SUPREME COURT RULES THAT FEDERAL BANKRUPTCY LAW DOES NOT PROHIBIT AN UNSECURED CREDITOR FROM RECOVERING POSTPETITION ATTORNEY'S FEES AUTHORIZED BY AN ENFORCEABLE PREPETITION CONTRACT

The US Supreme Court recently ruled in Travelers Casualty & Surety Co of America v. Pacific Gas & Electric Co that federal bankruptcy law does not preclude an unsecured creditor from obtaining attorney's fees authorized by a valid prepetition contract and incurred in postpetition litigation. In reaching this decision, the Supreme court overruled the Ninth Circuit Court of Appeal's ruling in Gobian v. Western farm Credit Bank (In re Fobian), and, in all probability, fueled what will prove to be a lengthy debate concerning the collection of attorney's fees in bankruptcy cases.