Memorandum of Decision Re: Attorneys' Fees

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re FLOWIND CORPORATION,                                                                        No. 97-12265      Debtor(s). ______________________________________/ WINDKRAFT, INC.,      Plaintiff(s),    v.                                                                                                                    A.P. No. 98-1091 FLOWIND CORPORATION, et al.,      Defendant(s). _______________________________________/
Memorandum re Attorneys' Fees
     Prior to bankruptcy, debtor FloWind had sold all of its wind rights in certain property owned by the federal government to plaintiff Windkraft. Even though Windkraft paid the purchase price in full, when FloWind filed its Chapter 11 petition it scheduled the rights as its assets. Windkraft had disappeared after building a few test windmills, and FloWind thought it that because it was still the owner according to government records it could re-assert ownership even though it had been paid in full.      FloWind's scheme was foiled when Windkraft appeared in time to object to the plan. Windkraft also filed an adversary proceeding seeking to establish that the wind rights belonged to it, and not FloWind.      FloWind's plan called for the sale of the disputed wind rights to defendant WindCo . They were both in a hurry to consummate the sale. When the court announced that it would not confirm the plan until the ownership issue was resolved, the parties entered into an interim compromise. Under the terms of the compromise, Windkraft would withdraw its objection and allow the plan to be confirmed. In return, the plan was amended to provide that WindCo could elect to go forward with the purchase, stepping into FloWind's shoes and being subject to all of Windkraft's claims to the property to the same extent as FloWind.      After trial, the court ruled in favor of Windkraft. It found that FloWind's assertion of ownership of the wind rights after Windkraft had paid in full for those rights was nothing less than attempted larceny. Windkraft's motion for attorneys' fees is now before the court.      At the trial of this matter, WindCo's principal defense was that the contract did not really mean what it said, and that something less than the full rights described in the contract were actually purchased by Windkraft. The contract between FloWind and Windkraft was therefore central to the adversary proceeding. The contract provided:        If any Party brings any action or proceeding for the enforcement,        protection or establishment of any right or remedy under this Agreement        or for the interpretation of this Agreement, the prevailing Party shall be        entitled to recover its reasonable attorneys' fees and costs in connection        with such action or proceeding, whether or not taxable.      Whether Windkraft is entitled to its attorneys' fees depends on the exact nature of the compromise. If WindCo only was to take the property subject to Windkraft's claims, then it is not liable for attorneys' fees because it was not a party to the contract between FloWind and Windkraft. However, if WindCo became FloWind's successor under the contract, then it is treated the same as FloWind and has the same liabilities under the contract. Since the compromise was incorporated into the plan, the court must construe the plan. Its relevant language provides:        If a final judgment in the Windkraft Adversary Proceeding has not been        rendered prior to the Effective Date, and WindCo elects to implement the        Plan with respect to the assets that are the subject of the Windkraft        Adversary Proceeding, then as of the Effective Date, WindCo shall        succeed to the Debtor's position in the Windkraft Adversary Proceeding        and WindCo and Windkraft shall be bound by and comply with the        terms of any final judgment rendered therein and such final judgment        shall be enforceable against Windkraft and WindCo.      The affirmative language "succeed to the Debtor's position" makes it clear that if WindCo elected to proceed it would be doing more than just taking the property subject to Windkraft's claims. In return for Windkraft's consent to the plan, it was agreed that WindCo, if it elected to proceed, would be bound by any judgment in the adversary proceeding. There is no exclusion of attorneys' fees.      WindCo points out correctly that if FloWind had continued to defend the adversary proceeding as debtor in possession, then Windkraft's claim for attorneys' fees, while allowable, would not be entitled to priority status. However, there is no relevance to this point of law. If FloWind is liable for Windkraft's attorneys' fees, then under the plan WindCo is equally liable. The fact that FloWind would not have paid the award until after its priority creditors were paid does not give WindCo some sort of defense. Pursuant to the plan, the judgment in this case is enforceable against WindCo. If the judgment includes attorneys' fees, the award is enforceable against WindCo regardless of priority issues in the FloWind bankruptcy.      The amount of the award is the easiest part of this dispute to resolve. The amount is entirely reasonable, especially considering the litigation tactics employed by WindCo. Most notably, during the case WindCo filed an enormous (and utterly meritless) motion for summary judgment along with briefs of almost 75 pages. WindCo circumvented this district's 25 page limit on briefs by breaking the motion up into three "partial" motions. The court summarily denied the motion on account of these procedural machinations, but not before Windkraft had been subjected to considerable expense. This sort of conduct has been, and continues to be, the typical approach of WindCo to this litigation: there is no issue so simple that it cannot be made complex, convoluted, and expensive through voluminous motions, briefs, and argument. Having made the litigation far more expensive than it ever needed to be, WindCo cannot complain when confronted with a large claim for fees. WindCo's liability for these fees is nothing more complicated than simple justice.      For the foregoing reasons, Windkraft's motion for attorneys' fees will be granted, in full. Counsel for Windkraft shall submit an appropriate form of order.
Dated: August 5, 1999                                                                        ____________________________                                                                                                             Alan Jaroslovsky                                                                                                             United States Bankruptcy