In re Chamberlain, Bankr. Case No. 15-22234 TBM; Order entered August 4, 2016 (attorney’s fees award to prevailing party in contested matter under Fed. R. Bankr. P. 9014 and 7054 and Fed. R. Civ. P. 54 and order of payment to priority claimholders under 11 U.S.C. §§ 507, 1322, and 1326)
In this Chapter 13 case, the court held a trial in which it ruled on a contested proof of claim filed by the Debtor’s ex-wife (the “Creditor”), ordering that her proof of claim be allowed in a reduced amount as a “domestic support obligation” (“DSO”) under 11 U.S.C. § 101(14A) and entitled to priority under 11 U.S.C. § 507(a)(1)(A). Following the ruling, the Creditor did not seek an award of fees or costs pursuant to Fed. R. Bankr. P. 7054 and Fed. R. Civ. P. 54. Instead, well after the Fed. R. Civ. P. 54 deadline had expired, the Creditor amended her proof of claim unilaterally to include a claim for attorney’s fees incurred in the bankruptcy proceeding. She also objected to the amended Chapter 13 plan filed by the Debtor, which provided for payment of her DSO in the amount allowed by the Court’s ruling, but did not provide for payment of the amounts now claimed by the Creditor in her amended proof of claim. The Creditor also objected that the Debtor’s Third Plan did not comply with Sections 507(a)(1)(A) and 1322(a)(2) because it provided for the payment of the Debtor’s Class One attorney’s fees prior to paying in full the Class One DSO owed to the Creditor.
The Court held that the Debtor’s objection to the amount and priority of the Creditor’s proof of claim, which was also a dispute regarding the priority of the Creditor’s claim, was a “contested matter” under Fed. R. Bankr. P. 9014. The Court also held its ruling on the contested matter had ended the litigation on the merits. Because Rule 7054 governed the Creditor’s rights to recover fees and costs incurred in the bankruptcy case, and because the Creditor failed to seek an award of fees and costs within the time limits in that Rule and in Fed. R. Civ. P. 54(d) the Creditor waived her right to request fees and costs in this case. Accordingly, the Court sustained the Debtor’s objection to the Creditor’s amended proof of claim and overruled the Creditor’s objection that the plan did not provide for payment in full of her claim.
The Court also rejected the Creditor’s contention that the Debtor’s amended Chapter 13 Plan could not be confirmed because it provided for payment of the Debtor’s attorney’s fees and costs prior to payment of the Creditor’s DSO claim. Though Section 507 provides first-priority status to claims for DSOs, it is a statute of general application that in Chapter 13 is more specifically modified by Sections 1322(a)(2) and 1326(b)(1). Under Section 1322(a)(2), the plan is required to provide for the “full payment, in deferred cash payments, of all claims entitled to priority under section 507” but does not require that claims entitled to priority under Section 507 be paid in the order listed in Section 507. And under Section 1326(b)(1), unpaid claims of the kind specified in Section 507(a)(2) – that is, claims for administrative costs, including attorney’s fees – must be paid ahead of, or at least concurrently with, other priority claims. Accordingly, the Court overruled the Creditor’s objection.