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In Re v. Banyon Limited Partnership

August 7, 2012

IN RE: IBT INTERNATIONAL, INC.; SOUTHERN CALIFORNIA SUNBELT DEVELOPERS, INC., DEBTORS. IBT INTERNATIONAL, INC.; SOUTHERN CALIFORNIA SUNBELT DEVELOPERS, INC., APPELLANTS,
v.
BANYON LIMITED PARTNERSHIP; ORANGE BLOSSOM LIMITED PARTNERSHIP;
PEAR TREE LIMITED PARTNERSHIP;
DONALD W. GRAMMAR; VAN DAN LIMITED PARTNERSHIP;
CTM LIMITED PARTNERSHIP;
DTG LIMITED PARTNERSHIP;
BIRCH INTERNATIONAL LIMITED PARTNERSHIP;
GALLERY I, INC.; HAMPTON LIMITED PARTNERSHIP; KEY ENTERPRISES, INC.; SLEVIN LIMITED PARTNERSHIP; SNOWTHUNDER, INC.; TRAILS END LIMITED PARTNERSHIP;
DAVID H. TEDDER, APPELLEES.



Appeal from the United States Bankruptcy Court for the Central District of California Honorable Erithe A. Smith, Bankruptcy Judge, Presiding Bk. Nos. 02-10608-ES 02-10617-ES

SUSAN M SPRAUL, CLERK

U.S. BKCY. APP. PANEL OF THE NINTH CIRCUIT

(Related appeals)

MEMORANDUM*fn1

23 Argued and Submitted on July 19, 2012 at Pasadena, California

Filed - August 7, 2012

Before: DUNN, MARKELL and KIRSCHER, Bankruptcy Judges.

Southern California Sunbelt Developers, Inc. ("SCSD") and IBT International, Inc. ("IBT") appeal the bankruptcy court's order denying their motions for post-judgment attorney's fees and costs ("post-judgment fee motions").*fn2 Specifically, SCSD and IBT sought awards of attorney's fees and costs incurred in defending against an appeal of attorney's fees and costs and punitive damages earlier awarded in their favor under § 303(i). The bankruptcy court declined to award SCSD and IBT their post- judgment attorney's fees and costs, based on its reading of Higgins v. Vortex Fishing Sys., Inc., 379 F.3d 701 (9th Cir. 2004).*fn3 We AFFIRM.

FACTS*fn4

Ten years ago, thirteen creditors filed involuntary chapter 11 bankruptcy petitions against SCSD and IBT.*fn5 Donald Grammar and David Tedder controlled the petitioning creditors.*fn6

The bankruptcy court dismissed the involuntary petition against SCSD after finding that the petitioning creditors' claims were the subject of a bona fide dispute under § 303(b). It also dismissed the involuntary petition against IBT on a motion by the petitioning creditors.

SCSD and IBT thereafter filed motions for attorney's fees and costs and punitive damages under § 303(i)("§ 303(i) fee motions").*fn7 They also sought sanctions against Grammar and Tedder under Rule 9011 and the bankruptcy court's inherent power. SCSD and IBT did not seek damages under § 303(i)(2)(A).

After a month-long evidentiary hearing on the § 303(I) fee motions, the bankruptcy court entered judgment against Grammar, Tedder and the petitioning creditors ("§ 303(I) fee judgment"). It held the petitioning creditors jointly and severally liable under § 303(i)(1) for $745,318 in costs and attorney's fees incurred by SCSD and IBT, including costs and fees they incurred during the post-dismissal proceedings on the § 303(I) fee motions. It further found that the petitioning creditors had 1 filed the involuntary chapter 11 petitions in bad faith under 2 § 303(i)(2)(B), holding them jointly and severally liable for 3 $130,000 in punitive damages ($5,000 per creditor per petition).

4 Under its inherent power to impose sanctions, the bankruptcy 5 court also held Grammar and Tedder jointly and severally liable 6 for costs and attorney's fees awarded against the petitioning 7 creditors.

8 Grammar, Tedder and the petitioning creditors appealed to 9 the district court, which affirmed the § 303(I) fee judgment in 10 its entirety. They then appealed to the Ninth Circuit. In its 11 opinion, Orange Blossom Ltd. P'Ship v. Southern California 12 Sunbelt Devs., Inc. (In re Southern California Sunbelt Devs., 13 Inc.), 608 F.3d 456 (9th Cir. 2010), the Ninth Circuit affirmed 14 the § 303(I) fee judgment in part and reversed it in part. 15 Specifically, the Ninth Circuit affirmed the § 303(I) fee 16 judgment as against the petitioning creditors. Id. at 460. It 17 also affirmed that portion of the § 303(I) fee judgment against 18 Grammar and Tedder for the attorney's fees and costs SCSD and IBT 19 incurred in obtaining dismissal of the involuntary petitions.

20 Id.

21 The Ninth Circuit determined that the bankruptcy court did 22 not err by awarding attorney's fees incurred by SCSD and IBT in 23 pursuing their claims under § 303(i)(1) and (2), as § 303(i)(1) 24 was a fee shifting provision. Id. at 463. It pointed out that 25 in statutory fee cases, it has held that time spent in 26 establishing entitlement to and the amount of attorney's fees was 27 compensable under § 303(i)(1). Id. (citing In re Nucorp Energy, 28 Inc., 764 F.2d 655, 659-60 (9th Cir. 1985)). Relying on Comm'r v. Jean, 496 U.S. 154 (1990), the Ninth ...


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