United States District Court, N.D. California
ORDER REVERSING BANKRUPTCY COURT'S AWARD OF
ATTORNEYS' FEES AND COSTS
HAYWOOD S. GILLIAM, JR., United States District Judge
Ditech Financial LLC's
("Appellant") appeals the bankruptcy court's
order granting Debtor-Appellee Jacqueline Giusto's
("Appellee") motion for attorneys' fees and
costs. Dkt. No. 7 ("OB"). Appellee's motion was
filed in the wake of Appellant's unsuccessful motion for
relief from an automatic stay of debt collection under 11
U.S.C. § 362(d). Appellee filed an answering brief, Dkt.
No. 9 ("AB"), and Appellant has filed a reply, Dkt.
No. 9 ("RB").
Federal Rule of Civil Procedure 78(b) and Bankruptcy Local
Rule 8019-1, the Court finds that this matter is suitable for
decision without oral argument. For the reasons set forth
below, the order of the bankruptcy court is REVERSED.
October 21, 2013, Appellee filed a petition for bankruptcy
under Chapter 13 of the United States Bankruptcy Code, 13
U.S.C. § 1321, et seq. Dkt. No. 4
("ER"), Ex. 16 at 1. In her petition, Appellee listed
the real property located at 3971 Arbuckle Drive, San Jose,
California as an asset. Id. Appellee had inherited
the property, which was encumbered by a note
("Note") and deed of trust ("Deed") in
favor of Bank of America, N.A. Id. at 2. Appellee
stopped paying the debt after she filed for bankruptcy, as
enforcement of the Note and Deed was automatically stayed
under 11 U.S.C. § 362(a) upon initiation of the
bankruptcy action. ER, Ex. 1 at 2-3.
December 30, 2013, Appellant, acting under a limited power of
attorney authorized by Bank of America, filed a motion for
relief from the automatic stay under 11 U.S.C. § 362(d)
to foreclose upon the Deed. ER, Ex. 1 at 3. Appellee opposed
the motion on the grounds that Appellant had not shown it had
standing to enforce the Note or Deed. ER, Ex. 2. The
bankruptcy court agreed and ordered Appellant to file a
declaration that established a colorable claim of standing.
ER, Ex. 6. When Appellant failed to file a proper
declaration, the Bankruptcy Court denied its motion without
prejudice. ER, Ex. 7. Appellant did not attempt to refile the
November 3, 2015, Appellee moved for an award of
attorneys' fees and costs incurred in connection with
opposing Appellant's unsuccessful motion for relief from
the automatic stay. ER, Ex. 8. Appellee contended it was
entitled to an award on the grounds that the Note contained a
provision entitling Bank of America to recoup its own fees
and costs it incurred from any debt collection efforts that
was made reciprocal by operation of California Civil Code
§ 1717. Id. at 1-2. Appellant responded
that § 1717 makes unilateral attorneys' fees
provisions reciprocal only if the fees motion is brought
"[i]n an action on the contract." ER, Ex. 9 at 3-4.
Appellant argued that because a motion for relief from an
automatic stay was not an action "on the contract,
" per In re Johnson, 756 F.2d 738 (9th Cir.
1985), a fees award was inappropriate. Id. Appellee
replied that In re Johnson, while on all fours, was
of "highly questionable" precedential value in
light of the Supreme Court's decision in Travelers
Casualty & Surety Co. of America v. PG&E, 549 U.S. 443
(2007). ER, Ex. 10 at 6-10. The Bankruptcy Court ordered
supplemental briefing on the fees motion, asking in part how
it could "get around" In re Johnson. ER,
Ex. 13 at 2. Appellant maintained that Travelers had
not overruled or abrogated In re Johnson, but only
distinguished it from the case that it did overrule, In
re Fobian, 951 F.2d 1149 (9th Cir. 1991). Id.
Appellee did not discuss the issue. ER, Ex. 11.
lengthy, reasoned decision, the bankruptcy court held that
Travelers had overruled In re
Johnson. ER, Ex. 16 at 6-9. The court proceeded to
consider afresh whether, under California law, a motion for
relief from automatic stay in federal bankruptcy proceedings
was an action "on the contract" that could trigger
fees reciprocity under California Civil Code § 1717(a).
Id. at 10-15. The court began by finding that
California courts liberally apply § 1717(a) to any
proceeding that "involves" a contract or is brought
to "enforce" a contract provision. Id. at
10-14. Because the "only relationship" between the
parties was "contractual, " the court concluded
that Appellant's motion to lift the stay was an action on
the contract within the meaning of § 1717(a).
Id. at 14-15. And the court held that even if
Travelers did not overrule In re Johnson,
the facts of this case were distinguishable because Appellee
had opposed the motion on standing grounds. Id. at
15-16. The bankruptcy court then awarded Appellee its
attorneys' fees and costs. Id. at 20-25.
filed a notice of appeal under 28 U.S.C. § 158(a) and
its election for the appeal to be heard by a district court
under 28 U.S.C. § 158(c)(1)(A). ER, Exs. 18-19.
courts have jurisdiction to hear appeals from the final
orders of bankruptcy judges. 28 U.S.C. § 158(a). The
Ninth Circuit has adopted a "pragmatic approach"
for determining what constitutes a final order in a
bankruptcy proceeding. Eden Place, LLC v. Perl, 811
F.3d 1120, 1125 (9th Cir. 2016). Bankruptcy orders are final
and immediately appealable if they "finally dispose of
discrete disputes within the larger case." Id.
(quoting Bullard v. Blue Hills Bank, __U.S.__, 135
S.Ct. 1686, 1692 (2015)). An order finally disposes of a
discrete dispute if it: (1) "resolves and seriously
affects substantive rights" and (2) "finally
determines the discrete issue to which it is addressed."
See Id. at 1126-27 (citation omitted).
this framework, the Court finds that the bankruptcy
court's order awarding attorneys' fees and costs in
this case is final and immediately appealable because it
substantively affected Appellant's rights in a discrete
and final manner. No further proceedings can affect the total
amount of this award regarding the motion to lift the stay.
That fact likens this case to the one presented in In re
Yermakov, 718 F.2d 1465, 1471 (9th Cir. 1983), in which
the Ninth Circuit found the interim fees award to be final,
and distinguishes it from In re Four Seas Center,
Ltd., 754 F.2d 1416, 1418-19 (9th Cir. 1985), in which
the Ninth Circuit found the interim fees award to be
interlocutory because the total amount of the fees award was
subject to potential revision. To the extent that this fees
award is not final,  the Court exercises its discretion to
grant leave to hear the interlocutory appeal under 28 U.S.C.
§ 158(a)(3). See Perl, 811 F.3d at 1131.
STANDARD OF REVIEW
courts generally review a bankruptcy court's findings of
fact for clear error and conclusions of law de novo.
Northbay Wellness Grp., Inc. v. Beyries, 789 F.3d
956, 959 (9th Cir. 2015). But a bankruptcy court's award
of attorneys' fees will not be disturbed unless it abused
its discretion or erroneously applied the law. Galam v.
Carmel, 249 F.3d 832, 836 (9th Cir. 2001).