Ninth Circuit Rejects Awarding Fees Based Upon Tort Concepts or Class Theories of Liability.
Bankruptcy practitioners, we have one for you. Do not despair. If we find them or you point them out (a call for interactive discussion with us), we will report on attorney’s fees in the insolvency arena. The next case happens to be one of interest to you.
Sofris v. Maple-Whitworth, Inc., Case No. 07-56537 (9th Cir. Feb. 10, 2009) (for publication) primarily dealt with statutory interpretation of 11 U.S.C. sec. 303(i), which provides that a bankruptcy judge may grant a debtor reasonable attorney’s fees and costs upon dismissal of an involuntary bankruptcy petition. The bankruptcy court ordered that fees and costs must be awarded against all involuntary bankruptcy petitioners as a class, a determination affirmed by a divided BAP concluding that section 303(i) is governed by the common law tort doctrine of joint and several liability. The fees/costs award at issue was $42,257.
On appeal, the Ninth Circuit decided otherwise. Section 303(i) does not incorporate the common law doctrine of joint and several liability. Rather, Higgins v. Vortex Fishing Systems, Inc., 379 F.3d 701, 707 (9th Cir. 2004) requires that a bankruptcy court consider the totality of circumstances, not just tort liability principles, in exercising discretion under section 303(i). “In light of Higgins, a bankruptcy court has discretion to hold all or some petitioners jointly or severally liable for costs and fees, to apportion liability according to petitioners’ relative responsibility or culpability, or to deny an award against some or all petitioners, depending on the totality of the circumstances.” (Slip Opn., at p. 1625.)