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In re Snowden

United States Court of Appeals, Ninth Circuit

September 12, 2014

IN THE MATTER OF: RUPANJALI SNOWDEN, Debtor, RUPANJALI SNOWDEN, Debtor, Appellant,
v.
CHECK INTO CASH OF WASHINGTON INC., Appellee; CHECK INTO CASH OF WASHINGTON INC., Appellant,
v.
RUPANJALI SNOWDEN, Debtor, Appellee

Argued and Submitted, Seattle, Washington June 5, 2014.

Page 652

[Copyrighted Material Omitted]

Page 653

Appeal from the United States District Court for the Western District of Washington. D.C. No. 2:12-cv-01095-RSL, D.C. No. 2:12-cv-01095-RSL. Robert S. Lasnik, District Judge, Presiding.

SUMMARY[*]

Bankruptcy

The panel affirmed in part and reversed in part the district court's affirmance of the bankruptcy court's judgment awarding a chapter 7 debtor damages and attorneys' fees for a creditor's willful violation of the automatic stay under 11 U.S.C. § 362(k)(1).

The panel affirmed the district court's affirmance of the decisions of the bankruptcy court on emotional distress and punitive damages. The panel held that the emotional distress damages award was proper because the debtor suffered significant emotional harm, clearly established the significant harm, and demonstrated a causal connection between that significant harm and the violation of the automatic stay. The panel concluded that the bankruptcy court applied the correct legal standard for awarding punitive damages by considering whether the creditor recklessly or callously disregarded the law or rights of others. In addition, the award of punitive damages was not an abuse of discretion.

The panel reversed the district court's order affirming the bankruptcy court's award of attorneys' fees. The panel stated that under Sternberg v. Johnston, 595 F.3d 937 (9th Cir. 2010), attorneys' fees under § 362(k) are limited to fees relating to enforcing the automatic stay and remedying the stay violation, not the fees incurred by the debtor in prosecuting the bankruptcy adversary proceeding seeking damages for the stay violation. The panel concluded that here, the stay violation did not end when the creditor sent an e-mail conditionally offering partial reimbursement; accordingly, the debtor was entitled to fees incurred in remedying the stay violation after receiving the e-mail, and the stay violation ended when the bankruptcy court found a violation of the automatic stay. The panel remanded for a recalculation of attorneys' fees.

The panel affirmed the district court's affirmance of the bankruptcy court's denial of sanctions.

Concurring, Judge Watford agreed that the attorneys' fees award must be vacated. He wrote that Sternberg construed § 362(k)(1)'s authorization of fee awards more narrowly than Congress likely intended. Judge Watford agreed with the Fifth Circuit that § 362(k)(1) allows a plaintiff to recover attorneys' fees incurring both in remedying a violation of the automatic stay and in bringing an action to recover the " actual damages" caused by that violation.

Christina L. Henry (argued) and Jacob DeGraaff, Henry, DeGraaff, & McCormick, P.S., Seattle, Washington, for Appellant.

Amit D. Ranade (argued) and Alexander M. Wu, Hillis Clark Martin & Peterson P.S., Seattle, Washington, for Appellee.

Before: Alfred T. Goodwin, M. Margaret McKeown, and Paul J. Watford, Circuit Judges. Opinion by Judge McKeown; Concurrence by Judge Watford.

OPINION

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McKEOWN, Circuit Judge:

This is the story of how a bankruptcy filing listing a $575 payday loan snowballed into a violation of the automatic stay, and protracted litigation, which left a stressed borrower with attorneys' fees and emotional distress. When the automatic stay that accompanies a bankruptcy filing is violated, the bankruptcy petitioner is entitled to recover damages and attorneys' fees. 11 U.S.C. § 362(k)(1). The issue we consider is whether a bankruptcy petitioner can collect attorneys' fees incurred litigating the violation of the automatic stay after the violator sends an e-mail conditionally offering partial reimbursement. We conclude that such fees are recoverable under § 362(k)(1). The bankruptcy laws do not permit a stay violator to undermine the remedies available under § 362(k) by forcing a bankruptcy petitioner to accept a conditional offer in lieu of pursuing fair compensation and attorneys' fees.

Background and Procedural History

Rupanjali Snowden took out a $575 payday loan[1] from Check Into Cash of Washington (" CIC" ) to make ends meet for herself and her daughter. Before payment was due, Snowden put a stop payment on the check. On the same day, Snowden advised CIC's Sequim, Washington office that she was " thinking about filing for bankruptcy," and provided her bankruptcy attorney's phone number. She was advised that she should let CIC know if she decided to file. When Snowden told CIC that she could not repay the loan, CIC said that she must call CIC every day, otherwise the company would call her " references." Snowden complied, calling CIC every day until the day she filed for bankruptcy because she " didn't want to be embarrassed."

Snowden was employed as a hospital nurse. CIC employees called her at work numerous times asking why she had not yet repaid the loan. Snowden referred them to her attorney and asked that they stop calling her at work, but the calls persisted. These calls affected her work performance and were " very frustrating" because every time Snowden heard her name over the loudspeaker she would, " run to the phone thinking . . . [her daughter had] an emergency." CIC advised Snowden that it would not cash the check securing the loan.

In an effort to get her financial house in order, Snowden filed her Chapter 7 bankruptcy petition without directly advising CIC. She listed CIC as an unsecured creditor with a $575 claim. When Snowden checked her bank account a little over a month after the bankruptcy filing, she saw that it was overdrawn. The bank advised her that CIC had cashed the check securing the payday loan. Instead of honoring the automatic stay, and after a number of

Page 655

harassing phone calls to Snowden at the hospital, CIC used an electronic funds transfer to debit Snowden's bank account for the amount due, overdrawing her ...


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