Saccheri v. St. Lawrence Valley Dairy (In re Saccheri), BAP No. 12-1269-JuKiD, (B.A.P. 9th Cir. Nov. 1, 2012) (UNPUBLISHED) :
In a nondischargeable action under Sections 523(a)(2)(A) and (a)(4) of the Bankruptcy Code, the Bankruptcy Appellate Panel for the Ninth Circuit (“B.A.P.”) held that the bankruptcy court erred when it awarded plaintiff attorneys fees pursuant to the terms of a pre-bankruptcy settlement agreement between the parties. Citing Cohen v. de la Cruz, 523 U.S. 213, 223 (1998), for its holding that attorneys’ fees may be awarded and declared nondischargeable in a nondischargeability action, the B.A.P. concluded that the fee award was not appropriate in the instant case.
The Court noted that 2 requirements must be met before attorneys’ fees can be awarded in a nondischargeability action:
- An underlying contract or nonbankruptcy law must provide a right to recover attorneys’ fees, and
- The issues litigated in the dischargeability action must fall within the scope of the contractual or statutory attorneys’ fees provision.
Simply stated, the issue for the court should turn upon whether the claims litigated in the dischargeability action fall within the scope of the contractual or statutory attorneys’ fees provision in dispute. In concluding that attorneys fees were not warranted, the Court noted that plaintiff’s claims in the nondischargeability proceeding were not brought to enforce the terms of the settlement agreement or allege that the agreement had been breached. Rather, plaintiff’s action before the bankruptcy court sought the remedy of nondischargeability based on the tort claims of fraud, breach of fiduciary duty and embezzlement. As such, the attorneys’ fee clause in the settlement agreement was inapplicable to the claims litigated in the nondischargeability action.
spent 