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The Essential Resource for Today’s Busy Insolvency Professional
Last in Line
By Mark L. DesgrosseiLLiers anD JuLie B. PaPe
NHL Scores Big on Attorneys’
Fees Against Nondebtors
Last fall, the National Hockey League (NHL)
enjoyed a big off-ice victory when the U.S.
District Court for the District of Arizona
found that it was entitled to recover from Jerry
and Vickie Moyes and the Jerry and Vickie Moyes
Family Trust (collectively, the “Moyes defendants”)
signicant attorneys’ fees and expenses (up to $15
million) incurred by the NHL in connection with the
bankruptcy cases of several corporate entities that
the Moyes defendants controlled and that comprised
the Phoenix Coyotes hockey franchise.1 Specically,
the court held that the NHL’s claims for indemni-
cation (including attorneys’ fees and expenses),
based on a consent agreement and a separate guar-
anty into which the NHL and the Moyes defendants
had entered in connection with the Moyes defen-
dants’ original acquisition of the Phoenix Coyotes,
were not pre-empted by the Bankruptcy Code and
federal bankruptcy law, and were therefore enforce-
able against the Moyes defendants. This article
examines the recent NHL v. Moyes decision in the
context of current law addressing the ability of
unsecured creditors to recover claims for attorneys’
fees and expenses incurred after and in connection
with a bankruptcy ling from a debtor, or, as was
the case for the NHL in the Coyotes dispute, against
nondebtor parties.
Enforceability of Attorneys’ Fees
Provisions in Bankruptcy Cases
Section 365 (e) (1) of the Bankruptcy Code gen-
erally provides that contractual clauses purporting to
terminate or modify the contract based on a bank-
ruptcy filing are not enforceable. In line with the
prohibition of these ipso facto clauses, bankruptcy
courts have refused to enforce, among other things,
contractual provisions that would prohibit a debtor
from ling a bankruptcy case.2 A contractual pro-
vision does not need to expressly prohibit a bank-
ruptcy filing to be invalid; it may be enough that
the substance or practical result of the provision is
to waive a benefit afforded to a debtor under the
Bankruptcy Code.3 Some courts have found such
clauses unenforceable, even against nondebtor third
parties such as guarantors.4
In 2007, in Travelers Casualty & Surety Co. of
America v. Pacific Gas & Electric Co.,5 the U.S.
Supreme Court held that contract-based claims for
attorneys’ fees are not disallowed solely because
the fees at issue were incurred litigating issues of
bankruptcy law.6 In Travelers, the lower court had
found that the attorneys’ fees were not recoverable
because they were incurred while litigating issues
that were “peculiar to” or “governed entirely” by
federal bankruptcy law.7 The Supreme Court found
that there were no Code provisions addressing unse-
cured claims for contractual attorneys’ fees incurred
while litigating issues of bankruptcy law.
Accordingly, based on the permissive scope
of § 502 (b) (1) and upon its prior recognition that
“[t] he character of [a contractual] obligation to pay
attorney [s’] fees presents no obstacle to enforcing
it in bankruptcy,” the idea that attorneys’ fees can-
not be recovered where they were incurred in liti-
Julie B. Pape
Womble Carlyle
Sandridge & Rice, LLP
Winston-Salem, N.C.
1 National Hockey League v. Moyes, Case No. CV-10-01036, slip op., 2015 WL 7008213
(D. Ariz. Nov. 12, 2015).
Mark Desgrosseilliers
is a partner in the
Capital Markets
Group of Womble
Carlyle Sandridge
& Rice, LLP in
Wilmington, Del.
Julie Pape is Of
Counsel in the
Capital Markets
Group in the rm’s
Winston-Salem,
N.C., ofce.
case law for well-accepted presumption that an agreement whereby a debtor agrees to
forgo bankruptcy protection violates public policy and is unenforceable).
attempt by a creditor in a private prebankruptcy agreement to opt out of the collec-
tive consequences of a debtor’s future bankruptcy filing is generally” unenforceable
because “Bankruptcy Code pre-empts the private right to contract around its essen-
tial provisions”).
claim against nondebtor party was pre-empted because claim “that could have been
made, and for which a remedy is provided, under the Bankruptcy Code cannot be the
subject of regulation by state statutory or common-law remedies”).
5 549 U.S. 443 (2007).
6 Id. at 449-54.
7 Travelers Cas. & Surety Co. of Am. v. Pac. Gas & Elec. Co., 167 Fed. App’x. 593, 594 (9th
Cir. 2006).
Mark L.
Desgrosseilliers
Womble Carlyle
Sandridge & Rice, LLP
Wilmington, Del.
