First Service Bank v. World Aircraft, Inc. et al

Filing 63

ORDER denying 48 Motion to Reopen Case; denying without prejudice 49 Motion for Attorney Fees; denying without prejudice 62 Amended Motion for Attorney Fees. Signed by District Judge Taylor B. McNeel on 3/5/2025. (KAB)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
SOUTHERN DIVISION
FIRST SERVICE BANK
v.

PLAINTIFF
CIVIL ACTION NO. 1:24-cv-20-TBM-RPM

WORLD AIRCRAFT, INC. and
THOMAS SWAREK

DEFENDANTS
ORDER

Following the Court’s Order [45] granting summary judgment in favor of First Service Bank
and entering a default judgment against Thomas Swarek, First Service Bank timely moved for
attorney fees and nontaxable expenses under Rule 54(d)(2) of the Federal Rules of Civil Procedure
seeking a substantial sum of $3,459,833.07. After receiving a reimbursement of $623,8212.28 from
the Final DIP Order in Bankruptcy Court, First Service Bank amended its request and now seeks
$2,549,817.96 in attorney fees and nontaxable expenses. According to First Service Bank, these
fees and expenses arise from six interrelated proceedings: the “Guaranty Suit” (the instant action),
“El Dorado Chapter 11” bankruptcy proceeding, “Hugoton Chapter 11” bankruptcy proceeding,
“World Aircraft Chapter 11” bankruptcy proceeding, “Bluestone Chapter 11” bankruptcy
proceeding, and the “Escambia Chapter 11” bankruptcy proceeding. [50], pps. 2-3. First Service
Bank asserts that because “Swarek refused to honor his guaranty when [First Service Bank] called
upon him to do so,” First Service Bank was obligated to “?le this Action, [and] in order to seek
recovery from Swarek, it also forced [First Service Bank] into the ?ve interrelated bankruptcy
proceedings—which would not have happened had Swarek honored his contract.” [50], p. 13.
In support of its request, First Service Bank attaches 343 pages of billing records and
a?davits. Upon review, a large portion, if not the vast majority, of the fees are related to the ?ve

bankruptcy proceedings. But First Service Bank has not cited to any cases where a bank has sought
to recover attorney fees and expenses in a single breach of contract action rather than in each
individual bankruptcy or action from which the fees and expenses were incurred—and this Court
has found none.
Instead, First Service Bank argues that it is entitled to seek all attorney fees and expenses
related to Swarek’s “refus[al] to honor his guaranty” in this Court, even if they were not incurred
in this action, pursuant to the contractual language within Swarek’s guaranty, the Term Loan
Credit Agreement, and the Security Agreement. [50], p. 2. According to First Service Bank,
Arkansas law governs the contract between the parties and “[t]he Arkansas Supreme Court has
made clear that a court must enforce any contract-based prevailing party attorneys’ fee and
expenses provision like the ones in Swarek’s loan and guaranty-related documents.” [50], p. 8. The
Arkansas Supreme Court, however, has only found such contract-based attorney fee agreements to
be enforceable “where the parties entered into a written contract that speci?cally provides for the
payment of attorney’s fees incurred in the enforcement of the contract.” Gri?n v. First National
Bank, 318 Ark. 848, 888 S.W.2d 306 (1994) (emphasis added). And unfortunately for First Service
Bank, the terms of the instant contract do not “speci?cally provide” for the payment of attorney
fees to be recovered in one action to enforce a contract rather than in the separate bankruptcies or
actions in which the fees were incurred.
To be sure, in executing the guaranty, Swarek agreed to “the prompt payment and
performance of the Guaranteed Obligation when due . . . and at all times thereafter.” [50], p. 6. The
“Guaranteed Obligation” included “all reasonable attorneys’ fees and expenses with respect to the
foregoing, and including any obligations in respect of interest, fees or expenses that accrue after the

2

?ling of any proceeding under any Debtor Relief Law, regardless of whether allowed or allowable
in whole or in part as a claim in such proceeding.” [50], p. 6. First Service Bank argues that this
provision “explicitly covers bankruptcy proceedings resulting from Swarek’s breach” because the
Guaranteed Obligation included proceedings “under any Debtor Relief Law.” [50], p. 6. While
First Service Bank may be able to recover attorney fees and expenses arising out of the ?ve separate
bankruptcy proceedings, the provision does not support First Service Bank’s argument that such
fees may be recovered in this action.
First Service Bank also relies on the Term Loan Credit Agreement and the Security
Agreement in support of the position that the contractual language permits it to recover all attorney
fees and expenses in one action rather than separate actions. But like the Guaranteed Obligation
provision, neither Term Loan Credit Agreement nor the Security Agreement support First Service
Bank’s argument. Indeed, the Term Loan Credit Agreement merely provides that Swarek shall pay:
All out-of-pocket costs and expenses of Lender in connection with . . . this
Agreement and the other Loan Documents including, without limitation, the
reasonable fees and out of pocket expenses of counsel for Lender with respect to
advising Lender as to its rights and responsibilities under this Agreement, and . . .
counsel fees and expenses of Lender [] in connection with the enforcement . . .
whether through negotiations, legal proceedings, or otherwise[,] of this Agreement
and the other Loan Documents following an Event of Default.
[50], p. 6. And according to the Security Agreement, Swarek is obligated to: “forever indemnify,
protect, defend and hold harmless” First Service Bank from “any and all . . . suits, costs, expenses,
or disbursements . . . (including the fees, charges and disbursements of any counsel) that may be
. . . incurred by, or . . . in any way relating to or arising out of this agreement.” [50], p. 7. In light of
the contractual language, the Court ?nds that while First Service Bank contracted for the recovery
of attorney fees and expenses in certain circumstances, it did not contract for such recovery in a

3

singular action opposed to the individual actions in which the fees were actually accrued—and
where a court in each bankruptcy can determine the applicability of the contract language to the
particular bankruptcy at issue.
Even if First Service Bank had provided this Court with authority that awarding
$2,549,817.96 in attorney fees and nontaxable expenses accrued in ?ve separate bankruptcy
proceedings was permissible in this case, the bankruptcy court would nevertheless be better
equipped to analyze First Service Bank’s request for fees and expenses arising out of the ?ve
bankruptcy actions. In re Akatugba, No. 21-cv-01015-JST, 2022 WL 20275202, at *2 (N.D. Cal.
Nov. 15, 2022) (?nding the reasonableness of the fees accrued in the bankruptcy proceedings
“should be decided by the bankruptcy court, which is more familiar than this Court is with the
market for legal services within the bankruptcy specialty.”) (collecting cases). Indeed, it is this
Court’s understanding that such fee requests are traditionally brought before the bankruptcy court,
and then appealed to the district court if issues arise. See In re Peabody Ener

Corp., No. No. 16-

42529-399, 2019 WL 1367769, at * 4 (E.D. Mo. Mar. 26, 2019).
First Service Bank can certainly attempt to pursue separate requests for attorney fees in the
proper bankruptcy proceedings. But, as for this case, First Service Bank is instructed to ?le a new
motion for attorney fees in this action, ensuring the fees requested relate only to the fees and
nontaxable expenses incurred from the instant action.

4

IT IS THEREFORE ORDERED AND ADJUDGED that First Service Bank’s Motion to
Reopen Case [48] is DENIED, as this Court need not reopen the case to rule on First Service
Bank’s Motion for Attorney Fees.1
IT IS FURTHER ORDERED AND ADJUDGED that First Service Bank’s Motion for
Attorney Fees [49] is DENIED without prejudice to re?ling.
IT IS FURTHER ORDERED AND ADJUDGED that First Service Bank’s Amended
Motion for Attorney Fees [62] is DENIED without prejudice to re?ling.
This, the 5th day of March, 2025.

__________________________
TAYLOR B. McNEEL
UNITED STATES DISTRICT JUDGE

In its Final Judgment Against Thomas Swarek and Order Administratively Closing the Case [47], the Court
ordered that this case be administratively closed “pursuant to the Order [33] staying this matter as to World Aircraft,
Inc., pending World Aircraft, Inc.’s bankruptcy proceeding.” [47]. The Court also advised the parties that “[n]othing
contained in this Order shall be considered a dismissal or disposition of this matter against World Aircraft, Inc. [and]
[t]he parties may seek, by motion, to reopen this case for further proceedings.” [47]. Thus, the parties need only to
seek to reopen this case for further proceedings upon the resolution of World Aircraft Inc.’s bankruptcy proceeding.
The Court recognizes that First Service Bank’s Motion was made out of an abundance of caution, but since there is no
indication on the docket that World Aircraft, Inc.’s bankruptcy proceeding has been resolved, or that the Order [33]
staying this matter as to World Aircraft, Inc. should be lifted, it is unnecessary to reopen the case at this time.
1

5