Jacqueline Sterling v Southlake Nautilus Health & Racquett Club, Incorpo
Seventh Circuit holds that comparative fault requires a reduction in compensatory damages for a discharge violation but not for a debtor’s attorneys’ fees.
- Rochelle Quick Take
View Rochelle Summary- Case Type:
- Consumer
- Case Status:
- Affirmed in part and Reversed in part
- Citation:
- No. 24-2021 (7th Circuit, Jun 20,2025) Published
- Tag(s):
- Ruling:
- The U.S. Court of Appeals for the 7th Circuit reversed in part and vacated in part the district court's judgment affirming the bankruptcy court’s awarding of reduced attorney’s fees to Debtor due to Debtor’s contribution to her injury. The court ruled that the bankruptcy court has broad discretion to award attorney’s fees and that the bankruptcy court abused its discretion by applying the doctrine of pure comparative fault when determining the award. The court remanded the case to the bankruptcy court to reconsider awards for attorney’s fees with its broad discretion in mind.
- Procedural context:
- Debtor sought relief from Defendant’s civil contempt, which the bankruptcy court granted in the form of awarding Debtor compensatory damages and attorney’s fees. Debtor appealed the bankruptcy court’s sanctions decision, first to the district court, which affirmed, and then to the U.S. Court of Appeals.
- Facts:
- Creditor violated the bankruptcy court’s discharge order by continuing to pursue a pre-petition claim against Debtor worth $957, based on unpaid gym membership fees, leading to Debtor being arrested and spending a weekend in jail. Creditor failed to forward notices of Debtor’s bankruptcy to its outside attorneys, who continued to pursue Creditor’s pre-petition claims against Debtor in state court. Because Debtor failed to follow a local bankruptcy rule, which required her to provide written notice of her bankruptcy to any court where an action was maintained against her, the state court judge who issued the bench warrant that led to Debtor's arrest had no record of her bankruptcy. The bankruptcy court found Debtor blameworthy and determined award amounts by applying the doctrine of pure comparative fault. The state court judge likely would not have issued the warrant if Debtor had followed the local rule; thus, her arrest may have been avoided. The bankruptcy court awarded Debtor $9,724.50 in compensatory damages for Defendant's share of liability for Debtor's emotional distress and lost wages stemming from her arrest. Reasonable attorney's fees were valued at $198,710, but the bankruptcy court awarded Debtor $99,355 because it applied the doctrine of pure comparative fault. The bankruptcy court correctly applied the doctrine of comparative fault when determining the award of compensatory damages; however, it erred by applying the doctrine when determining the award for attorney’s fees.
- Judge(s):
- Rovner, Brennan, and St. Eve