Hawkeye: The High Price of Litigating Contract-Based Disputes Before Bankruptcy Court

Bankruptcy, Restructuring and Creditors' Rights attorneys Lynne Xerras and Kathleen St. John co-authored an article analyzing a recent case in which a California bankruptcy court considered whether to award attorneys' fees to a debtor as the "prevailing party" in a contested matter. Under a principle known as the "American Rule," each party in litigation bears the cost of hiring legal counsel, but if the dispute is related to a contract, the prevailing party may be entitled to recover attorneys' fees from the "losing party" if specified in the contract or if a statute allows for fee-shifting. In the case In re Hawkeye Entertainment LLC, the U.S. Bankruptcy Court for the Central District of California determined that the contract in question — a lease — obligated the losing party to reimburse the prevailing party for attorneys' fees in an action or proceeding related to the lease and that California law allowed for such fee allocation. In this article, the authors summarize the case, explaining that it highlights the need for parties to bankruptcy proceedings involving contract disputes to calculate the risk of "losing" when fee-shifting provisions are in place. The article was published in the American Bankruptcy Institute Journal.

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