “prevailing party,”.... Costs have been taxed in favor of a prevailing party without explanation ... and costs have been taxed in favor a party prevailing on a motion to disqualify an attorney [previously disqualified].
In re Gioioso,
28 U.S.C. § 1920 allows costs for the following expenses:
(1) Fees of the clerk and marshal;
(2) Fees of the court reporter for all or any part of the stenographic transcript necessarily obtained for use in the case;
(3) Fees and disbursements for printing and witnesses;
(4) Fees for exemplification and copies of papers necessarily obtained for use in the case;
(5) Docket fees under section 1923 of this title;
(6) Compensation of court appointed experts, compensation of interpreters, and salaries, fees, expenses, and costs of special interpretation services under section 1828 of this title.
A bill of costs shall be filed in the case, and upon allowance included in the judgment or decree.
28 U.S.C. § 1920.
The statement of services submitted by Vincent’s attorney for the adversary proceeding indicates that she billed $663.50 in costs but requested only $503.26 in reimbursement. Of that $663.50, $150.00 is for the filing fee, an allowable cost under 28 U.S.C. § 1920(1), and $400.74 is for photocopying, an allowable cost under 28 U.S.C. § 1920(3). As the sum of these exceeds the amount sought by Vincent’s attorney, the court finds that the $503.26 requested is an allowable cost.
The financial data show that Sara has the ability to pay these costs. Sara certifies that she earns $23,088.00 annually, and her pay stub indicates the potential to earn overtime. Her husband’s pay stub shows an annual income of $57,804.47 per year, for a gross household income of at least $80,892.47. In the court’s discretion under Fed. R. BankeP. 7054(b) the court orders Sara to pay Vincent $503.26 in costs as the prevailing party in the adversary proceeding.
CONCLUSION
For the reasons set forth above, the court concludes that no exception under the American Rule applies to allow the court to make an award of attorney’s fees to the plaintiff for the expenses that he incurred in successfully prosecuting the nondischargeability action in bankruptcy court. The court awards the plaintiff $503.26 for costs.
Notes
. All references to the U.S.C. and NJ. Stat. Ann. are to the West 2001 edition.
. The version of N.J. R. 4:42-9(a)(l) in effect in 1997-1998 when the Appellate Division instructed the Chancery Division to make a determination of counsel fees and costs states:
4:42-9. Counsel fees.
(a) Actions in Which Fee Is Allowable. No fee for legal services shall be allowed in the taxed costs or otherwise, except
(1) In a family action, the court in its discretion may make an allowance both pendente lite and on final determination to be paid by any party to the -action, including if deemed to be just any party successful in the action, on any claim for ... support ... custody, visitation ... and claims relating to family type matters in actions between unmarried persons.
PRESSLER, Current N.J. COURT RULES, (GANN 1998), R. 4:42-9(a)(l). The current rule provides
4:42-9. Counsel fees.
(a) Actions in Which Fee Is Allowable.
No fee for legal services shall be allowed in the taxed costs or otherwise, except
(1) In a family action, a fee allowance both pendente lite and on final determination may be made pursuant to R. 5:3-5(c).
PRESSLER, Current N.J. COURT RULES, (GANN 2001), R. 4:42-9(a)(l). N.J. R. 5:3-5(c) provides:
5:3-5. Attorney Fees and Retainer Agreements in Civil Family Actions; Withdrawal.
(c) Award of Attorney Fees. Subject to the provisions of R. 4:42-9(b), (c), and (d), the court in its discretion may make an allowance ... to ... any party successful in the action, on any claim for ... support .. . custody, parenting time ... and claims relating to family type matters in actions between unmarried persons.
PRESSLER, Current N.J. COURT RULES, (GANN 2001), R. 5:3-5(c).
. 11 U.S.C. § 523(d) allows attorney’s fees to the debtor if the creditor’s application for non-dischargeability under 11 U.S.C. § 523(a)(2) is not "substantially justified.”