UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF ALASKA

Two objections were filed to the Clerk's Decision On Cost Bill (Docket Entry 90, filed January 29, 1996).

The Stengas objected for the purpose for reserving the right to recover costs should they be awarded by an appellate court. The Clerk did not purport to rule on this and therefore, as a "comfort order," the objection will be granted.

4M 2B objected on the grounds that costs were not allowed under the ruling in In re Fobian, 921 F2d 1149, 1153 (9th Cir 1991). In In re Fobian, the court considered both costs and attorney fees at the bankruptcy court level, and costs on appeal. It awarded costs on appeal because FRBP 8014 provided that they shall be taxed against the losing party on appeal, with several exceptions.

In its discussion on attorney fees and costs at the bankruptcy court level, the court's ruling, in its entirety, was:

B. Attorneys' Fees at all levels; Costs in the Bankruptcy Court

[2] Where a contract or statute provides for an award of attorneys' fees, a creditor may be entitled to such fees in bankruptcy proceedings. Such an award is governed by state       4 ABR 261  law. Collingwood Grain, Inc. v. Coast Trading Co. (In re Coast Trading Co.), 744 F.2d 686, 693 (9th Cir.1984); Merced Production Credit Ass'n v. Sparkman (In re Sparkman), 703 F.2d 1097, 1099 (9th Cir.1983).

However, where the litigated issues involve not basic contract enforcement questions, but issues peculiar to federal bankruptcy law, attorney's fees will not be awarded absent bad faith or harassment by the losing party. Coast Trading, 744 F.2d at 693 (refusing to award fees where creditor brought a nondischargeability action); Grove v. Fulwiler (In re Fulwiler), 624 F.2d 908, 910 (9th Cir.1980) (refusing to award fees for creditor's action under Section 546); see also Johnson v. Righetti (In re Johnson), 756 F.2d 738, 741-42 (9th Cir.1985) (because creditor's request for relief from the automatic stay pursuant to Section 362(d) was not an "action on the contract," debtor was not entitled to attorneys' fees for defense against the request).

Here, litigation involved solely issues of federal bankruptcy law: the Bank sought proper application of Sections 506 and 1225. This was not a traditional "action on the contract." "[T]he question of the applicability of the bankruptcy laws to particular contracts is not a question of the enforceability of a contract but rather involves a unique, separate area of federal law." Coast Trading, 744 F.2d at 693. Thus, we decline to award the Bank attorneys' fees for its litigation of this case at all levels, and limit the award of costs to costs incurred on appeal.

Although in the last phrase the appellate court denied costs at the bankruptcy court level, it gave no reason for doing so. All the discussion in the quote applies only to attorney fees as opposed to run-of-the-mill costs, such as a filing fee, subpoena fees, etc. I decline to treat this afterthought as a holding regarding the ability to assess costs in a bankruptcy court trial.

An additional reason for allowing costs is that the rules specially allow for costs and all federal courts have upheld the allowance of costs if cases involving federal issues under FRCivP 54(d) [the pre-December, 1993 version] routinely. See Wright, Miller & Kane, Federal Practice and Procedure: Civil 2nd § 2665 et seq.

The panel in Fobian acknowledged that the Federal Rules of Bankruptcy Procedure can provide for costs when it allowed for appellate costs. FRBP 8014. It did not discuss the fact that FRBP 7054(b)the also provides for costs at the trial level. FRBP 7054(b) provides "[t]he court may allow costs to the prevailing party except when a Statute of       4 ABR 262  the United States or these Rules otherwise provide." It is difficult to see how the panel could allow costs under one rule, but hold that costs were not allowed under another. In fact, the Fobian panel never discussed FRCivP 7054(b).

The version of FRCivP 54(d) before the amendment in December, 1993, was essentially the same as FRBP 7054, except for some minor difference in syntax. In other cases, the 9th Circuit has noted the distinction in the award of attorney fees (a special kind of costs) and other costs allowable under FRCivP 54(d). See e.g. Metcalf v Borba, 681 F2d 1183, 1185-88 (9th Cir 1982) (a civil rights case). The run-of-the-mill costs are treated by a cost bill filed with the clerk. A judge usually rules on the allowance of attorney fees. Thus, to the extent Fobian is a holding, it is in conflict with other 9th Circuit holdings, and I choose to follow the more rational cases which allow the award of regular costs at the discretion of the court.

The 1993 amendment alleviated many problems relating to the allowance of attorney fees by specifically providing a procedure for them and other nontaxable costs in FRCivP 54(d)(2). The amendment was not carried over to the Federal Rules of Bankruptcy Procedure, however. Nonetheless, the amendment and the advisory notes do acknowledge the distinction between ordinary costs and attorney fees. It is well recognized. See also Wright, Miller & Kane, Federal Practice and Procedure: Civil 2nd §§ 2675, 2675.1.

Therefore, IT IS ORDERED that,

1. OBJECTION BY THE STENGAS- The objection by the Stengas is GRANTED since the Clerk of the Bankruptcy Court never intended to bar costs which might be awarded at the appellate level.

2. OBJECTION BY 4M 2B- The objection by 4M 2B is OVERRULED.

DATED: February 27, 1996

HERBERT A. ROSS
U.S. Bankruptcy Judge