Travelers Casualty & Surety Co. of America v. Pacific Gas & Electric Co.

(Slip Opinion) OCTOBER TERM, 2006 1

Syllabus

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is

being done in connection with this case, at the time the opinion is issued.

The syllabus constitutes no part of the opinion of the Court but has been

prepared by the Reporter of Decisions for the convenience of the reader.

See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

TRAVELERS CASUALTY & SURETY CO. OF AMERICA

v. PACIFIC GAS & ELECTRIC CO.

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE NINTH CIRCUIT

No. 05–1429. Argued January 16, 2007—Decided March 20, 2007

After respondent (PG&E) filed for Chapter 11 bankruptcy, petitioner

(Travelers), which had previously issued a surety bond to guarantee

PG&E’s payment of state workers’ compensation benefits, asserted a

claim in the bankruptcy action to protect itself should PG&E default

on the benefits. With the Bankruptcy Court’s approval, PG&E

agreed to insert language into its reorganization plan and disclosure

statement to protect Travelers in case of such a default. Additional

litigation over the negotiated language nevertheless ensued and was

ultimately resolved by a court-approved stipulation stating, inter

alia, that Travelers could assert a general unsecured claim for attor

ney’s fees, which were authorized in the parties’ original indemnity

agreements. When Travelers filed an amended claim for such fees,

PG&E objected based on the rule the Ninth Circuit adopted in its

prior Fobian decision that where the litigated issues involve not basic

contract enforcement questions, but issues peculiar to federal bank

ruptcy law, attorney’s fees generally will not be awarded. The Bank

ruptcy Court rejected Travelers’ claim on that basis, and the District

Court and the Ninth Circuit affirmed.

Held:

1. Federal bankruptcy law does not disallow contract-based claims

for attorney’s fees based solely on the fact that the fees were incurred

litigating bankruptcy law issues. Because the Fobian rule finds no

support in federal bankruptcy law, the Ninth Circuit erred in disal

lowing Travelers’ claim. Pp. 4–12.

(a) The American rule that “the prevailing litigant is ordinarily

not entitled to collect a reasonable attorneys’ fee from the loser,” Aly

eska Pipeline Service Co. v. Wilderness Society, 421 U. S. 240, 247,

2 TRAVELERS CASUALTY & SURETY CO. OF AMERICA v.

PACIFIC GAS & ELEC. CO.

Syllabus

may be overcome by, inter alia, an “enforceable contract” allocating

such fees, Fleischmann Distilling Corp. v. Maier Brewing Co., 386

U. S. 714, 717. A contract allocating attorney’s fees that is enforce

able under substantive, nonbankruptcy law is allowable in bank

ruptcy except where the Bankruptcy Code provides otherwise. Cf.

Security Mortgage Co. v. Powers, 278 U. S. 149, 154. The Code does

not do so here. Pp. 4–5.

(b) Under the Bankruptcy Code, the bankruptcy court “shall al

low” a creditor’s claim “except to the extent that” the claim implicates

any of nine enumerated exceptions. 11 U. S. C. §502(b). Because

Travelers’ attorney’s fees claim has nothing to do with the exceptions

set forth in §§502(b)(2)–(9), it must be allowed unless it is unenforce

able under §502(b)(1), which disallows any claim that is “unenforce

able against the debtor and property of the debtor, under any agree

ment or applicable law for a reason other than because such claim is

contingent or unmatured.” Pp. 5–6.

(c) Section 502(b)(1) is most naturally understood to provide that,

with limited exceptions, any defense to a claim that is available out

side of the bankruptcy context is also available in bankruptcy. This

reading is consistent not only with the plain statutory text, but also

with the settled principle that “[c]reditors’ entitlements in bank

ruptcy arise in the first instance from the underlying substantive law

creating the debtor’s obligation, subject to any qualifying or contrary

provisions of the Bankruptcy Code.” Raleigh v. Illinois Dept. of Reve

nue, 530 U. S. 15, 20. That principle requires bankruptcy courts to

consult state law in determining the validity of most claims. See

ibid. Thus, when the Code uses the word “claim”—i.e., a “right to

payment,” §101(5)(A)—it is usually referring to a right to payment

recognized under state law, “[u]nless some federal interest requires a

different result,” Butner v. United States, 440 U. S. 48, 55. Pp. 6–7.

(d) The Fobian rule finds no support in §502 or elsewhere in fed

eral bankruptcy law. The Fobian court did not identify any Code pro

vision as presenting such support, but instead cited three of its own

prior decisions, none of which identified any basis for disallowing a

contractual claim for attorney’s fees. Nor did the court have occasion

to do so; in each of those cases, the attorney’s fees claim failed as a

matter of state law. The absence of such textual support is fatal for

the Fobian rule. See FCC v. NextWave Personal Communications

Inc., 537 U. S. 293, 302. In light of §502(b)(1)’s broad, permissive

scope, and the Court’s prior recognition that “the character of [a con

tractual] obligation to pay attorney’s fees presents no obstacle to en

forcing it in bankruptcy,” it necessarily follows that the Fobian rule

cannot stand. Security Mortgage, supra, at 154. Pp. 7–10.

2. The Court expresses no opinion as to PG&E’s arguments that

Cite as: 549 U. S. ____ (2007) 3

Syllabus

unsecured claims for contractual attorney’s fees, such as Travelers’,

are categorically disallowed by §506(b), which expressly authorizes

such fees “[t]o the extent that an allowed secured claim is secured by

property [whose] value [exceeds] the amount of such claim,” and that

such disallowance is confirmed by the Bankruptcy Code’s structure

and purpose, as examined against the backdrop of pre-Code bank

ruptcy law. The Court ordinarily does not consider arguments, such

as these, that were neither raised nor addressed below, Cooper Indus

tries, Inc. v. Aviall Services, Inc., 543 U. S. 157, 168–169, and PG&E

has not identified any circumstances warranting an exception to that

rule here. PG&E’s insistence that its arguments are “fairly included”

within the question presented in the certiorari petition is not persua

sive. Pp. 10–12.

167 Fed. Appx. 593, vacated and remanded.

ALITO, J., delivered the opinion for a unanimous Court.

Cite as: 549 U. S. ____ (2007) 1

Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in the

preliminary print of the United States Reports. Readers are requested to

notify the Reporter of Decisions, Supreme Court of the United States, Wash

ington, D. C. 20543, of any typographical or other formal errors, in order

that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES

_________________

No. 05–1429

_________________

TRAVELERS CASUALTY AND SURETY COMPANY OF

AMERICA, PETITIONER v. PACIFIC GAS AND

ELECTRIC COMPANY

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE NINTH CIRCUIT

[March 20, 2007]

JUSTICE ALITO delivered the opinion of the 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 Court of Appeals

for the Ninth Circuit held, based on a rule previously

adopted by that court, that such fees are categorically

prohibited—even where the contractual allocation of

attorney’s fees would be enforceable under applicable

nonbankruptcy law—to the extent the litigation involves

issues of federal bankruptcy law. Because that rule finds

no support in the Bankruptcy Code, we vacate and

remand.

I

Respondent Pacific Gas and Electric Company (PG&E)

filed a voluntary Chapter 11 bankruptcy petition in April

2001, 11 U. S. C. §1101 et seq., and continued thereafter to

operate its business as a “debtor in possession.” §§1107(a),

1108. The bankruptcy filing caught the attention of peti

tioner Travelers Casualty & Surety Company (Travelers),

2 TRAVELERS CASUALTY & SURETY CO. OF AMERICA v.

PACIFIC GAS & ELEC. CO.

Opinion of the Court

which had previously issued a $100 million surety bond on

PG&E’s behalf to the California Department of Industrial

Relations, guaranteeing PG&E’s payment of state work

ers’ compensation benefits to injured employees.1 In

connection with the bond, PG&E executed a series of

indemnity agreements in favor of Travelers. The indem

nity agreements provide that PG&E will be responsible for

any loss Travelers might incur in connection with the

bonds, including any attorney’s fees incurred in pursuing,

protecting, or litigating Travelers’ rights in connection

with those bonds.

Although no default occurred, Travelers asserted a

claim in the bankruptcy action to protect itself in case

PG&E defaulted on its workers’ compensation benefits at

some point in the future, requiring Travelers to make

payments under its bond. In response to Travelers’ claim,

and with the knowledge and approval of the Bankruptcy

Court, PG&E agreed to insert language into its reorgani

zation plan and disclosure statement to protect Travelers’

right to indemnity and subrogation in the event of a de

fault by PG&E.

Travelers claims, however, that PG&E then unilaterally

altered the negotiated language in a way that substan

tially diminished the protection it had been seeking.

According to Travelers, that development resulted in

additional litigation, but Travelers and PG&E ultimately

resolved the dispute by entering into a stipulation that

——————

1 California law required PG&E to provide workers’ compensation

benefits for its employees by either (1) purchasing workers’ compensa

tion insurance from a licensed provider of such insurance or (2) adopt

ing a plan, with the State’s approval, to self-insure. PG&E chose the

latter option, and was therefore required to post security with the State

to ensure ongoing payment of mandatory workers’ compensation

benefits. See Cal. Lab. Code Ann. §§3700, 3701 (West 2003). Travelers

posted the required security by issuing a bond on PG&E’s behalf. The

bond makes Travelers liable, up to $100 million, for workers’ compensa

tion benefits in the event of a default by PG&E.

Cite as: 549 U. S. ____ (2007) 3

Opinion of the Court

was later approved by the Bankruptcy Court. In addition

to accommodating Travelers’ substantive concerns, the

stipulation stated that Travelers “may assert its claim for

attorneys’ fees under the [i]ndemnity [a]greements” (sub

ject to PG&E’s right to object) as a general unsecured

claim against PG&E. Brief for Petitioner 17.

Travelers subsequently filed an amended proof of claim

seeking to recover the attorney’s fees it incurred in con

nection with PG&E’s bankruptcy proceedings. PG&E

objected, arguing that Travelers could not recover attor

ney’s fees incurred while litigating issues of bankruptcy

law.

The Bankruptcy Court agreed and rejected Travelers’

claim on that basis. App. to Pet. for Cert. 23a–25a. Trav

elers appealed that ruling to the District Court. The

District Court affirmed, relying on In re Fobian, 951 F. 2d

1149 (CA9 1991), which held that “where the litigated

issues involve not basic contract enforcement questions,

but issues peculiar to federal bankruptcy law, attorney’s

fees will not be awarded absent bad faith or harassment

by the losing party,” id., at 1153. See App. to Pet. for Cert.

10a, 17a.

Travelers appealed again, and the United States Court

of Appeals for the Ninth Circuit affirmed. 167 Fed. Appx.

593 (2006). The panel acknowledged that, in at least some

circumstances, a “ ‘prevailing party in a bankruptcy pro

ceeding may be entitled to an award of attorney fees in

accordance with applicable state law . . . .’ ” Id., at 594

(quoting In re Baroff, 105 F. 3d 439, 441 (CA9 1997)). The

panel nevertheless rejected Travelers’ claim based on the

Fobian rule, which it cited for the proposition that “attor

ney fees are not recoverable in bankruptcy for litigating

issues ‘peculiar to federal bankruptcy law.’ ” 167 Fed.

Appx., at 594 (quoting Fobian, supra, at 1153). The panel

explained that, because the fees claimed by Travelers were

incurred litigating issues that were “governed entirely by

4 TRAVELERS CASUALTY & SURETY CO. OF AMERICA v.

PACIFIC GAS & ELEC. CO.

Opinion of the Court

federal bankruptcy law,” Travelers’ claim necessarily

failed.2 167 Fed. Appx., at 594.

Travelers sought review in this Court, noting a conflict

among the Courts of Appeals regarding the validity of the

Fobian rule. Compare Fobian, supra, at 1153, with In re

Shangra-La, Inc., 167 F. 3d 843, 848–849 (CA4 1999). We

granted certiorari to resolve that conflict, 549 U. S. ___

(2006).

II

Under the American Rule, “the prevailing litigant is

ordinarily not entitled to collect a reasonable attorneys’ fee

from the loser.” Alyeska Pipeline Service Co. v. Wilderness

Society, 421 U. S. 240, 247 (1975); see Hauenstein v. Lyn

ham, 100 U. S. 483, 490–491 (1880); Arcambel v. Wise-

man, 3 Dall. 306 (1796). This default rule can, of course,

be overcome by statute. Fleischmann Distilling Corp. v.

Maier Brewing Co., 386 U. S. 714, 717 (1967). It can also

be overcome by an “enforceable contract” allocating attor

ney’s fees. Ibid.

In a case governed by the Bankruptcy Act of 1898, we

observed that “[t]he character of [a contractual] obligation

to pay attorney’s fees presents no obstacle to enforcing it

in bankruptcy, either as a provable claim or by way of a

lien upon specific property.” Security Mortgage Co. v.

Powers, 278 U. S. 149, 154 (1928). Similarly, under the

terms of the current Bankruptcy Code, it remains true

that an otherwise enforceable contract allocating attor

ney’s fees (i.e., one that is enforceable under substantive,

nonbankruptcy law) is allowable in bankruptcy except

——————

2 The Court of Appeals incorporated by reference the reasoning em

ployed in In re DeRoche, 434 F. 3d 1188 (CA9 2006), which was decided

by the same panel that decided this case. 167 Fed. Appx., at 593.

Although the DeRoche opinion is longer than its counterpart in this

case, it adds very little to the panel’s explanation of the Fobian rule.

See DeRoche, supra, at 1190–1192.

Cite as: 549 U. S. ____ (2007) 5

Opinion of the Court

where the Bankruptcy Code provides otherwise. See 4

Collier on Bankruptcy ¶ 506.04[3][a], p. 506–118 (rev.

15th ed. 2006) (hereinafter Collier).

This case requires us to consider whether the Bank

ruptcy Code disallows contract-based claims for attorney’s

fees based solely on the fact that the fees at issue were

incurred litigating issues of bankruptcy law. We conclude

that it does not.

A

When a debtor declares bankruptcy, each of its creditors

is entitled to file a proof of claim—i.e., a document provid

ing proof of a “right to payment,” 11 U. S. C. §101(5)(A)—

against the debtor’s estate. Once a proof of claim has been

filed, the court must determine whether the claim is “al

lowed” under §502(a) of the Bankruptcy Code: “A claim or

interest, proof of which is filed under section 501 . . . is

deemed allowed, unless a party in interest . . . objects.”

But even where a party in interest objects, the court

“shall allow” the claim “except to the extent that” the

claim implicates any of the nine exceptions enumerated in

§502(b). Ibid. Those exceptions apply where the claim at

issue is “unenforceable against the debtor . . . under any

agreement or applicable law,” §502(b)(1); “is for un

matured interest,” §502(b)(2); “is for [property tax that]

exceeds the value of the [estate’s] interest” in the property,

§502(b)(3); “is for services of an insider or attorney of the

debtor” and “exceeds the reasonable value of such ser

vices,” §502(b)(4); is for unmatured debt on certain ali

mony and child support obligations, §502(b)(5); is for

certain “damages resulting from the termination” of a

lease or employment contract, §§502(b)(6) and (7); “results

from a reduction, due to late payment, in the amount of

. . . credit available to the debtor in connection with an

employment tax on wages, salaries, or commissions earned

from the debtor,” §502(b)(8); or was brought to the court’s

6 TRAVELERS CASUALTY & SURETY CO. OF AMERICA v.

PACIFIC GAS & ELEC. CO.

Opinion of the Court

attention through an untimely proof of claim, §502(b)(9).

Travelers’ claim for attorney’s fees has nothing to do

with property tax, child support or alimony, services pro

vided by an attorney of the debtor, damages resulting from

the termination of a lease or employment contract, or the

late payment of any employment tax. See §§502(b)(2)–(8).

Nor does it appear that the proof of claim was untimely.

See §502(b)(9). Thus, Travelers’ claim must be allowed

under §502(b) unless it is unenforceable within the mean

ing of §502(b)(1).

B

Section 502(b)(1) disallows any claim that is “unenforce

able against the debtor and property of the debtor, under

any agreement or applicable law for a reason other than

because such claim is contingent or unmatured.” This

provision is most naturally understood to provide that,

with limited exceptions, any defense to a claim that is

available outside of the bankruptcy context is also avail

able in bankruptcy. See 4 Collier ¶ 502.03[2][b], at 502–22

(explaining that §502(b)(1) is generally understood to

“make available to the trustee any defense” available to

the debtor “under applicable nonbankruptcy law”—i.e.,

any defense that the debtor “could have interposed, absent

bankruptcy, in a suit on the [same substantive] claim by

the creditor”).

This reading of §502(b)(1) is consistent not only with the

plain statutory text, but also with the settled principle

that “[c]reditors’ entitlements in bankruptcy arise in the

first instance from the underlying substantive law creat

ing the debtor’s obligation, subject to any qualifying or

contrary provisions of the Bankruptcy Code.” Raleigh v.

Illinois Dept. of Revenue, 530 U. S. 15, 20 (2000). That

principle requires bankruptcy courts to consult state law

in determining the validity of most claims. See ibid.

Indeed, we have long recognized that the “ ‘basic federal

Cite as: 549 U. S. ____ (2007) 7

Opinion of the Court

rule’ in bankruptcy is that state law governs the substance

of claims, Congress having ‘generally left the determina

tion of property rights in the assets of a bankrupt’s estate

to state law.’ ” Ibid. (quoting Butner v. United States, 440

U. S. 48, 57, 54 (1979); citation omitted). Accordingly,

when the Bankruptcy Code uses the word “claim”—which

the Code itself defines as a “right to payment,” 11 U. S. C.

§101(5)(A)—it is usually referring to a right to payment

recognized under state law. As we stated in Butner,

“[p]roperty interests are created and defined by state law,”

and “[u]nless some federal interest requires a different

result, there is no reason why such interests should be

analyzed differently simply because an interested party is

involved in a bankruptcy proceeding.” 440 U. S., at 55;

accord, Vanston Bondholders Protective Comm. v. Green,

329 U. S. 156, 161 (1946) (“What claims of creditors are

valid and subsisting obligations against the bankrupt at

the time a petition in bankruptcy is filed is a question

which, in the absence of overruling federal law, is to be

determined by reference to state law”).

C

In rejecting Travelers’ claim for contractual attorney’s

fees, the Court of Appeals did not conclude that the claim

was “unenforceable” under §502(b)(1) as a matter of appli

cable nonbankruptcy law. Nor did it conclude that Travel

ers’ claim was rendered unenforceable by any provision of

the Bankruptcy Code. To the contrary, the court acknowl

edged that, in at least some circumstances, a “ ‘prevailing

party in a bankruptcy proceeding may be entitled to an

award of attorney fees in accordance with applicable state

law . . . .’ ” 167 Fed. Appx., at 594 (quoting Baroff, 105

F. 3d, at 441).

The court nevertheless rejected Travelers’ claim based

solely on a rule of that court’s own creation—the so-called

Fobian rule—which dictates that “attorney fees are not

8 TRAVELERS CASUALTY & SURETY CO. OF AMERICA v.

PACIFIC GAS & ELEC. CO.

Opinion of the Court

recoverable in bankruptcy for litigating issues ‘peculiar to

federal bankruptcy law.’ ” 167 Fed. Appx., at 594 (quoting

Fobian, 951 F. 2d, at 1153). The court explained that,

because the fees claimed by Travelers were incurred liti

gating issues that were “governed entirely by federal

bankruptcy law,” 167 Fed. Appx., at 594, Travelers’ claim

necessarily failed.

The Fobian rule finds no support in the Bankruptcy

Code, either in §502 or elsewhere. In Fobian, the court did

not identify any provision of the Bankruptcy Code as

providing support for the new rule. See 951 F. 2d, at 1153.

Instead, the court cited three of its own prior decisions,

In re Johnson, 756 F. 2d 738 (1985); In re Coast Trading

Co., 744 F. 2d 686 (1984); and In re Fulwiler, 624 F. 2d

908 (1980) (per curium). Significantly, in none of those

cases did the court identify any basis for disallowing a

contractual claim for attorney’s fees incurred litigating

issues of federal bankruptcy law. Nor did the court have

occasion to do so; in each of those cases, the claim for

attorney’s fees failed as a matter of state law. See John

son, supra, at 741–742; Coast Trading, supra, at 693;

Fulwiler, supra, at 910.3

The absence of textual support is fatal for the Fobian

rule. Consistent with our prior statements regarding

——————

3 In Johnson, the debtor sought attorney’s fees after the creditor un

successfully requested relief from the automatic stay under 11 U. S. C.

§362(d)(1). The debtor acknowledged that the contract between the

parties entitled only the creditor to attorney’s fees, but the debtor

claimed that a California statute extended that entitlement to both

parties. The court rejected that argument, noting that the statute

applied only in the context of an “ ‘action on a contract,’ ” and concluding

that a request for relief from an automatic stay could not be considered

an action on a contract. 756 F. 2d, at 741–742. Both Coast Trading

and Fulwiler involved claims for attorney’s fees based on an Oregon

statute similar to the statute at issue in Johnson; the court found the

statute inapplicable in both cases. Coast Trading, 744 F. 2d, at 693;

Fulwiler, 624 F. 2d, at 909–910.

Cite as: 549 U. S. ____ (2007) 9

Opinion of the Court

creditors’ entitlements in bankruptcy, see, e.g., Raleigh,

530 U. S., at 20, we generally presume that claims en

forceable under applicable state law will be allowed in

bankruptcy unless they are expressly disallowed. See 11

U. S. C. §502(b). Neither the court below nor PG&E has

offered any reason why the fact that the attorney’s fees in

this case were incurred litigating issues of federal bank

ruptcy law overcomes that presumption.

Section 502(b)(4) is instructive on this point. That

provision expressly disallows claims for a particular cate

gory of attorney’s fees—those “for services of an . . . attor

ney of the debtor,” to the extent the claimed fees “excee[d]

the reasonable value of such services.” The existence of

that provision suggests that, in its absence, a claim for

such fees would be allowed in bankruptcy to the extent

enforceable under state law. The absence of an analogous

provision excluding the category of fees covered by the

Fobian rule likewise suggests that the Code does not

categorically disallow them. See 4 Collier ¶ 506.04[3][a],

at 506–118 (concluding that Fobian “inverts the proper

analysis” by allowing attorney’s fees only where they are

expressly authorized by the Bankruptcy Code, and ex

plaining that “a claim for attorney’s fees arising in the

context of litigating bankruptcy issues must be allowed if

valid under applicable state law”).

Congress, of course, has the power to amend the Bank

ruptcy Code by adding a provision expressly disallowing

claims for attorney’s fees incurred by creditors in the

litigation of bankruptcy issues. But because no such

provision exists, the Bankruptcy Code provides no basis

for disallowing Travelers’ claim on the grounds stated by

the Ninth Circuit.

As we explained in FCC v. NextWave Personal Commu

nications Inc., 537 U. S. 293 (2003), “where Congress has

intended to provide . . . exceptions to provisions of the

Bankruptcy Code, it has done so clearly and expressly.”

10 TRAVELERS CASUALTY & SURETY CO. OF AMERICA v.

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Id., at 302. Here, the Bankruptcy Code does not “clearly

and expressly” compel courts to follow the Fobian rule; on

the contrary, the Code says nothing about unsecured

claims for contractual attorney’s fees incurred while liti

gating issues of bankruptcy law. In light of the broad,

permissive scope of §502(b)(1), and our prior recognition

that “the character of [a contractual] obligation to pay

attorney’s fees presents no obstacle to enforcing it in

bankruptcy,” it necessarily follows that the Fobian rule

cannot stand. Security Mortgage, 278 U. S., at 154; see

Cohen v. de la Cruz, 523 U. S. 213, 221 (1998) (“We . . .

‘will not read the Bankruptcy Code to erode past bank

ruptcy practice absent a clear indication that Congress

intended such a departure’ ” (quoting Pennsylvania Dept.

of Public Welfare v. Davenport, 495 U. S. 552, 563 (1990))).

III

PG&E makes no effort to defend the Fobian rule. See

Tr. of Oral Arg. 28 (conceding that PG&E does not defend

the Fobian rule, and acknowledging that “[t]he Fobian

rule is wrong . . . as to the distinction that it draws be

tween State law and Federal litigation”). Instead, PG&E

argues that §506(b) categorically disallows unsecured

claims for contractual attorney’s fees and—noting that

Travelers’ claim is unsecured—asks us to affirm on that

basis. Section 506(b) provides as follows:

“To the extent that an allowed secured claim is se

cured by property the value of which . . . is greater

than the amount of such claim, there shall be allowed

to the holder of such claim, interest on such claim,

and any reasonable fees, costs, or charges provided for

under the agreement or State statute under which

such claim arose.” 11 U. S. C. A. §506(b) (Supp. 2006).

According to PG&E, this provision authorizes claims for

contractual attorney’s fees to the extent the creditor is

Cite as: 549 U. S. ____ (2007) 11

Opinion of the Court

oversecured, but disallows such claims to the extent the

creditor is either not oversecured or (like Travelers) com

pletely unsecured. This reading of the Code, PG&E ar

gues, “is not a matter of negative implication, but of ex

plicit negation.” Brief for Respondent 18. PG&E also

argues that the structure and purpose of the Bankruptcy

Code, examined against the backdrop of pre-Code bank

ruptcy law, confirm that Congress did not intend to allow

unsecured creditors to recover attorney’s fees. See id., at

25–38.

PG&E did not raise these arguments below. Conse

quently, none of the lower courts had occasion to address

them. Nor were these arguments presented in PG&E’s

brief in opposition to certiorari. PG&E nevertheless in

sists that we should address these arguments as though

they were “fairly included” within the question presented

in Travelers’ petition for certiorari. See id., at 41. That

contention appears to be premised on the theory that “the

Fobian rule reaches the correct conclusion in this case,”

but “doesn’t go far enough in . . . preventing creditors from

requiring other creditors to pay for their attorneys’ fees.”

Tr. of Oral Arg. 25.

We are not persuaded. We granted certiorari to resolve

a conflict among the lower courts regarding the Fobian

rule, which is analytically distinct from, and fundamen

tally at odds with, PG&E’s reading of §506(b).4

In any event, we ordinarily do not consider claims that

were neither raised nor addressed below, Cooper Indus

——————

4 PG&E’s new reading of the Code would prohibit all unsecured credi

tors from recovering contractual, postpetition attorney’s fees in bank

ruptcy proceedings—even if those fees were incurred while litigating

issues of state law. See Brief for Respondent 17–19. The Fobian rule,

by contrast, would allow such a recovery—even by unsecured credi

tors—so long as the litigation resulting in the claimed fees did not

involve “issues peculiar to federal bankruptcy law.” See In re Fobian,

951 F. 2d 1149, 1153 (CA9 1991).

12 TRAVELERS CASUALTY & SURETY CO. OF AMERICA v.

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Opinion of the Court

tries, Inc. v. Aviall Services, Inc., 543 U. S. 157, 168–169

(2004), and PG&E has failed to identify any circumstances

that would warrant an exception to that rule in this case.

We therefore will not consider these arguments.5

Accordingly, we express no opinion with regard to

whether, following the demise of the Fobian rule, other

principles of bankruptcy law might provide an independ

ent basis for disallowing Travelers’ claim for attorney’s

fees. We conclude only that the Court of Appeals erred in

disallowing that claim based on the fact that the fees at

issue were incurred litigating issues of bankruptcy law.

* * *

The judgment of the United States Court of Appeals for

the Ninth Circuit is therefore vacated, and the case is

remanded for further proceedings consistent with this

opinion.

It is so ordered.

——————

5 For similar reasons, we will not address PG&E’s argument that

Travelers’ claim should be denied based on the theory that the fees at

issue were incurred in connection with activities that were not rea

sonably necessary to preserve Travelers’ rights and, alternatively, were

not authorized by Travelers’ contract with PG&E. See Brief for Re

spondent 42–49. This argument was not addressed below, was not

raised in PG&E’s brief in opposition to certiorari, and bears no relation

to the question presented. See this Court’s Rule 14.1(a) (“Only the

questions set out in the petition, or fairly included therein, will be

considered by the Court”).