its possession. Such has not been the case here.
Prior to adoption of Bankruptcy Rule 115(e), a debtor who successfully obtained dismissal of an involuntary petition in bankruptcy could proceed to recover damages under § 2(a)(18)
and General Order 34.
These provisions speak only in terms of costs and do not specifically authorize attorneys fees. Because it has been widely held that attorneys fees are not costs under the Bankruptcy Act, see, e.g., Berry v. Root, 148 F.2d 945 (5th Cir.), cert. denied, 326 U.S. 755, 90 L. Ed. 453, 66 S. Ct. 91 (1945); In Re Warstler, CCH Bankr. L. Rep., P 63,083 (W.D. Mich. 1969), and that attorneys fees are not ordinarily recoverable by a prevailing litigant without specific statutory authorization, Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 95 S. Ct. 1612, 44 L. Ed. 2d 141, 43 U.S.L.W. 4561 (1975); Hall v. Cole, 412 U.S. 1, 36 L. Ed. 2d 702, 93 S. Ct. 1943 (1973), an award of attorneys fees to a debtor who successfully obtained dismissal of an involuntary petition would not ordinarily be possible. See, e.g., Berry v. Root, supra; In Re Childs, 52 F. Supp. 89 (S.D.N.Y. 1943); In Re Sabul, 36 F. Supp. 95 (D. N.J. 1940); In Re Wilkes-Barre Hotel Co., 17 F. Supp. 875 (M.D. Pa. 1937); In Re Shon, 212 F. 797 (D. Mass. 1913); In Re Hines, 144 F. 142 (D. Oregon 1906); In Re Morris, 115 F. 591 (E.D. Pa. 1902); In Re Ghiglione, 93 F. 186 (S.D.N.Y. 1899).
An exception to this rule has developed in bankruptcy cases generally, to award attorneys fees if required by equitable principles, such as business libel or lack of good faith by the losing party.
In Re Boston and Providence Railroad Corp., CCH Bankr. L. Rep. [*] 65,325 (1st Cir. 1974); In Re Hunt, CCH Bankr. [*] 65,307 (5th Cir. 1974); In Re Brendan Reilly Associates, Inc., 405 F.2d 487 (2d Cir. 1968); In Re National Carbon Co., 241 F. 330 (6th Cir. 1917); In Re Carico, 308 F. Supp. 815 (E.D. Va. 1970); In Re Robinson, CCH Bankr. L. Rep. [*] 63,745 (M.D. Ga. 1970); In Re Warstler, supra; In Re Industrial Sound Engineering, Inc., 230 F. Supp. 154 (E.D. Wisc. 1964). The authority for this exception rests upon the general equity powers of the federal courts. Hall v. Cole, supra. See also, Sprague v. Ticonic National Bank, 307 U.S. 161, 83 L. Ed. 1184, 59 S. Ct. 777 (1939). In this context, the language of General Order 34 which allowed recovery of the "same costs that are allowed to a party recovering in a civil action cognizable as a case in equity" is instructive.
In the instant case there are no equitable considerations militating in favor of Eastern. The issue of solvency was a close question hotly disputed. Judge Goldhaber found that Eastern was solvent, but undercapitalized. In the district court, Judge Masterson found the problem to be novel because of the debtor's undercapitalization, but nonetheless affirmed Judge Goldhaber's finding of solvency. The Court of Appeals affirmed per curiam. Although this case seemingly lacks the vexatious attributes found in those instances where attorneys fees have been awarded, see, e.g., In Re Boston and Providence Railroad Corp., supra; In Re Hunt, supra; In Re Robinson, supra, it does not appear from the record whether this issue was before the Bankruptcy Court. Therefore, the case must be remanded for a determination in accordance with the principles set out in this opinion.
The other means of obtaining attorneys fees is under Rule 115(e).7va169,3 I concur wholeheartedly with Judge Goldhaber's analysis of the Rule and can add little to it. However, because of the paucity of decisional law concerning the Rule, it is important to emphasize a few points in light of various contentions by both appellant and appellee. As 1 Collier on Bankruptcy P 2.70, p. 377, points out, Rule 115(e) adds a "new dimension to the concept of costs." At the outset, the prevailing party is entitled to "the same costs . . . allowed to a prevailing party in a civil action." This was the extent of General Order 34 which is replaced by Rule 115(e). In addition, under Rule 115(e), the prevailing party is entitled to "counsel fees, and . . . any other sums required by the Act." The exact language of the Rule is critical. The prevailing party may recover "the same costs . . . and the counsel fees, and. . . any other sums required by the Act." Thus, the rights are cumulative. The prevailing party may recover costs and attorneys fees in the Bankruptcy Court.
Moreover, the attorneys fees may be awarded without regard to equitable considerations as formerly required by § 2(a)(18) and General Order 34 or the detention of debtor's property as required by § 69(b). As the Advisory Committee Note states, the authority to award costs and counsel fees is found in § 2(a)(18). The reference to § 69(b) in the Note is in conjunction with the last clause -- "other sums required by the Act".
The Bankruptcy Court correctly found that Eastern could not satisfy the requisites of Rule 115(e). The Rule requires the case be commenced by a petition pursuant to Rule 104(a) or 105(b), and that the petition be dismissed or withdrawn. In the instant case, the applicable rule is 104(a) -- involuntary petition. While the involuntary petition was dismissed, it was not filed pursuant to Rule 104(a). As Judge Goldhaber observed, Rule 104(a) was not effective until October 1, 1973 and the creditor's petition was filed November 10, 1971. Thus, Eastern cannot avail itself of the benefits of Rule 115(e). It is of no moment that Rule 104(a) may be either the embodiment or functional equivalent of earlier involuntary petitions. The language of Rule 115(e) is clear. The petition must be " filed pursuant to Rule 104(a) " (emphasis added), and this would have been impossible in this case. This language is equally compelling in concluding that the instant case was not "pending" within the meaning of the Order of the United States Supreme Court of April 24, 1973, which transmitted the Bankruptcy Rules. 411 U.S. 989, 991 (1973).
AND NOW, this 26th day of June, 1975, it is ORDERED that the petition for attorneys fees filed In Re Eastern Erectors, Inc., an alleged bankrupt, Bankruptcy No. 71-786, be remanded to the Referee in Bankruptcy to determine, consistent with the foregoing opinion, whether attorneys fees may be awarded in favor of Eastern Erectors, Inc. against the creditors who filed the petition for involuntary bankruptcy under § 2(a)(18) of the Bankruptcy Act, 11 U.S.C. § 11(a)(18) and General Order 34; and if so, the amount thereof.
BY THE COURT:
Donald W. VanArtsdalen / J.