Galam

Michael A. Galam appeals the district court’s order which affirmed the bankruptcy court’s order awarding attorneys’ fees against him. The award was in favor of N.D. Duco Corporation, Larry Jarnigan and Linda Jarnigan (collectively NDDC) and Michael W. Carmel, trustee for the bankruptcy estate of Larry’s Apartment, L.L.C. (the Debtor). Galam asserts that the award was improperly granted pursuant to fee statutes of the State of Arizona regarding sanctions and contract claims. We agree and we reverse.

BACKGROUND

The Debtor operated a topless bar known as “The Jungle Cabaret” in Phoenix, Arizona. Michael T. Taraska, an attorney, was the major shareholder of the Debtor, and acted as its counsel. Throughout its operation, the Debtor leased a parking lot immediately to the west of The Jungle Cabaret, which it deemed to be necessary for the proper operation of the bar. The original lease was dated March 3, 1993, and was amended September 23, 1993. The lessor was the Abner E. England Trust. The September lease was for a term of five years with a five-year-renewal option. It provided that the lot was exclusively for the use of the bar. In December of 1993, the Debtor filed for bankruptcy.…