Court Awards Costs, Not Attorney Fees, Due to American Rule


Publication| Bankruptcy & Corporate Restructuring

In Claybrook v. Autozone Texas, L.P., the Delaware Bankruptcy Court awarded costs to the defendants based in part on the court’s finding that the plaintiff-trustee failed to demonstrate a viable basis for his claims against the defendants. The court, however, declined to award attorney fees, relying on the American Rule “that all parties must pay their own way.” 

In Autozone, the trustee sought to avoid and recover alleged preferential transfers and compel the payment of allegedly overdue account receivables. The defendants contested liability on the grounds that any payable due from the defendants was offset by a receivable due from the debtor. During discovery, the defendants demonstrated substantial doubt regarding the viability of the trustee’s claim that the defendants owed any amounts to the debtor. Nevertheless, the trustee continued to pursue his claims. In support of his case, the trustee attempted to rely on the testimony of an alleged expert witness. The trustee, however, did not comply with the expert-related disclosure requirements under the federal rules or the applicable scheduling order. Moreover, at deposition, the trustee’s expert was unable to answer questions related to topics on which he was designated to appear. The trustee also failed to produce certain documents as requested by the defendants.

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