Plaintiff Entitled To Appeal Fee Award Despite Bankruptcy Court Plan Confirmation

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In Edwards v. Broadwater Casitas Care Center, 2013 DJDAR 15911 (2013), the California Court of Appeal for the Second Appellate District decided an interesting case involving the interplay of a petition for attorney fees rendered in state court and the U.S. Bankruptcy Code.

Broadwater Casitas Care Center LLC (Broadwater) won a case following an arbitration. The state court affirmed the arbitrator’s award, and further held that Broadwater was entitled to $20,000 in costs and approximately $150,000 in attorney fees. The plaintiff then filed a Chapter 13 bankruptcy petition. The bankruptcy petition “scheduled” the cost award, but omitted the fee claim.

In the bankruptcy, Broadwater asserted claims to both the cost and fee awards. The plaintiff did not initially argue against the merits of those claims. Subsequently, the plaintiff filed an appeal in the state court, regarding both the cost and fee awards.

The bankruptcy court then confirmed a repayment plan. The plan required the plaintiff to pay a percentage of both awards.  Broadwater moved to strike the plaintiff’s appeal as moot. Broadwater argued that the bankruptcy court’s order precluded any further challenge of the judgment.

The court of appeal concluded that the confirmation of a Chapter 13 bankruptcy plan will only preclude a litigant from subsequently raising an issue under very specific circumstances. The court of appeal stated that the bankruptcy court did not have to decide whether the lower court had the authority to impose costs and attorney fees, thus the plaintiff was allowed to subsequently challenge the trial court’s awards. The reasoning for a subsequent challenge is somewhat murky and the holding of this case is perhaps best limited to these specific facts.