Court Opinion

ID: 7801818
Source: CourtListenerOpinion
Date Created: 2022-08-18 21:01:11.73055+00
Date Added: 2024-06-11T16:29:21.263287
License: Public Domain

In the

    United States Court of Appeals
                  For the Seventh Circuit
                      ____________________
No. 21-2783
IN RE:
         RYAN L. LANEY,
               Debtor-Appellant.
                      ____________________

          Appeal from the United States District Court for the
                      Southern District of Illinois.
           No. 20-cv-01312-DWD — David W. Dugan, Judge.
                      ____________________

   ARGUED FEBRUARY 24, 2022 — DECIDED AUGUST 18, 2022
                ____________________

   Before ROVNER, KIRSCH and JACKSON-AKIWUMI, Circuit
Judges.
    JACKSON-AKIWUMI, Circuit Judge. Over debtor Ryan
Laney’s objection, the bankruptcy court allowed creditor Sec-
ond Chance Auto, Inc., to file an amended proof of claim to
include attorney’s fees after the court confirmed the bank-
ruptcy plan. The district court affirmed the bankruptcy
court’s decision. Laney appeals. Because the bankruptcy court
provided compelling reasons for allowing the post-confirma-
tion amendment, and the attorney’s fees were reasonable and
necessary, we affirm.
2                                                         No. 21-2783

                                   I
    In June 2019, Laney and Second Chance entered into a Re-
tail Installment Contract and Security Agreement (the “con-
tract”) under which Laney financed a 2007 Ford Edge from
Second Chance. Under the contract, Laney agreed to pay the
principal and finance charges for the vehicle, plus Second
Chance’s attorney’s fees to collect amounts owed under the
contract in the event of default. Four months after purchasing
the Edge, Laney filed a Chapter 13 bankruptcy petition.
     Between November 2019 and March 2020, the parties sub-
mitted various filings to address how the bankruptcy plan
should treat Second Chance’s claim for the Edge in the pro-
ceedings. Among the filings, Second Chance filed its initial
proof of claim for the Edge and labeled the claim as “Claim
3,” Laney filed his original plan, and Second Chance filed an
objection to Laney’s treatment of the Edge under the original
plan. After holding a hearing, the bankruptcy court ordered
Laney to amend the original plan within seven days to ac-
count for the Edge as a “910 claim” to be paid in full. 1 Laney
amended the plan but failed to provide for full payment for
the Edge. Second Chance again objected to the plan based on
the Edge’s treatment, and also requested attorney’s fees for
filing the same objection twice.
   The bankruptcy court held another hearing and again or-
dered Laney to amend the plan, this time within three days,
to provide for full payment for the Edge. The court also
granted Second Chance’s request to file an affidavit of

1 A “910 claim” applies to debt for personal vehicles purchased less than
910 days before the filed bankruptcy petition. This type of claim must be
paid in full. See 11 U.S.C. § 1325(a).
No. 21-2783                                                   3

attorney’s fees. Before complying with the court’s order,
Laney filed a motion for clarification. Then, Laney filed his
second amended plan, which accounted for the full outstand-
ing principal and interest for Second Chance’s Edge claim.
The second amended plan did not account for Second
Chance’s attorney’s fees.
    Meanwhile, Second Chance submitted an affidavit for at-
torney’s fees for time spent responding to various filings after
the first hearing in which Laney was ordered to amend the
plan to account for full payment of the Edge, up until Laney’s
compliance with the court’s initial order. Second Chance also
filed a response to Laney’s motion for clarification. Laney ob-
jected to Second Chance’s request for attorney’s fees, and
withdrew his motion for clarification.
   In March 2020, the bankruptcy court confirmed the plan.
The confirmed plan listed Second Chance’s claim for the Edge
as a claim that would be paid in full with interest and in-
cluded an “estimated claim” amount.
    Between March and July 2020, the court held at least two
hearings on Second Chance’s request for attorney’s fees. After
the hearings, it approved Second Chance’s fee affidavit and
ordered Second Chance to amend Claim 3, the Edge claim, to
add its attorney’s fees. Second Chance subsequently amended
Claim 3 to include its attorney’s fees, but labeled the amended
claim as “Claim 9,” which led Laney to file additional objec-
tions. Laney objected to Claim 9 as untimely, but the bank-
ruptcy court overruled Laney’s objection, concluding that
Claim 9 would be treated as an amendment to Claim 3. Laney
again objected to Claim 9, arguing that the claim violated 11
4                                                           No. 21-2783

U.S.C. § 1327(a) 2 and that the majority of the attorney’s fees in
Claim 9 were unnecessary. The bankruptcy court rejected
Laney’s arguments and overruled the objection, making two
basic rulings.
    First, citing Holstein v. Brill, 987 F.2d 1268 (7th Cir. 1993),
the court concluded that there were “several compelling rea-
sons” for allowing Second Chance’s post-confirmation
amendment to include attorney’s fees. The court reasoned
that: (1) the parties agreed to attorney’s fees in their contract;
(2) the confirmed plan stated that the Edge claim would be
paid in full; (3) Laney’s counsel knew about the fees before
the bankruptcy court confirmed the plan and because the
court held several hearings about the fees; and (4) Second
Chance’s counsel had a duty to respond to all of the pleadings
Laney’s counsel filed.
   Second, the court concluded that the fees were necessary
and reasonable. The court explained that the fees were neces-
sary for Second Chance’s counsel to respond to Laney’s vari-
ous pleadings and the fees were reasonable based on the time
entries with minimal time billed for very detailed briefs.
    Laney appealed to the district court, and the district court
affirmed the bankruptcy court’s decision. Laney appealed the
district court’s decision.

2 Section 1327(a) states that the “provisions of a confirmed plan bind the
debtor and each creditor, whether or not the claim of such creditor is pro-
vided for by the plan, and whether or not such creditor has objected to,
has accepted, or has rejected the plan.” 11 U.S.C. § 1327(a).
No. 21-2783                                                   5

                               II
    Laney argues that the bankruptcy court erred by permit-
ting Second Chance to amend its proof of claim to include at-
torney’s fees because: (1) Second Chance filed the amendment
after the plan was confirmed; and (2) Second Chance’s attor-
ney’s fees were unnecessary. We address each argument in
turn, giving deference to the bankruptcy court. Holstein, 987
F.2d at 1270.
    First, Laney argues that the bankruptcy court erred be-
cause Second Chance’s post-confirmation amendment was
barred by 11 U.S.C. § 1327(a). We disagree. Although con-
firmed plans are generally binding on debtors and creditors
under § 1327(a), compelling circumstances may warrant post-
confirmation claim amendments. See Holstein, 987 F.2d 1270.
    In Holstein, we explained that the relation back principle
of Rule 15(c) of the Federal Rules of Civil Procedure applies
to amended claims and “[l]eave to amend should be freely
granted early in a case.” 987 F.2d at 1270. We acknowledged
that passing litigation milestones like the confirmation date
make amendments less appropriate, and further plan changes
“should be allowed only for compelling reasons.” Id. (citing
In re Chappell, 984 F.2d 775, 782 (7th Cir. 1993)). Because nei-
ther the bankruptcy court nor the creditor in that case pro-
vided a compelling reason for allowing the plan amendment
four years after the plan was confirmed, we rejected the cred-
itor’s attempt to amend his claim.
   Here, unlike in Holstein, the bankruptcy court provided
compelling reasons for allowing the post-confirmation
amendment, including that the parties’ contract called for at-
torney’s fees, Laney’s counsel knew about the fees before the
6                                                  No. 21-2783

plan was confirmed, and the attorney’s fees accumulated be-
cause Second Chance’s counsel had a duty to respond to all
the pleadings Laney’s counsel filed. The bankruptcy court’s
reasoning here is sufficient where Second Chance filed its
amended claim merely months after the bankruptcy court
confirmed the plan and soon after hearings about the fees.
    Laney’s other argument about § 1327(a) is unpersuasive.
He argues that Holstein is distinguishable because it was a
Chapter 11 case, not a Chapter 13 case as this case is, and pos-
its instead that Chappell, a Chapter 13 case, controls the out-
come here. But in Holstein we actually relied on Chappell for
the proposition that changes to the plan after confirmation
“should be allowed only for compelling reasons.” 987 F.2d at
1272 (citing Chappell, 984 F.2d at 782). Furthermore, Chappell
does not compel a different conclusion. There, we rejected a
creditor’s post-confirmation amendment based on § 1327(a)
because the claims under the confirmed plan had been paid
in full, the bankruptcy case had closed, and the creditor had
several opportunities during the life of the plan to amend the
claim but failed to do so. Chappell, 984 F.2d 775. No compel-
ling circumstances existed that warranted an exception to
§1327(a)’s general rule. Here, Second Chance brought the is-
sue of attorney’s fees to the bankruptcy court and Laney’s at-
tention on more than one occasion before the plan was con-
firmed, and the bankruptcy court held several hearings re-
lated to the fees, which culminated in the amended claim. But,
more importantly, as the bankruptcy court found, compelling
circumstances existed to permit the amendment.
   Second, Laney argues that the bankruptcy court erred by
permitting Second Chance’s attorney’s fees because the work
was unnecessary or erroneous. He asserts, for example, that
No. 21-2783                                                  7

“Second Chance’s entry for February 28, 2020, . . . claims that
its Attorney conducted extensive research [], but Second
Chance’s Response only cites to one case” and that case did
not support its position. We have reviewed Second Chance’s
entries and we conclude that the bankruptcy court’s finding
that the fees were reasonable and necessary was sound: Sec-
ond Chance’s attorney’s fees were necessary to respond to
Laney’s various pleadings and the fees were reasonable based
on the time entries with minimal time billed for the work com-
pleted.
                              III
   For the reasons stated above, we AFFIRM the judgment of
the district court.