In re Moon

Case Type:
Case Status:
Affirmed in part and Reversed in part
NV-20-1144-BTaF, NV-20-1155-BTaF (9th Circuit, Jan 07,2021) Not Published
The Ninth Circuit Bankruptcy Appellate Panel affirmed in part and reversed in part the award of attorneys' fees and costs to debtors for the violation of the automatic stay by a creditor. The BAP held that attorneys' fees and costs are recoverable under section 362(k)(1) even if the debtor is not personally liable for them, but it vacated the fee award and remanded to the bankruptcy court to provide an explanation supporting the fee award.
Procedural context:
The bankruptcy court found that a creditor had willfully violated the automatic stay with its postpetition collection efforts against chapter 13 debtors but declined to award damages for an alleged violation of the discharge injunction. The court subsequently awarded the debtors their fees and costs but denied the debtors' request for a fee enhancement. The creditor appealed the fee award and the debtors appealed the fee enhancement. The BAP affirmed the award the decision to award fees and costs but vacated and remanded because the bankruptcy court failed to state the reasons for the fee award. The BAP also directed the court to consider the reversal of the damages award and remand of the punitive damages award.
The debtors hired their attorney to represent them in the stay violation proceedings against the creditor on a contingent basis but did not have a written agreement with the attorney. The debtors prevailed in the stay violation litigation and were awarded $100,742.10 in compensatory damages, including $100,000 for emotional distress by one of the debtors, and $200,000 in punitive damages. The court subsequently awarded the debtors their attorneys' fees and costs in the amount of $67,007.94 over the objection of the creditor, which had argued that fees could not be awarded because they had not been "incurred." The creditor pointed out that there was no written agreement obligating the debtors to pay the contingency fee, and Nevada Rule of Professional Conduct 1.5(c) requires contingency fee agreements be in writing. The creditor also argued that any fees awarded should be attributed only to the time spent on the stay violation claim because the debtors had not succeeded on their discharge injunction violation claim. The debtors argued that they had incurred the fees even though they had not paid the attorney for his services and that they were successful on both claims even if the court had only awarded damages for the stay violation. The BAP held that, based on Ninth Circuit precedent, section 362(k) is in the nature of a fee-shifting statute. Under other federal fee-shifting statutes, the Supreme Court and the Ninth Circuit Court of Appeals have held that attorneys' fees and costs are "incurred" even when the plaintiff is not personally liable for them, such as where counsel is representing the plaintiff on a contingent fee basis or pro bono. Therefore, the BAP held that the debtors had "incurred" the fees and costs even if they were not personally liable for them such that the decision to award fees and costs was proper. However, the BAP vacated the award and remanded for the bankruptcy court to determine the amount of fees to be awarded and provide an explanation for the award, including as to the fees awarded for the discharge injunction violation.
Brand, Taylor, Faris

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