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Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 

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PUBLISH 

UNITED STATES COURT OF APPEALS 

TENTH CIRCUIT 

In re: MERIDIAN RESERVE, INC., 

Debtor. 

) 

) 

) 

) 

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OCTAGON RESOURCES, INC., successor ) 

in interest by merger to Octagon Gas ) 

Systems, Inc., ) 

Appellant, 

v. 

BONNETT RESOURCES 

CORPORATION, 

Appellee, 

ROY T. RIMMER, 

Intervenor-Appellee. 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

) 

No. 95-6239 

FILED 

lJDbed States Court of Appeals Teath Circuit 

JUN 1 8 1996 

PATRICK FISHER 

Clerk 

APPEAL FROM THE UNITED STATES DISTRICT COURT 

FOR THE WESTERN DISTRICT OF OKLAHOMA 

(D.C. No. CIV-95-506-W) 

D. Kent Meyers (Harvey D. Ellis, Jr., with him on the briefs), Crowe & Dunlevy, 

Oklahoma City, Oklahoma, for Appellant. 

Appellate Case: 95-6239 Document: 01019279358 Date Filed: 06/18/1996 Page: 1 
Kenneth L. Jones, Jr., Jones & Blaney, Oklahoma City, Oklahoma, for Appellee. 

Robert S. Ballentine (H. Rey Stroube ill, Charles A Moore, and Betty C. Bradley, Akin, 

Gump, Strauss, Hauer & Feld with him on the briefs), Houston, Texas, for IntervenorAppellee. 

Before PORFILIO, BRORBY, and EBEL, Circuit Judges. 

PORFILIO, Circuit Judge. 

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This appeal represents the second time an aspect of this bankruptcy case has been 

before us. The present controversy concerns an attempt by Octagon Resources Inc., as 

the prevailing party, as defined by Okla Stat. Ann. tit. 12, § 936 (West 1996), to gain its 

attorney fees from Roy T. Rimmer and Bonnet Resources Corporation. The bankruptcy 

court denied Octagon's motion, and the district court affirmed Octagon now appeals. 

We affirm. 

An understanding of the basic facts of the substantive controversy between the 

parties is necessary to resolving this appeal. Poll Gas, Inc. (not a party here) owned and 

operated a natural gas gathering system. After a series of complicated transactions, Mr. 

Rimmer received, "a full Five Percent (5%) perpetual overriding royalty interest on all 

proceeds payable to [Poll] under the [system] .... " Octagon Gas Sys., Inc. v. Rimmer, 

995 F.2d 948, 952 (lOth Cir.), cert. denied, 114 S.Ct. 554 (1993) (alterations in original) 

(Rimmer /). Poll Gas, Inc. filed for Chapter 11 bankruptcy protection in 1988, and in 

January 1990, the bankruptcy court approved the trustee's reorganization plan. Pursuant 

to the plan, Poll's natural gas gathering system was conveyed to Norwest Bank 

Minnesota to satisfy the Bank's secured claim. Norwest received the Poll system "free 

and clear of liens, claims, interests, and encumbrances," id, and conveyed the system to 

Octagon who refused to recognize Mr. Rimmer's interest in the system or pay him any 

royalties. As a result, Bonnett Resources, a secured creditor of Mr. Rimmer asserting a 

claim in Mr. Rimmer's interest in the Poll system, filed a declaratory judgment action in 

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the bankruptcy court to determine Mr. Rimmer's interest. Mr. Rimmer intervened. The 

bankruptcy court held Mr. Rimmer maintained his five percent interest in the proceeds of 

natural gas sold through the Poll system unaffected by the reorganization plan or the 

transfer to Octagon Resources. Id 

On appeal, we reversed that judgment. First, applying Oklahoma law, we 

concluded Mr. Rimmer had an enforceable interest in the Poll system natural gas sale 

proceeds by virtue of the various agreements. ld at 952-54. Second, we determined Mr. 

Rimmer's interest was an "account" within the meaning of Article 9 of the Uniform 

Commercial Code as adopted by Oklahoma. ld at 954-55; see generally Okla. Stat. Ann. 

tit. 12A, § 9-101 (West 1996) (codifying Article 9 of the U.C.C.). Pursuant to Article 9, 

"the buyer of an account is treated as a secured party, his interest in the account is treated 

as a security interest, the seller of the account is a debtor, and the account sold is treated 

as collateral." Rimmer I, 995 F.2d at 955. Third, we decided Poll's Chapter 11 

reorganization plan did not alter the application of Article 9 to Mr. Rimmer's account. 

ld. at 955-57. Finally, we remanded the case to the bankruptcy court with directions to 

"readdress, in light of Article 9, the central issue of whether the reorganization plan 

effectuated a transfer of Rimmer's interest to Octagon, or whether Rimmer's interest 

survives the Plan." ld at 957. 

On remand, the bankruptcy court concluded Mr. Rimmer did not perfect his 

security interest in the account. In Re: Meridian Reserve, Inc., No. 90-0131-BH, slip 

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op. at 8 (Bankr. W.D. Okla Oct. 7, 1994). The court further held the exception 

contained in Okla Stat. Ann. tit. 12A, § 9-302(1) (West 1996) did not apply to the 

requirement of filing a financing statement. /d. at 18. Therefore, the underlying 

substantive controversy was resolved in favor of Octagon. 

After the bankruptcy court's judgment was entered, Octagon filed a motion for an 

award of attorney fees, as provided in Okla. Stat. Ann. tit. 12, § 936, in an amount 

exceeding $460,000. That statute provides: 

In any civil action to recover on an open account, a statement of 

account, account stated, note, bill, negotiable instrument, or contract 

relating to the purchase or sale of goods, wares, or merchandise, or for 

labor or services, unless otherwise provided by law or the contract which is 

the subject [of]l the action, the prevailing party shall be allowed a 

reasonable attorney fee to be set by the court, to be taxed and collected as 

costs. 

In ruling upon the motion, the bankruptcy court determined Oklahoma law applied 

to the issue of whether attorney fees were appropriate because state law provided the rule 

of decision in the underlying bankruptcy proceeding. That conclusion is not contested 

here. The bankruptcy court further concluded the instant proceeding fell outside the 

scope of the Oklahoma statute, reasoning the court was required to look to the "substance 

of the complaint" filed by Bonnett. That substance, the court found, was ''whether 

Rimmer's interest passed to the buyer [Octagon]." In Re: Meridian Reserve, Inc., No. 

1

The statute here reads ''to," but a footnote in the annotated code indicates ''to" should 

instead read "of" We have altered the statute to conform with this correction. 

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90-0131-BH, slip op. at 4-5 (Bankr. W.D. Okla. Feb. 28, 1995). Further, the court 

characterized Bonnett's request for back payments from Octagon as "[ c ]ollaterally related 

to the [substantive] issue." ld Finally, the court believed Oklahoma law dictated this 

interpretation, stating: 

Viewed under the strict interpretation mandated by the Oklahoma Supreme 

Court, the instant proceeding simply does not fall within the class of cases 

contemplated by the statute. See, e.g., Kay v. Venezuelan Sun Oil Co., 806 

P.2d 648 (Okla. 1991). In Oklahoma, the term "[o]pen account is defined 

as an unsettled debt arising from items of work and labor, goods sold and 

delivered, and other open transactions not reduced to writing and subject to 

future settlement and adjustment. Nicholson v. Thixton, 448 P.2d 454, 455 

(Okla. 1968). Oklahoma Oil & Gas Exploration Drilling Program, 877 

P.2d 605, 611 n.8 (Old. App. 1994). Here, the contract is in writing, the 

debt is settled at 5% of the specified sales and is not subject to future 

settlement and adjustment. 

ld The court found further support for this view in Paramount Pictures Corp. v. 

Thompson Theatres, Inc., 621 F.2d 1088, 1092 (lOth Cir. 1980) ("An express contract, 

which defines the duties and liabilities of the parties, whether it be oral or written, is not, 

as a rule, an open account."), and in Bickford v. John E. Mitchell Co., 595 F.2d 540, 545 

(1Oth Cir. 1979) (The plaintiffs "claims of alleged deficiencies in the payment of 

royalties and alleged failure to reconvey patent and trademark rights" fall outside the 

purview of§ 936.). Therefore, the court concluded, "[t]his contract, thus, does not 

constitute an account with the meaning of these interpretations, nor is it a suit on a 

contract within the contemplation of the statute. It also does not fall within any of the 

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other causes of action stated in the statute." I d. at 5. The district court affirmed the 

bankruptcy court's ruling, reasoning in relevant part: 

Giving this statute a strict interpretation as it is required to do, the 

Court finds the subject of this lawsuit was not a contract relating to the 

purchase or sale of goods. Rather, as stated, the issues concerned the 

nature of Rimmer's interest and whether such interest was property of 

· Poll's bankruptcy estate. 

In Re: Meridian Reserve, Inc., No. Civ-95-506-W, slip op. at 2 (W.D. Okla June 20, 

1995). 

On appeal, Octagon raises the single issue of whether Okla Stat. Ann. tit. 12, § 

936 applies under the circumstances of this case. Octagon argues Bonnett Resources and 

Mr. Rimmer's action is on a contract to recover a percentage of the proceeds from 

Octagon's sale of goods to third parties and, therefore, is an action on a "contract relating 

to the purchase or sale of goods" within the meaning of the statute. Octagon contends 

both the bankruptcy court and the district court erred in concluding otherwise. 

We review the denial of an attorney fees award for an abuse of discretion. Mann 

v. Reynolds, 46 F.3d 1055, 1062 (lOth Cir. 1995); Sheets v. Salt Lake County, 45 F.3d 

1383, 1391 (lOth Cir.), cert. denied, 116 S.Ct. 74 (1995). However, any statutory 

interpretation or other legal analysis underlying the district court's decision concerning 

attorney fees is reviewed de novo, Daleske v. Fairfield Communities, Inc., 17 F.3d 321, 

323 (lOth Cir.), cert. denied, 114 S.Ct. 1832 (1994), and any supporting findings of fact 

are reviewed for clear error. Mann, 46 F.3d at 1062; Homeward Bound, Inc. v. Hissom 

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Memorial Ctr., 963 F.2d 1352, 1355 (lOth Cir. 1992). See also Akrla Energy Resources 

v. Roye Realty & Developing, Inc., 9 F.3d 855, 865 (lOth Cir. 1993) ("We review the 

meaning of 'prevailing party' under Oklahoma law de novo."). 

Octagon raises a threshold question of whether the earlier decision of this court 

represents the law of the case on certain dispositive issues. "The law of the case is a 

judicial doctrine designed to promote decisional finality. Once a court decides an issue, 

the doctrine comes into play to prevent the re-litigation of that issue in subsequent 

proceedings in the same case." Pittsburgh & Midway Coal Mining Co. v. Watchman, 

52 F.3d 1531, 1536 n.4 (lOth Cir. 1995). "The doctrine applies to issues previously 

decided, either explicitly or by necessary implication." Guidry v. Sheet Metal Workers 

Int'l Ass'n, 10 F. 3d 700, 705 (lOth Cir. 1993), reh 'g on other grounds, 39 F.3d 1078 

(lOth Cir. 1994) (en bane), cert. denied, 115 S.Ct. 1691 (1995) (citation omitted). In 

Guidry, the court identified three potential reasons for concluding an issue had been 

implicitly decided previously. "(1) resolution of the issue was a necessary step in 

resolving the earlier appeal; (2) resolution of the issue would abrogate the prior decision 

and so must have been considered in the prior appeal; and (3) the issue is so closely 

related to the earlier appeal its resolution involves no additional consideration and so 

might have been resolved but unstated" ld at 707 (footnote omitted). These factors 

were not intended to be exhaustive. ld at 707 n.S. In addition, this court has also 

recently joined "the majority of our sister circuits in holding that dicta is not subject to 

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the law of the case doctrine." United States v. Rice, 1996 WL 44452, at *4 (lOth Cir. 

Feb. 5, 1996) (unpublished disposition), petition for cert. filed,_ U.S.L.W. _ (U.S. 

May 6, 1996) (No. 95-8943). 

Applying these rules to the instant case, we conclude the law of the case doctrine 

is inapplicable here. Our previous description of Mr. Rimmer's "interest in the Poll 

System gas sales proceeds" was made in two different contexts. First, in reciting the 

facts, we described Mr. Rimmer's interest as five percent of the proceeds from the sale of 

natural gas through Poll's system. Rimmer I, 995 F.2d at 951-52. Second, the court 

similarly characterized Mr. Rimmer's interest when responding to Octagon's argument 

Mr. Rimmer had no enforceable contractual interest. /d. at 952-53. Our prior 

characterization was not made while applying the Oklahoma attorney fee statute; 

therefore, the difference in context is crucial because the considerations involved in 

determining the applicability of the attorney fees statute differ from either circumstance 

described in the prior decision. The terminology has a specific meaning in the Oklahoma 

attorney fee statute, but our discussion labeling Mr. Rimmer's interest was general in 

nature. At most, our description of Mr. Rimmer's interest can properly be characterized 

either as not resolving the particular issue raised in this second appeal, or as dictum. 

Under either circumstance, the law of the case doctrine does not drive our resolution of 

this appeal. 

Octagon challenges the bankruptcy and district courts' determination the language 

ofOkla Stat. Ann. tit. 12, § 936 must be strictly construed Octagon advances an 

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argument based on a purported distinction between the Oklahoma courts' interpretation of 

the "labor or services" clause of the statute in comparison to the "goods, wares, or 

merchandise" clause. According to Octagon, the Oklahoma courts strictly construe the 

"labor or services" clause by requiring the contract to be for labor or services, but broadly 

interpret the "goods, wares, or merchandise" clause by giving full effect to the statutory 

language "related to." Octagon is correct that Oklahoma case law may have previously 

drawn a distinction in interpreting these two clauses of§ 936. However, the distinction is 

not as significant or dispositive as Octagon argues. 

Oklahoma, like most states, follows the American Rule that each party is 

responsible for its own litigation costs and expenses including attorney fees. See 

generally Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 247 (1975) 

(holding American Rule governed absent specific statutory authorization for awarding 

attorney fees to prevailing party); Kay v. Venezuelan Sun Oil Co., 806 P.2d 648, 650 

(Okla. 1991) ("The American Rule is firmly established in this jurisdiction."). Oklahoma 

courts are without the authority to award attorney fees absent a specific statute or 

contractual term. In this case, Octagon maintains the necessary authority is provided by 

§ 936. 

There is no overarching organizing principle to determine when an attorney fees 

award is appropriate under the statute, however. Awarding attorney fees depends on the 

totality of the circumstances involved in each particular case. With that caveat in mind, 

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we believe the distinction between the two clauses Octagon draws is not supported by 

Oklahoma precedent. 

In 1970, the Oklahoma legislature amended this statute to include the "labor or 

services" clause. Five years later, in Russell v. Flanagan, 544 P.2d 510 (Okla. 1975), 

the Oklahoma Supreme Court considered the scope of the new clause, offering a strict 

interpretation of the statute. In that case, the plaintiff had brought a small claims action 

for a breach of warranty on a labor contract for servicing a sewer line. /d. at 511. The 

court held the action only collaterally concerned labor and services making an attorney 

fees award inappropriate, reasoning: 

We are of the opinion that the phrase "or for labor labor [sic] or 

services" properly comes within the initial category of "a civil action" not, 

as appellant contends, the antecedent classification of a "contract relating to 

" 

We believe that the addition of the phrase "or for labor or services" 

by amendment to the statute in 1970 was intended by the legislature to be 

limited to those situations where suit is brought for labor or services 

rendered We believe that an improper and unintended meaning would 

result if, as appellant contends, this clause were construed to allow attorney 

fees in the all encompassing field of "contracts related to ... , labor or 

services." 

It is our opinion that the clauses of the statute are arranged in an 

illusory sequence and that to arrive at the obvious intent of the legislature 

we must transpose the sections of the statute to read: ' * * * instrument, or 

for labor or services, or contract relating to,* * *' 

Where the legislative intent would be defeated by construction of a 

statute as written the Court may transpose words and phrases as necessary 

to arrive at the true meaning. 

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Id at 512. The Oklahoma legislature apparently has acquiesced in this reasoning, and the 

Oklahoma courts continue to apply it. See, e.g., Bu"ows Constr. Co. v. Independent 

Sch. Dist. No.2, 704 P.2d 1136, 1138 (Okla 1985); Fe"ell Constr. Co., Inc. v. Russell 

Creek Coal Co., 645 P.2d 1005, 1011 (Okla. 1982). 

In contrast, Octagon argues in cases interpreting the "goods, wares, or 

merchandise" clause, the Oklahoma courts have adopted a broad interpretation. In 

addition to an Oklahoma Bar Journal article, James R Lieber and Stephanie L. Jones, An 

Analysis of 12 O.S .. § 936 (1981): An Attorney Fee to the Prevailing Party, 59 O.B.J. 

3661 (1988), Octagon Resources relies on three cases for its assertion. First, Octagon 

argues the court adopted a broad definition of"relating to" in Hardesty v. Andro 

Corporation-Webster Division, 555 P.2d 1030, 1036 (Okla. 1976). Octagon is correct. 

In Hardesty, the court adopted the following expansive definition of the term of art from 

another jurisdiction: 

" .. .it is commonly understood that 'relating to' embraces much more than 

such words as 'directly connected to' or 'a part of.' We constantly use the 

words 'relating to' in many circumstances where time and again we find an 

event or a status often leading to or in our experience being followed by a 

common consequence." 

Id at 1036 (quoting State v. Gaddy, 184 N.E.2d 689,693 (Ohio Com.Pl. 1962)). 

Second, Octagon citesArine v. McAmis, 603 P.2d 1130 (Okla 1979), where the court 

rejected an ''unduly narrow reading of the statute," in allowing a plaintiff who sought to 

rescind a contract to receive attorney fees under§ 936. The court noted the legislature 

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used the general term "recover on" a contract and rescission fit within this definition. I d. 

at 1132. Third, Octagon offers a quotation from a case dealing with another attorney fees 

provision. "This Court is bound to liberally construe statutes in derogation of the 

common law so as to effect legislative object and promote justice." Schaeffer v. 

Shaeffer, 743 P.2d 1038, 1040 (Okla. 1987) (considering Okla. Stat. Ann. tit. 12, § 940 

(West 1996) which allows an attorney fee award to the prevailing party in cases involving 

the "negligent or willful infliction of harm to property."). Nonetheless, we do not think 

these three precedents and the Oklahoma Bar Journal support Octagon's proposition. 

In particular, more recent Oklahoma cases have adopted a strict interpretation of 

the statute in all cases, not just those dealing with the "labor or services" clause. For 

example, consider the relatively recent decision in Kay. There, the Oklahoma Supreme 

Court began with an analysis of the "labor or services" precedents. 

Exceptions to the American Rule are narrowly defined Similarly, the 

mandatory provisions of§ 936 that the prevailing party in an action to 

recover for labor and services shall be allowed a reasonable attorney fee are 

strictly applied. 

In Russell v. Flanagan, the "for labor and services" provisions of 

§ 936 were strictly limited to actions brought to recover for labor and 

services rendered We specifically rejected an interpretation of§ 936 

which would authorize the courts to award attorney fees to the prevailing 

party in an action alleging injury that was merely related to a contract for 

labor and services. 

ld. at 650 (footnotes omitted). However, the court's continuing discussion casts serious 

doubt on Octagon's argument. 

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The revisit of our previous opinions confirms the rule of strict 

application of the "labor and services" provisions of § 936. And, a plain 

reading of § 936 in view of the amendatory history commands strict 

application of the statute. As originally enacted, § 936 authorized the 

award of attorney fees for collection on an open account, and was 

subsequently amended to include seven additional specific categories 

evidencing contractual indebtedness sought to be recovered Our strict 

application rule preserves the obvious legislative intent to authorize awards 

·of attorney fees to the prevailing parties in actions for money judgments for 

debts created by the contracts enumerated in the statute. 

Id at 651-52 (footnotes omitted). Finally, in a footnote, the court further elaborated: 

Legislative intent to mandate prevailing party attorney fees in actions 

brought to enforce executory promises to pay monetary consideration for 

receipt of property or labor or services is readily discernable from the 

amendatory history of§ 936 ..... These amendments indicate legislative 

intent to mandate, "shall be allowed", attorney fees in actions to collect 

money promised, whether evidenced by a promissory note, a negotiable 

instrument, an account whether from sale of tangible property or labor and 

services and a bill or a contract for goods sold and delivered. 

ld at 652 n.11. Since Kay, the Oklahoma courts have continued to apply this stricter 

interpretation of the statute. See TRWIREDA Pump v. Dean, 829 P.2d 15, 22 (Okla. 

1992) ("Here we do have a specific statute allowing an award of fees for appellate work 

in certain circumstances, but we recognize statutes allowing a prevailing party to recover 

attorney fees are strictly applied by this Court."); Beard v. Richards, 820 P.2d 812, 815-

16 (Okla 1991) ("The Oklahoma Constitution, art. 2, § 6, guarantees that our courts will 

be open to every person and justice shall be administered without sale, denial, delay or 

prejudice. Liberal application of statutes authorizing prevailing party attorney fees has a 

chilling effect on our open access to the courts guarantee. Accordingly, statutes 

authorizing prevailing party attorney fees are strictly applied by this Court.") (citations 

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omitted); Robert L. Wheeler, Inc. v. Scott, 818 P.2d 475, 481 n.9 (Okla 1991) ("We held 

in Kay v. Venezuelan Sun Oil Co., 806 P.2d 648 (Okla 1991), that§ 936 must be strictly 

applied and that an award of prevailing party attorney's fees shall be allowed in actions to 

collect money promised, whether evidenced by a promissory note, a negotiable 

instrument, an account whether for sale of tangible property or labor and services and a 

bill or a contract for goods sold and delivered"). Whatever the Oklahoma Supreme 

Court did in past cases, we think Kay and its progeny make clear a strict interpretation of 

§ 936 is warranted The Oklahoma Supreme Court has effectively read "related to" as 

"for" as it originally did in Russell in interpreting the "labor or services" clause. We 

therefore conclude both the bankruptcy court and the district court were correct in 

applying a strict interpretation of the statute. 

Under a strict interpretation of the statute, both the bankruptcy court and the 

district court were correct in denying Octagon attorney fees. The nature of the action 

filed by Bonnett Resources and Mr. Rimmer against Octagon was at most tangentially or 

collaterally related to the purchase or sale of goods, wares, or merchandise. While 

Octagon is correct that there is a relationship between the natural gas sold through the 

system and the underlying litigation, we do not believe the relationship is close enough 

to warrant an award of attorney fees. One need only examine the relief prayed for in the 

various complaints to determine the real dispute was about the status of Mr. Rimmer's 

five percent interest in the natural gas processed through the system after the bankruptcy 

reorganization plan. Although plaintiffs sought to recover unpaid proceeds that were 

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attributable to Mr. Rimmer and his successors, that claim was raised only as an attribute 

of the ownership rights the plaintiffs sought to settle. The action was simply not about 

any debt Mr. Rimmer owed Octagon, which under Kay, appears to be the only way 

attorney fees are recoverable under § 936. 

AFFIRMED. 

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