Travelers Casualty v. Pacific Gas & Electric Co.
Travelers Casualty sued Pacific Gas & Electric Company (PG&E) to recover the attorneys' fees it incurred when litigating to protect certain surety bonds and indemnity agreements during PG&E's chapter 11 bankruptcy proceedings. Travelers had issued surety bonds to PG&E before it commenced bankruptcy proceeding, and PG&E had executed a series of indemnity agreements in favor of Travelers in connection with the bonds. The indemnity agreements provide that PG&E was responsible for Travelers' attorneys' fees incurred in litigating its rights in connection with the indemnity agreements or the bonds. During PG&E's bankruptcy case, Travelers incurred attorneys' fees in the course of asserting its rights regarding the bonds. The bankruptcy court and federal district court denied Travelers' suit for attorneys' fees, noting that the fees were incurred in the course of litigating questions of federal bankruptcy law, which does not allow for the collection of attorneys' fees.
The Ninth Circuit Court of Appeals affirmed. According to a prior decision, Fobian v. Western Farm Credit Bank, parties can contractually allocate between them the burden of attorneys' fees incurred in litigating state law issues, but they cannot do so with respect to litigating federal issues unless federal law specifically authorizes the allocation. In this case, where only federal bankruptcy issues were involved, the federal bankruptcy statute does not allow for recovery of attorneys' fees.
Question Presented:
Petitioner and Respondent entered into a contract that included a provision that Petitioner is entitled to recover its attorneys’ fees incurred in connection with the enforcement, protection, or litigation of its contractual and legal rights. Petitioner incurred attorneys’ fees litigating its rights during the course of Respondent’s bankruptcy case and sought to recover them from Respondent. Adhering to its prior decision in Fobian v. Western Farm Credit Bank (In re Fobian), 951 F.2d 1149 (9th Cir. 1991), the Ninth Circuit held that Petitioner could not recover its attorneys’ fees because the relevant litigation in the bankruptcy court involved issues of federal bankruptcy law. The court reasoned that, as a matter of general federal common law, a party may not recover its attorneys’ fees pursuant to a contract or state statute where the issues litigated involve matters of federal law because only federal law may authorize such a recovery. The question presented is:
Should the Court grant certiorari to resolve a conflict among nine courts of appeals concerning whether a litigant may recover attorneys' fees under a contract or state statute where the issues litigated involve matters of federal bankruptcy law?
