State of Montana Department of v. Gregory B. Duncan

The Montana Department of Revenue (MDOR) appeals the district court’s order affirming the bankruptcy court’s denial of MDOR’s application for $13,447.50 in attorneys’ fees. The fees were sought by Lynn Butler, a private attorney hired by MDOR. We will not “disturb a bankruptcy court’s award of attorneys’ fees unless the bankruptcy court abused its discretion or erroneously applied the law.” In re Kord Enterprises II, 139 F.3d 684, 686 (9th Cir.1998). We affirm.

MDOR’s primary argument is that the bankruptcy court erroneously applied the law by creating a per se rule that oversecured creditors with unchallenged claims are never entitled to attorneys’ fees under 11 U.S.C. § 506 (b) because such fees are inherently unreasonable. We, like the district court, do not read the bankruptcy court’s decision to create such a per se rule. Although the bankruptcy court relied in part on the fact that MDOR’s claims were unsecured and unchallenged, it also relied on the facts that MDOR had three salaried attorneys working on the case, including a bankruptcy specialist, and that Butler’s work did not change the outcome of the case.

Although the bankruptcy court did describe Butler’s fees as…