Document: 127 S. Ct. 1199 (2007) TRAVELERS CASUALTY & SURETY CO. OF AMERICA, Petitioner, v. PACIFIC GAS ELECTRIC No. 05-1429. Supreme Court of United States. Argued January 16, 2007. Decided March 20, *1201 G. Eric Brunstad, Jr., Hartford, Connecticut, for Petitioner. E. Joshua Rosenkranz, New York, Respondent. Rheba Rutkowski, Robert A. Brundage, William C. Heuer, Francesca L. Miceli, Heining, Sukti Dhital, Amy Lawler, Nicholas Salazar, Bingham McCutchen LLP, Gary M. Kaplan, Howard Rice Nemerovski, Canady Falk Rabkin, San Francisco, California, Thomas Goldstein, Akin Gump Strauss Hauer Feld *1202 Washington, DC, David B. Goodwin, Carren Shulman, Timothy Mehok, Andrew Levine, Heller Ehrman Justice ALITO delivered the opinion Court. We are asked to consider whether federal bankruptcy law precludes an unsecured creditor from recovering attorney's fees authorized by a prepetition contract and incurred in postpetition litigation. The Appeals Ninth Circuit held, based on rule previously adopted that court, such categorically prohibitedeven where contractual allocation would be enforceable under applicable nonbankruptcy lawto extent litigation involves issues law. Because finds no support Bankruptcy Code, we vacate remand. I Respondent Pacific Gas Electric Company (PG E) filed voluntary Chapter 11 petition April 2001, U.S.C. § 1101 et seq., continued thereafter operate its business as "debtor possession." §§ 1107(a), 1108. filing caught attention petitioner Travelers Casualty Surety (Travelers), which had issued $100 million surety bond PG E's behalf California Department Industrial Relations, guaranteeing payment state workers' compensation benefits injured employees.[1] In connection with bond, E executed series indemnity agreements favor Travelers. provide will responsible any loss might incur bonds, including pursuing, protecting, or litigating Travelers' rights those bonds. Although default occurred, asserted claim action protect itself case defaulted at some point future, requiring make payments bond. response claim, knowledge approval Court, agreed insert language into reorganization plan disclosure statement right subrogation event claims, however, then unilaterally altered negotiated way substantially diminished protection it been seeking. According Travelers, development resulted additional litigation, but ultimately resolved dispute entering stipulation was later approved addition accommodating substantive concerns, stated "may assert *1203 attorneys' [i]ndemnity [a]greements" (subject object) general against Brief Petitioner 17. subsequently amended proof seeking recover proceedings. objected, arguing could not while rejected basis. App. Pet. Cert. 23a-25a. appealed ruling District affirmed, relying re Fobian, 951 F.2d 1149 (C.A.9 1991), held "where litigated involve basic enforcement questions, peculiar law, awarded absent bad faith harassment losing party," id., 1153. See 10a, 17a. again, States affirmed. 167 Fed.Appx. 593 (2006). panel acknowledged that, least circumstances, "`prevailing party proceeding may entitled award attorney accordance law....'" Id., 594 (quoting Baroff, 105 F.3d 439, 441 1997)). nevertheless Fobian rule, cited proposition "attorney recoverable `peculiar law.'" Fed.Appx., supra, 1153). explained because claimed were "governed entirely law," necessarily failed.[2] 594. sought review this noting conflict among Courts regarding validity rule. Compare 1153, Shangra-La, Inc., 843, 848-849 (C.A.4 1999). granted certiorari resolve conflict, 549 U.S. ___, 377, 166 Ed. 2d 265 II Under American Rule, "the prevailing litigant is ordinarily collect reasonable fee loser." Alyeska Pipeline Service Co. Wilderness Society, 421 240, 247, 95 1612, 44 141 (1975); see Hauenstein Lynham, 100 483, 490-491, 25 628 (1880); Arcambel Wiseman, 3 Dall. 306, 1 613 (1796). This can, course, overcome statute. Fleischmann Distilling Corp. Maier Brewing Co., 386 714, 717, 87 1404, 18 475 (1967). It can also "enforceable contract" allocating fees. Ibid. governed Act 1898, observed "[t]he character [a contractual] obligation pay presents obstacle enforcing bankruptcy, either provable lien upon specific property." Security Mortgage Powers, 278 149, 154, 49 84, 73 236 (1928). Similarly, terms current *1204 remains true otherwise (i.e., one substantive, law) allowable except Code provides otherwise. 4 Collier ¶ 506.04[3][a], p. 506-118 (rev. 15th ed.2006) (hereinafter Collier). requires us disallows contract-based claims solely fact issue conclude does not. A When debtor declares each creditors file claimi.e., document providing "right payment," 101(5)(A)against debtor's estate. Once has filed, court must determine "allowed" 502(a) Code: "A interest, section 501 ... deemed allowed, unless interest... objects." But even interest objects, "shall allow" "except that" implicates nine exceptions enumerated 502(b). Those apply "unenforceable agreement 502(b)(1); "is unmatured interest," 502(b)(2); [PRoperty tax that] exceeds value [estate's] interest" property, 502(b)(3); services insider debtor" "exceeds services," 502(b)(4); debt certain alimony child obligations, 502(b)(5); "damages resulting termination" lease employment contract, 502(b)(6) (7); "results reduction, due late payment, amount credit available wages, salaries, commissions earned debtor," 502(b)(8); brought court's through untimely 502(b)(9). nothing do property tax, alimony, provided debtor, damages termination tax. 502(b)(2)-(8). Nor appear untimely. Thus, allowed 502(b) unenforceable within meaning 502(b)(1). B Section 502(b)(1) reason other than contingent unmatured." provision most naturally understood limited exceptions, defense outside context bankruptcy. 502.03[2][b], 502-22 (explaining generally "make trustee defense" "under law"i.e., "could have interposed, suit [same substantive] creditor"). reading consistent only plain statutory text, settled principle "[c]reditors' *1205 entitlements arise first instance underlying creating obligation, subject qualifying contrary provisions Code." Raleigh Illinois Dept. Revenue, 530 15, 120 1951, 147 13 (2000). That courts consult determining claims. ibid. Indeed, long recognized "`basic rule' governs substance Congress having `generally left determination assets bankrupt's estate Butner States, 440 48, 57, 54, 99 914, 59 136 (1979); citation omitted). Accordingly, when uses word "claim"which defines 101(5)(A)it usually referring As Butner, "[p]roperty interests created defined "[u]nless different result, there why should analyzed differently simply interested involved proceeding." U.S., 55, 914; accord, Vanston Bondholders Protective Comm. Green, 329 156, 161, 67 237, 91 162 (1946) ("What valid subsisting obligations bankrupt time question which, absence overruling determined reference law"). C rejecting fees, did "unenforceable" matter rendered Code. To contrary, F.3d, 441). own creationthe so-called rulewhich dictates F.2d, 594, failed. 502 elsewhere. identify new Instead, three prior decisions, Johnson, 756 738 (1985); Coast Trading 744 686 (1984); Fulwiler, 624 908 (C.A.1980) (per curiam). Significantly, none cases basis disallowing occasion so; cases, failed 741-742; Trading, 693; 910.[3] *1206 textual fatal Consistent our statements creditors' see, e.g., Raleigh, presume they expressly disallowed. Neither below nor offered overcomes presumption. 502(b)(4) instructive point. particular category feesthose "for "excee[d] services." existence suggests absence, analogous excluding covered likewise disallow them. (concluding "inverts proper analysis" allowing explaining "a arising if Congress, power amend adding issues. exists, grounds Circuit. FCC NextWave Personal Communications 537 293, 123 832, 154 863 (2003), intended provide... done so clearly expressly." 302, 832. Here, "clearly expressly" compel follow rule; says about light broad, permissive scope 502(b)(1), recognition bankruptcy," follows cannot stand. Mortgage, 84; Cohen de la Cruz, 523 213, 221, 118 1212, 140 341 (1998) ("We `will read erode past practice clear indication departure'" *1207 Pennsylvania Public Welfare Davenport, 495 552, 563, 110 2126, 109 588 (1990))). III makes effort defend Tr. Oral Arg. 28 (conceding acknowledging wrong distinction draws between State Federal litigation"). argues 506(b) andnoting unsecuredasks affirm follows: "To secured greater shall holder costs, charges statute arose." U.S.C.A. (Supp.2006). E, authorizes oversecured, oversecured (like Travelers) completely unsecured. argues, negative implication, explicit negation." 18. structure purpose examined backdrop pre-Code confirm intend allow 25-38. raise these arguments below. Consequently, lower address presented brief opposition certiorari. insists though "fairly included" 41. contention appears premised theory reaches correct conclusion case," "doesn't go far enough preventing their fees." 25. persuaded. analytically distinct from, fundamentally odds with, 506(b).[4] event, neither raised addressed below, Cooper Industries, Inc. Aviall Services, 543 157, 168-169, 125 577, 160 548 (2004), circumstances warrant exception case. therefore arguments.[5] express regard whether, following demise *1208 principles independent erred * judgment vacated, remanded further proceedings opinion. ordered. NOTES [1] required employees (1) purchasing insurance licensed provider (2) adopting plan, State's approval, self-insure. chose latter option, post security ensure ongoing mandatory benefits. Cal. Lab.Code Ann. 3700, 3701 (West 2003). posted issuing behalf. liable, up million, [2] incorporated reasoning employed DeRoche, 434 1188 2006), decided same 593. DeRoche longer counterpart case, adds very little panel's explanation 1190-1192. [3] after unsuccessfully requested relief automatic stay 362(d)(1). parties extended entitlement both parties. argument, applied "`action contract,'" concluding request considered contract. 741-742. Both Fulwiler Oregon similar Johnson; found inapplicable cases. 909-910. [4] prohibit all contractual, proceedingseven 17-19. contrast, recoveryeven creditorsso "issues law." 1149, 1153 1991). [5] For reasons, argument denied activities reasonably necessary preserve and, alternatively, 42-49. certiorari, bears relation presented. Court's Rule 14.1(a) ("Only questions set out petition, fairly included therein, Court").

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