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Attorneys' Fees Preserved In Bankruptcy Cases

By John H. Bae and Philip John Nichols
June 27, 2007

Until recently, courts were split over whether parties may recover attorneys' fees for litigation in a bankruptcy case under applicable non-bankruptcy law. Some courts allowed such fees, but the Court of Appeals for the Ninth Circuit and certain other courts followed the so-called 'Fobian rule,' which disallowed postpetition attorneys' fees that were incurred while litigating issues of federal bankruptcy law, irrespective of the party's rights under state law or governing contracts. The Supreme Court in Travelers Casualty & Surety Co. v. Pacific Gas & Electric Co. (In re Pacific Gas & Electric Co.), 549 U.S. ____, 127 S. Ct. 1199 (2007) abrogated the Fobian rule and ruled that postpetition attorneys' fees are recoverable to the full extent of applicable non-bankruptcy law.

This article discusses the development of the Fobian rule and other courts' treatment of it. The article also summarizes the Supreme Court's reasoning in abrogating the Fobian rule in Travelers.

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