Unreported / Non-Citable
Background
Wolverine Endeavors VIII, LLC filed an involuntary bankruptcy petition against Carole D. King. The bankruptcy court dismissed the petition, and Wolverine appealed to the Ninth Circuit Bankruptcy Appellate Panel (BAP), which affirmed the dismissal. King then moved before the BAP for appellate attorneys' fees incurred in defending that appeal. The BAP denied the motion, and King appealed that denial to the Ninth Circuit. During the pendency of the appeal, Carole King died, and John E. King, as Administrator of her Estate, was substituted as appellant.
The Ninth Circuit first addressed Wolverine's motion to dismiss the appeal for alleged defects in the notice of appeal. Wolverine argued King's counsel lacked authorization to file the notice, citing two California Court of Appeal cases, Zirbes v. Stratton and Corcoran v. Arouh. The court found those cases inapposite because they involved uncontradicted evidence of unauthorized representation, which was absent here. The court denied the motion to dismiss and also denied King's request for sanctions against Wolverine's counsel.
The Court’s Holding
The court reviewed the BAP's decision de novo and reaffirmed its holding in Higgins v. Vortex Fishing Systems, Inc., 379 F.3d 701 (9th Cir. 2004), that Federal Rule of Appellate Procedure 38 is the only authority for awarding discretionary appellate attorneys' fees in bankruptcy appeals. The Higgins court explicitly stated that a debtor must demonstrate the appeal was frivolous under Rule 38 to recover appellate fees, notwithstanding Congress's intent to award fees for successfully defending an involuntary petition at the trial level.
Because King's opening brief affirmatively stated she was "not seeking appellate-level fees on the grounds that Wolverine's appeal was frivolous" under Rule 38, the court held she had waived any claim to fees under that rule. With no other statutory or rule-based authority available, the court affirmed the BAP's denial of appellate attorneys' fees. The court also denied King's Motion for Judicial Notice and Motion for Leave to Address an Issue Not Discussed in Reply Brief.
Key Takeaways
- Federal Rule of Appellate Procedure 38 is the exclusive vehicle for recovering appellate attorneys' fees in bankruptcy appeals in the Ninth Circuit.
- A debtor who successfully defends an involuntary bankruptcy petition at the trial level is not automatically entitled to appellate fees; they must prove the appeal was frivolous under Rule 38.
- An express statement in an opening brief disclaiming a frivolousness argument constitutes a waiver of the right to seek appellate fees under Rule 38.
- Challenges to the authorization of counsel to file a notice of appeal require uncontradicted evidence of lack of authority; mere allegations are insufficient to warrant dismissal.
- The court will not impose sanctions under 28 U.S.C. § 1927 or inherent authority absent a demonstration of bad faith by opposing counsel.
Why It Matters
This decision reinforces the strict procedural gatekeeping of appellate fee awards in bankruptcy cases within the Ninth Circuit. By adhering to Higgins, the court maintains a high bar for debtors seeking to shift appellate costs, effectively limiting fee recovery to cases where the appeal is objectively frivolous. The ruling clarifies that statutory fee-shifting provisions applicable to the underlying involuntary bankruptcy proceeding do not extend to the appellate stage, leaving Rule 38 as the sole remedy. Practitioners must carefully preserve frivolousness arguments in opening briefs to avoid waiver.