Travelers Casualty & Surety Co. v. Pacific Gas & Electric Co.
Issues
Can a litigant recover attorney fees pursuant to a private contract when the issues litigated involve matter exclusively governed by federal bankruptcy law?
Travelers Casualty & Surety Company of America (“Travelers”) is appealing a Ninth Circuit decision denying it attorney fees for claims governed entirely by federal bankruptcy law. Travelers maintains that it is entitled to the indemnity rights it negotiated for under its private contract with Pacific Gas and Electric (“Pacific Gas”). Travelers relies on precedent to conclude that the substantive rights under a private contract are governed by state law and therefore the Ninth Circuit decision is wrongly decided and should be reversed. Pacific Gas argues that the Ninth Circuit correctly concluded in prior cases that attorneys’ fees pursuant to a private contract may be granted in cases where the rights are governed by state law, but not when they are peculiar to federal bankruptcy law. The Ninth Circuit reasoned that state law cannot govern federal issues such as indemnity of attorney fees for claims resulting from objections to debt restructuring plans and disclosure statements implemented by a company under Chapter 11 bankruptcy. The Ninth Circuit is concerned that a decision in support of non-prevailing creditors whose conditional rights have not been triggered or impaired in cases where the debtor has not defaulted in bankruptcy cases would flood the court dockets with these premature claims. The Supreme Court decision will resolve whether private parties can contract for rights which have not been explicitly granted by federal bankruptcy law. The decision will impact the legal protective strategies that creditors use to shield their investments from debtors who have filed for bankruptcy.
Questions as Framed for the Court by the Parties
Whether a litigant may recover attorneys’ fees under a contract or state statute where the issues litigated involve matters of federal bankruptcy law?
This matter arises out of a Chapter 11 bankruptcy case initiated by Pacific Gas & Electric Company (“Pacific Gas”), Respondent. Before Respondent commenced its bankruptcy case, Travelers Casualty & Surety Company (“Travelers”), Petitioner, issued surety bonds to various third parties on Pacific Gas’s behalf. One of these bonds was a $100 million surety bond issued to the California Department of Industrial Relations. This bond guarantees Pacific Gas’ payment of state workers compensation benefits to injured employees.
Additional Resources
Law about... Bankruptcy