MEMORANDUM**

John J. Giovannone is the Chapter 7 Trustee in bankruptcy of Bannister-Brighton, Ltd. ("BBL"), a company that was involved in the sale of precious metals to the public in 1986. Bruce Englebrecht and the law firm of Burton, Englebrecht, Harrison & Lerch (collectively "Englebrecht"), advised BBL in connection with the sale of the precious metals.

Giovannone alleges that the principals of BBL violated the commodities and securities laws, causing "valid claims" to be filed with the bankruptcy court against BBL in excess of one million dollars. Giovannone further alleges that Englebrecht aided and abetted in the violation of the commodities and securities laws by advising the BBL principals to engage in such conduct and failing to advise that the conduct was illegal. Giovannone concludes that because customers of BBL have lost money, he is entitled to assert violations of the commodity and security laws against BBL principals and Englebrecht.

The district court granted Englebrecht's Motion to Dismiss, pursuant to Federal Rule of Civil Procedure 12(b)(6) and 9(b), on the basis that the Trustee in bankruptcy did not have standing to bring these claims. The district court denied Englebrecht's request for costs and attorneys' fees pursuant to Section 11(e) of the Securities Act of 1933. See 15 U.S.C. Sec. 77k(e) (1988).

This court has jurisdiction pursuant to 28 U.S.C. Sec. 1291 in that the parties are appealing from a final decision of the district court.

The district court's holding as to Giovannone's standing is a conclusion of law that this court reviews de novo. See Williams v. California 1st Bank, 859 F.2d 664, 666 (9th Cir.1988).

In order for a bankruptcy trustee to have standing to bring a lawsuit, the debtor in bankruptcy must have suffered damage or injury. See id. at 666; Rochelle v. Marine Midland Grace Trust Co., 535 F.2d 523, 527 (9th Cir.1976). A bankruptcy trustee does not have standing to maintain an action on behalf of any person or entity other than the debtor in bankruptcy. See id.

Giovannone claims that BBL was injured by Englebrecht's conduct, because as a proximate result of Englebrecht's legal advice, "valid claims" of customers were filed against BBL. Giovannone argues, therefore, that he is not bringing this action on behalf of the defrauded customers, but on behalf of BBL.

We disagree. Giovannone did not allege that BBL itself was a victim of Englebrecht's conduct. The only allegations of damage to BBL relate to the claims filed against BBL's bankruptcy estate. However, Giovannone does not allege that these claims have been adjudicated against BBL, or that BBL has settled the claims, or that BBL has paid any money to any of the claimants. The mere filing of claims against BBL's bankruptcy estate, without more, does not constitute injury to BBL.

Giovannone's suit against Englebrecht is very similar to an action for subrogation. The right to subrogation, however, only arises after the subrogee pays or discharges a debt for which another is primarily liable. See In re New England Fish Co., 749 F.2d 1277, 1282 (9th Cir.1984). If BBL pays off the claims of the defrauded customers, Giovannone may well be able to bring a subrogation action against Englebrecht. At the present time, however, Giovannone cannot bring this lawsuit. His suit is premature.

This court reviews the district court's failure to award attorneys' fees for an abuse of discretion. See Western Fed. Corp. v. Erickson, 739 F.2d 1439, 1444 (9th Cir.1984).

Section 11(e) of the 1933 Act allows a trial court, in its discretion, to award costs and reasonable attorneys' fees if it "believes the suit or defense to have been without merit." 15 U.S.C. Sec. 77k(e) (1988). Under this section, costs and attorneys' fees may only be awarded if the claim or defense borders on the frivolous or is brought in bad faith. See Weil v. Investment/Indicators, Research & Management, Inc., 647 F.2d 18, 22 (9th Cir.1981).

Englebrecht contends that the district court abused its discretion when it failed to award costs and attorneys' fees, because BBL clearly did not suffer any damage, and thus Giovannone's assertion of standing was frivolous. We disagree. An unsuccessful action under Section 11(e) is not necessarily meritless or frivolous. See Can-Am Petroleum Co. v. Beck, 331 F.2d 371, 374 (10th Cir.1964). Although we have held as a matter of law that BBL was not damaged, we cannot say that the district court abused its discretion by failing to award costs and attorneys' fees.

The parties shall bear their own costs, including attorneys' fees, on appeal.

AFFIRMED.