In re Williams
| Decision Date | 24 September 1998 |
| Docket Number | Bankruptcy No. 96-23802,BAP No. 98-50012,Adversary No. 97-2044. |
| Citation | 224 BR 523 |
| Parties | In re Jeannine Erin WILLIAMS, Debtor. AT & T UNIVERSAL CARD SERVICES CORP., Plaintiff-Appellant, v. Jeannine Erin WILLIAMS, Defendant-Appellee. |
| Court | U.S. Bankruptcy Appellate Panel, Tenth Circuit |
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Brotmann & Freedman by Andrew K. Brotmann, White Plains, NY, for plaintiff-appellant.
Dixon & Brooks, P.C. by Donna J. Brooks, Winsted, CT, for defendant-appellee.
Before CONRAD, NINFO II, and GALLET, Bankruptcy Judges.
AT & T Universal Card Services Corp. ("AT & T") appeals1 the Bankruptcy Court's Ruling and Order awarding Jeannine Williams (the "Debtor") legal fees of $4,020.00 pursuant to § 523(d) of the Bankruptcy Code.2 We affirm.
On June 7, 1993, Debtor and her then husband, Robert Weiss ("Weiss"), accepted AT & T's unsolicited offer for pre-approved credit of $4,000. They already had several other credit cards. By November 1, 1996, when she filed her petition under chapter 7 of the Bankruptcy Code, Debtor owed AT & T $4,516.79, including accrued interest.
1996 was a bad year for the Debtor. She lost her job as a factory worker in January. In February, she and Weiss separated and she was hospitalized for one week after a failed suicide attempt. Before their separation, Weiss controlled the couple's finances.
During March, she attended an outpatient program that required her attendance Monday through Friday, from 9:00 a.m. to 3:00 p.m. As a result, she was unable to work. Her only source of income was her unemployment compensation.
On February 1 and 2, 1996, Debtor drew cash advances from AT & T of $200 and $300, respectively, for food, clothing, diapers and formula for her child. During that month, Debtor made two purchases with the AT & T credit card totaling $97.56. She also made a $25 payment.
On March 6, 1996, Debtor drew a $2,400 cash advance from AT & T. She testified at trial that she took the advance in fear that Weiss would stop paying her bills and she would "end up on the street." She stored the cash in her dresser drawer and eventually spent it on gas, food, day care and other living expenses.
Once discharged from the outpatient program, Debtor enrolled in a six-week nurse's aide training program. After obtaining her certificate, she found employment at the end of June 1996. Once employed, Debtor made payments on other credit accounts, but not to AT & T.
In late June or July 1996, Debtor learned that Weiss intended to file for bankruptcy under chapter 7. At Weiss' urging, she accompanied him to consult with an attorney. Both Debtor and Weiss testified that she did not intend to file bankruptcy, and only attended the meeting for information. The attorney's intake form corroborates this testimony. Debtor testified that she did not want to file because she "wanted to be responsible for her own bills." Debtor's July 26 letter to her lawyer repeated her desire not to file bankruptcy.
However, she acknowledged that if she were liable on Weiss' substantial debts, she would file. Debtor later learned that she was jointly liable with Weiss and filed bankruptcy on November 1, 1996.
AT & T sued to declare that Debtor's debt of $4,516.79 was non-dischargeable pursuant to § 523(a)(2)(A) of the Code as fraudulently obtained. After trial, the Bankruptcy Court entered judgment for the Debtor discharging the debt. See AT & T Universal Card Servs. v. Williams (In re Williams), 214 B.R. 433 (Bankr.D.Conn.1997). AT & T did not appeal.
Debtor, in her pre-trial brief, but not in her pleadings, requested a judgment for costs and attorneys' fees pursuant to § 523(d) of the Code. AT & T did not respond. The Bankruptcy Court did not rule on Williams' request but allowed her to move for legal fees, supported by an affidavit itemizing fees and costs, within three weeks of the discharge decision.3
On February 17, 1998, the court issued a separate "Ruling and Order" finding that AT & T was not "substantially justified" in prosecuting its suit against Debtor and awarded her $4,020 in attorneys' fees. See AT & T Universal Card Servs. v. Williams (In re Williams), 217 B.R. 387, 389 (Bankr.D.Conn. 1998). AT & T appeals the award of attorneys' fees.
The first question before us is what standard of review to apply to this appeal. AT & T did not address this question. Debtor asserted that the standard is "clearly erroneous" under Fed.R.Bankr.P. 8013 and argued that AT & T seeks a de novo review. In reply, AT & T denied that it seeks a de novo review of the Bankruptcy Court's decision, but did not address what standard of review we should employ. Rather, AT & T merely stated:
there sic mere fact that Plaintiff lost at trial does not necessarily mean that Plaintiff was not substantially justified in commencing its action to begin with. What Plaintiff is appealing is Judge Krechevsky\'s determination that Plaintiff was not at least substantially justified in commencing and maintaining this action.
The proper standard was enunciated by the Supreme Court in Pierce v. Underwood, 487 U.S. 552, 108 S.Ct. 2541, 101 L.Ed.2d 490 (1988). It reviewed the term "substantially justified" in the context of a fee award under the Equal Access to Justice Act ("EAJA") and, by a six to two vote,4 ruled that an "abuse of discretion" standard was the appropriate form of review. Id. at 557-63, 108 S.Ct. 2541. "Application of an abuse of discretion standard . . . will permit . . . needed flexibility." Id. at 562, 108 S.Ct. 2541. The Court, in sum, stated:
although as we acknowledged at the outset our resolution of this issue is not rigorously scientific, we are satisfied that the text of the statute permits, and sound judicial administration counsels, deferential review of a district court\'s decision regarding attorney\'s fees under the EAJA. In addition to furthering the goals we have described, it will implement our view that a "request for attorney\'s fees should not result in a second major litigation."
Id. at 563, 108 S.Ct. 2541. The "abuse of discretion" standard is appropriate because "some of the elements that bear upon whether the creditor's position `was substantially justified' may be known only to the bankruptcy court."5 United States v. $19,047.00 in U.S. Currency, 95 F.3d 248, 251 (2d Cir. 1996) (quoting Pierce, 487 U.S. at 560, 108 S.Ct. 2541). After Pierce, every circuit adopted the "abuse of discretion" standard for review of awards of attorneys' fees under the EAJA. See United States Dep't of Labor v. Rapid Robert's Inc., 130 F.3d 345 (8th Cir.1997); United States v. Jones, 125 F.3d 1418 (11th Cir.1997); Meinhold v. United States Dep't of Defense, 123 F.3d 1275, amended by, 131 F.3d 842 (9th Cir.1997); Masonry Masters, Inc. v. Nelson, 105 F.3d 708 (D.C.Cir.1997); Damron v. Commissioner of Soc. Sec., 104 F.3d 853 (6th Cir.1997); Reich v. Walter W. King Plumbing & Heating Contractor, Inc., 98 F.3d 147 (4th Cir. 1996); United States v. $19,047.00 in U.S. Currency, 95 F.3d 248 (2d Cir.1996); Jackson v. Chater, 94 F.3d 274 (7th Cir.1996); Squires-Allman v. Callahan, 117 F.3d 918 (5th Cir.1997); Gilbert v. Shalala, 45 F.3d 1391 (10th Cir.), cert. denied, 516 U.S. 806, 116 S.Ct. 49, 133 L.Ed.2d 14 (1995); Hanover Potato Prods., Inc., v. Shalala, 989 F.2d 123 (3d Cir.1993); Paris v. United States Dep't of Housing & Urban Dev., 988 F.2d 236 (1st Cir.1993); Neal & Co., Inc. v. United States, 121 F.3d 683 (Fed.Cir.1997).
Code § 523(d) was modeled after the EAJA. Indeed, the texts of the two statutes are similar. The relevant portion of the Equal Access to Justice Act provides:
Except as otherwise specifically provided by statute, a court shall award to a prevailing party other than the United States fees and other expenses, in addition to any costs awarded pursuant to subsection (a), incurred by that party in any civil action (other than cases sounding in tort), including proceedings for judicial review of agency action, brought by or against the United States in any court having jurisdiction of that action, unless the court finds that the position of the United States was substantially justified or that special circumstances make an unjust award.
28 U.S.C. § 2412(d)(1)(A) (West 1994 & Supp.1998) (emphasis added). The counterpart in § 523(d) provides:
If a creditor requests a determination of dischargeability of a consumer debt under section (a)(2) of this section, and such debt is discharged, the court shall grant judgment in favor of the debtor for the costs of, and a reasonable attorney\'s fee for, the proceeding if the court finds that the position of the creditor was not substantially justified, except that the court shall not award such costs and fees if special circumstances would make the award unjust.
11 U.S.C. § 523(d) (West 1993) (emphasis added).
Several courts have found that the correct review of an award of attorneys' fees under § 523(d) of the Code is to follow the EAJA and review under an "abuse of discretion" standard. See In re Hingson, 954 F.2d 428 (7th Cir.1992); AT & T Universal Card Servs. v. Duplante (In re Duplante), 215 B.R. 444 (9th Cir. BAP 1997); Evans v. Dunston (In re Dunston), 146 B.R. 269 (D.Colo.1992) (); AT & T Universal Card Servs. Corp. v. McIvor, No. Civ. 97-4734, 1997 WL 749425 (E.D.Pa. Dec. 4, 1997); AT & T Universal Card Serv. Inc. v. Kennedy (In re Kennedy), No. Civ. 94-1157, 1994 WL 721508 (D.Kan. Dec. 27, 1994).
We note that some courts have applied different standards of review to § 523(d). See American Express Travel Related Servs. Co., Inc. v. Baker, 213 B.R. 834, 836 (N.D.Ill. 1997) (...
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