Attorneys' Fees Are Non-Dischargeable If They Are Traceable to Fraud

In Bartenwerfer v. Buckley (In re Bartenwerfer), BAP No. NC-19-1178-TaFB (April 23, 2020), the Ninth Circuit Bankruptcy Appellate Panel ("BAP") held that the bankruptcy court correctly determined that all of the appellee's state court attorney's fees were non-dischargeable pursuant to 11 U.S.C. § 523(a)(2)(A).

Under 11 U.S.C. § 523(a)(2)(A), one of the exceptions to discharge is attorneys' fees that are traceable to fraud. In Bartenwerfer, the debtors sold their home to the appellee and falsely represented the condition the home was in. The appellee discovered the defects after the sale and sued the debtors in state court. After much litigation, the jury awarded the appellee damages, interest, attorneys' fees, and costs. The appellee filed a motion seeking attorneys' fees, but the debtors filed a Chapter 7 petition before the state court could hear the motion. The bankruptcy court awarded the appellee a set amount of non-dischargeable fees and interest at a set rate, from the time of the entry of the original state court judgment. The BAP affirmed the bankruptcy court's decision holding that all of the appellee's state court attorney's fees were non-dischargeable because they were traceable to fraud.

The BAP's reasoning for this decision was two-fold. First, the BAP reasoned that the bankruptcy court properly excused fee apportionment and found that the debtors failed to identify or explain why the appellee's fees were unrelated to his non-dischargeable fraud claim. Fee apportionment is a factual question that is not required if the issues in the various claims are so inextricably intertwined that it would be impractical or impossible to separate the attorney's time into compensable and non-compensable units. Because the appellee's claims were inextricably intertwined and incorporated the same core operative facts, fee apportionment was not required in this case. Second, the debtors were required to object to specific time entries in order to obtain a reduction or disallowance of fees, since fee apportionment was unnecessary. Instead, the debtors objected to all entries of block billing without specifically identifying which entries were problematic.

Thus, the BAP correctly held that all of the appellee's state court attorneys' fees were non-dischargeable because they were traceable to fraud. To avoid this discharge issue, debtors must be able to identify why certain fees are unrelated to the claims being litigated and must specifically identify potentially problematic billing entries.

For the full opinion, please click here.

No Comments

Leave a comment
Comment Information
  • NBLSC Board Certified Lawyer Rated By Super Lawyers | Ryan P. Durham Rated By Super Lawyers | Ben Boston
  • Tennessee Association For Justice | Member 2015-2016 American Association For Premier DUI Attorneys The National Trial Lawyers | Top 100 Trial Lawyers
  • American Institute of Family Law Attorneys | 10 best 2015 American Institute of Personal Injury attorneys | 10 best 2016 AV preeminent |  Jeffery Broker

Schedule a Consultation Today

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy

Shulman Bastian LLP | Full Service. Business. Lawyers.

Irvine
100 Spectrum Center Drive
Suite 600
Irvine, CA 92618

Map & Directions

Riverside
3550 Vine Street
Suite 210
Riverside, CA 92507

Map & Directions