- Case Type:
- Case Status:
- BAP No. NV-21-1115-GTF (9th Circuit, Jan 11,2022) Published
- The Ninth Circuit Bankruptcy Appellate Panel reversed the bankruptcy court's decision to award attorneys' fees to the debtor under Nevada state law based on debtor's successful objection to a creditor's time-barred claims. The BAP held that the Nevada statute at issue was procedural in nature such that federal bankruptcy law preempted the statute. The BAP also held that filing the claims was not "groundless" conduct under the state statute because claims that are time-barred are still "claims" that may be filed and the statute of limitations is an affirmative defense that must be asserted.
- Procedural context:
- The debtor filed objections to three claims on the basis that they were not enforceable under state law based on the statute of limitations. The bankruptcy court sustained the objections and awarded debtor attorneys' fees under NRS § 18.010(2)(b). The creditor did not appeal the disallowance of its claims and appealed only the award of attorneys' fees. The Ninth Circuit Bankruptcy Appellate Panel reversed the bankruptcy court's award of fees.
- The debtor initially filed a chapter 7 bankruptcy and subsequently converted to chapter 13 in February 2018. The creditor filed three proofs of claim based on accounts that had been charged off by 2004 and and the latest transaction dates were in 2006. The chapter 13 trustee did not file objections to the claims but the debtor did. The bankruptcy court sustained the objections because the claims were filed several years after the expiration of applicable statutes of limitation. The bankruptcy court awarded attorneys' fees of $3,732 to debtor based on NRS § 18.010(2)(b). That statute provides for the award of attorneys' fees to the prevailing party "[w]ithout regard to the recovery sought, when the court finds that the claim, counterclaim, cross-claim or third-party complaint or defense of the opposing party was brought or maintained without reasonable ground or to harass the prevailing party." The BAP distinguished this subsection as procedural as compared to NRS § 18.010(2)(a), provides for an award of fees to the prevailing party that does not recover more than $20,000, which is substantive. Because NRS § 18.010(2)(b) is procedural in nature, it is preempted in federal court, including bankruptcy court.
- GAN, TAYLOR, and FARIS
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