The Ninth Circuit recently overturned precedent allowing for attorney’s fees in a debtor’s prosecution of a creditor, after the creditor violated an automatic stay. The case transpired after a woman filed a lawsuit against Wells Fargo subsidiary America’s Servicing Company in 2009 after it sold her home at a trustee’s sale, despite the fact that a stay had been entered in a Nevada bankruptcy court.
After the bankruptcy court found the company willful in its intent, it granted the woman $80,000 in sanctions and damages – including $20,000 in attorney’s fees. America’s Servicing argued on appeal that the bankruptcy court had improperly included the attorney’s fees with the “actual damages” awarded, and a federal judge reversed that portion of the award.
The woman then sought an additional $10,000 in attorney’s fees for her defense of the company’s appeal. The bankruptcy court denied this, finding that the fees did not constitute “actual damages” because the stay violation had ended before she had to challenge the appeal. But the Bankruptcy Appellate Panel reversed the decision and granted the fees, and the Ninth Circuit upheld the panel’s judgment.
In a 20-page opinion, Circuit Judge Paul Watford wrote that a crucial precedent case is Sternberg v. Johnston, in which the circuit held that the statute at issue allows a debtor to recover only those fees incurred to end the stay violation itself, not the fees incurred to prosecute a damages action.
But Watford pointed out that Sternberg “misconstrued the plain meaning” of the statute, and the circuit overruled the case to the extent that it was inconsistent with its opinion.”Rather than decide whether Sternberg‘s holding extends to the facts of this case, we think the better course is to jettison Sternberg‘s erroneous interpretation of [the statute] altogether,” he said.
Watford said that Congress’s inclusion of the automatic stay provision “strengthened the remedies previously available to debtors injured by willful stay violations,” and it “makes an award of actual damages and attorney’s fees mandatory, and grants bankruptcy courts the discretion to impose punitive damages in appropriate cases.”
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If you have any questions on this topic or are in a financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.