Ninth Circuit Adopts BAP Opinion As Its Own.
For bankruptcy and creditor practitioners, the Ninth Circuit Court of Appeals recently affirmed a BAP decision (380 B.R. 204 (9th Cir. BAP 2007)) on an interesting unsecured creditors’ fees issue. The case is In re SNTL Corp., Case No. 08-60001 (9th Cir. June 23, 2009) (for publication).
In SNTL Corp., the Ninth Circuit adopted the BAP’s reasoning in an opinion authored by Bankruptcy Judge Montali, who has handled several well-known bankruptcy cases in the Northern District of California.
The Rake in Debtor’s Prison. William Hogarth. (1697-1764).
This decision held that an unsecured creditor can seek allowance of postpetition contractual or statutory attorney’s fees arising out of a prepetition claim, but incurred postpetition, determining that it falls within the Bankruptcy Code’s broad definition of a claim. It departed company from the position of the majority of cases that Code section 502(b) precludes such fees, disagreeing with such decisions as In re Elec. Mach. Enter., Inc., 371 B.R. 549, 551 (Bankr. M.D.Fla. 2007) (which disallowed postpetition fees of an unsecured creditor under section 502(b)(1)). To address the concern that an overactive creditor could unfairly run up fees, the BAP decision, as adopted by the Ninth Circuit, believed that the general California doctrine imposing a reasonable requirement on fees would temper most abuses in this area.