Snowden v. Check into Cash of Washington, Inc

Summarized by David Hercher , U.S. Bankruptcy Court, District of Oregon
11 years 5 months ago

Citation:

Matter of Snowden, No. 13-35291 (9th Cir. Sep. 12, 2014).

Tag(s):

Ruling:

For an automatic stay violation, the chapter 7 debtor was entitled to receive emotional distress damages, punitive damages, and attorney fees incurred to end the violation, but not fees incurred to recover damages.

Procedural context:

The bankruptcy court awarded the debtor emotional-distress damages, punitive damages, and attorney fees incurred through the date the creditor made a conditional offer to return the funds improperly taken from the debtor's bank account after the petition date. The district court affirmed. The court of appeals affirmed the bankruptcy court's decisions on emotional-distress damages and punitive damages, but it reversed the bankruptcy court's award of attorney fees because the award excluded some fees incurred to end the stay violation.

Facts:

The creditor violated the automatic stay by cashing a prepetition check after the petition date. The components of damages recoverable under section 362(k) for a stay violation include emotional-distress damages, punitive damages, and attorney fees incurred until the violation ends. To recover emotional-distress damages, the debtor must demonstrate that the debtor (1) suffers significant harm (2) clearly establishes the significant harm, and (3) demonstrates a causal connection between that significant harm and the violation of the stay (as distinct from the anxiety and pressures inherent in the bankruptcy process). The bankruptcy court did not err in awarding emotional-distress damages. Under section 362(k), punitive damages are available for a stay violation “in appropriate circumstances.” A punitive-damages award requires “some showing of reckless or callous disregard for the law or rights of others.” The creditor's failure to provide a policy or employee training about how to address debt collection after a bankruptcy filing demonstrated reckless and callous disregard for the law. Attorney fees are recoverable under section 362(k) only to the extent that the fees related to remedying the stay violation and not to prosecuting the adversary proceeding in which the debtor pursued a claim for those damages. Because the creditor's offer to return the amount taken was conditioned on the debtor releasing other claims against the creditor, the offer did not end the violation. Having violated the stay, the creditor had an affirmative obligation to return to the debtor any property that the creditor had wrongfully seized. The debtor had to proceed with litigation to establish a stay violation. The violation ended only when the bankruptcy court found a violation. The bankruptcy court properly failed to award sanctions under the court's inherent authority or under section 105(a). The inherent-authority award was property rejected because the bankruptcy court declined to find any bad faith in the creditor's approach to the litigation. And, because a remedy was available to the debtor under section 362(k), no additional remedy was available under section 105(a).

Judge(s):

Alfred T. Goodwin, M. Margaret McKeown, and Paul J. Watford, Circuit Judges.

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