### IN THE UNI TED STATES COURT OFAPPEALS FOR THE FIF TH CIRCUIT

No. 10-11255 Summary Calendar

In the Matter of: SURETY CAPITAL CORPORATION,
Debtor

------------------------ ---------- RICHARD N. ABRAMS, Appellant
v. BANK OF TEXAS, N.A., Appellee

Appeal from the United States District Court for the Northern District of Texas USDC No. 4:10-CV-482

Before SMITH, SOUTHWICK and HAYNES, Circuit Judges. PER CURIAM: * After dismissing a noteholder’s complaint for breach of a Chapter 11 plan, the bankruptcy court awarded attorney’s fees. The noteholder appealed the fees award to the district court, which affirmed. We also AFFIRM. U n i te d S ta te s C o u rt o f A p p ea l s

F i ft h C i rc u i t 

### F I L E D Sep tem ber 8 , 20 11 Lyle W . Cayce Clerk

Pursua nt to 5 T H C IR

. R. 47.5 , the court hasd ete rm inedthat this op inion s houldnot * be publ ish ed and is not pr ece dent excep t unde r the lim ite d cir cum st ance s se t forth in 5 T H C IR

. R. 47.5 .4. Case: 10-11255 Document: 00511596176 Page: 1 Date Filed: 09/08/2011No. 10-11255

In 1998, Surety Capital Corporation issued debt in the form of notes pursuant to an indenture agreement. Richard N. Abrams held some of the notes. In 2007, Surety filed a Chapter 11 petition in the United State s Bankruptcy Court for the Northern District of Texas. During the bankruptcy proceedings, the Bank of Texas became the Indenture Trustee. The bankruptcy c o u rt e n t e red two orders for Surety to pay the Bank of Texas funds that the bank would disburse to the noteholders. The first was for the disbursement of p rincipal on the notes; the second was for the interest. Because there were insufficient funds for the interest to be paid in full, the bankruptcy court ordered that the interest payments be reduced by $350,000. For the disbursement of principal, the Bank of Texas filed a proof of claim for its fees a n d c o sts as trustee. Abrams did not object. For the disbursement of interest , th e B a nk of Texas disbursed the funds in accordance with the Indenture Agreement, which provided the trustee be paid for its fees and costs, and Abrams did not object. After all of the funds were di sbursed, the 1 bankruptcy court closed the case. I n 2009, Abrams brought suit in Texas state court for a declaratory judgment that the Bank of Texas failed to follow the te r m s of the Chapter 11 Plan. His claims were based on bre a c h o f c o ntract, negligent misconduct, and breach of fiduciary duty. The Bank of Texas removed the case to the bankruptcy court that had resolved Surety’s Chapter 11 petition, after an emergency motion to reop e n the bankruptcy case had been granted. The bankruptcy court dismissed Abrams’ suit on the basis of res judicata. I t a l s o awarded attorney’s fees to th e Bank of Texas, holding that the indenture agreement and Trust

Abram s devo tes a cons ide r ab l e portio n of his brie f to arguing the Chapt er 11 Plan 1 requ ired the Bank of Texas to sha re in the $350, 000 red uct ion on the se cond dis burs em ent of fund s. Even if that i s s o , t h e t i m e to rais e that objec tio n wa s during the pend ency of the bank rup tcy cas e, not in a coll ater al att ack suc h as this sui t. Rep ubli c Supp ly Co. v. Shoaf , 815 F.2d104 6, 1051- 52 ( 5th Cir. 198 7). We do not cons ide r it. 2 Case: 10-11255 Document: 00511596176 Page: 2 Date Filed: 09/08/2011No. 10-11255

Indenture Act permitted the di s c r e ti o nary award of fees and no statutory exception applied. From that award, Abrams has taken this appeal. Abrams argues that his suit in Te x a s s t a te court was to recover unpaid interest on the debt, a kind of suit that under the Trust Indenture Act would bar

an award of fees. Second, he argues that the district court should have denied fees because his suit was taken in good faith. Legal questions involving the interpreta t i o n a re answered de novo on appeal. Woodfield v. Bo w m a n , 193 F.3d 354, 358 (5th Cir. 1999). A district court’s award of attorney’s fees is reviewed deferentially for an ab use of discretion. Howard v. St. Germain , 599 F.3d 455, 457 (5th Cir. 201 0). Attorney’s fees generally are not awarded to the prevailing party in federal court litigation absent a relevant cont r a c t o r statute to support the award. Boland Marine & Mfg. Co. v. Rihner , 41 F.3d 997, 1004 ( 5 th C ir . 1995). The parties do not dispute that the Trust Indenture Ac t a s w e ll as the Indenture Agreement, which incorporates the terms of the Act, provide for an aw ard of attorney’s fees. What is disputed is the meaning of Section 315(e) of the Trust Indenture Act that provides two specific instances where a court may not award attorney’s fees and also compels a court to consider the merit and good faith of a suit prior to awarding attorney’s fees. The Act prohibits an award of attorney’s fees in “any suit instituted by any indenture security holder

. . . holding in the aggregate more than 10 per centum i n p ri n c ipal amount of the indenture securities outstanding, or . . . by any indenture security holder for the enforcement of the payment of the principal of or interest on any indenture security.” Trust Indenture Act § 315(e), 15 U.S.C. § 77ooo(e). In assessing attorney’s fees the court is to give “ du e r e g a rd to the merits and good faith of the claims or defenses made by such party litigant.” Id. The bankruptcy and district c o u rt s held that by the time the state court action was commenced, post-bankruptcy, Abrams was no longer “holding in the

3 Case: 10-11255 Document: 00511596176 Page: 3 Date Filed: 09/08/2011No. 10-11255

aggregate” more than ten percent of the outstanding securities; he had not been such a holder for a t l e a s t a year. On appeal, Abrams states he does not allege he was such a holder. We accept that concession. The only potentially applicable exception is if his suit were instituted for the enforcement of th e p ay m ent of principal or interest. In his complaint in state court, Abrams did not seek the enforc e ment of payment of principal or interest. He did not set out in the complaint that he had been paid a c e rt a in amount in principal and interest and was owed some a m o u nt more than that. Abrams argues that the prac tical effect of any award would be to return a portion of interest; therefore, his state court complaint falls under the exception prohibiting attorney’s fees in section 315(e). We disagree. The language of this statute is unambiguous. Consequently, we do not “undertake to add to or detract from its provisions.” Birdwell v. Skeen , 983 F.2d 1332, 1339 (5th Cir. 1993). Attorney’s fees are pr o h ib ited when the suit seeks to reco v e r p ri n c i p al or interest. Abrams’ state court complaint was not one to recover principal or interest. This exception does not apply. Abrams also argues his suit was in good faith because the Chapter 11 Plan provided that the Bank of Texas was to share in the $350,000 reduction along

w i th th e noteholders awaiting interest payments. The statute requires the district court give due regard to the merits and good faith bas i s f o r a suit, but the statute d o e s n o t require a finding of a meritless, bad faith suit in order to award attorney’s fees. The bankruptcy court and the district c o u rt both considered Abrams’ level of involvement in the bankruptcy case and concluded tha t his challenge should have been raised prior to the bankruptcy discharge. Neither court concluded that this suit was taken in either bad faith or good faith. The di s t rict court’s due regard of this issue is evidenced by its review of the merits of the suit and consideration whether it was brought in good faith. AFFIRMED.

4 Case: 10-11255 Document: 00511596176 Page: 4 Date Filed: 09/08/2011