Picerne prevailed in arbitration on its mechanics lien claim against Castellino, forcing Castellino to file a Chapter 11 bankruptcy petition. Castellino’s Chapter 11 plan was approved—as a settlement it allowed Picerne to proceed with its state court action to foreclose its mechanics lien. However, confirmation of the Chapter 11 plan discharged Castellino from its pre-petition debts which included all debts that were within the claimant’s fair contemplation when the petition was filed, even if the claim was contingent or had not yet accrued. Here, Picerne’s claim for attorney fees arose prepetition under the fair contemplation test and so was discharged upon confirmation of the Chapter 11 plan. The bankruptcy court therefore properly denied Picerne’s claim for attorney fees incurred in the state court mechanics lien foreclosure suit.
Ninth Circuit Court of Appeals (Ikuta, J.); September 6, 2016; 2016 WL 4608146