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filing." Congress could have easily included § 362(k) claims in the definition of 'property of the estate' in § 541. Also, if Congress meant to grant the bankruptcy trustee exclusive standing to assert § 362(k) claims, it could have used the word 'debtor' or 'trustee' instead of the word 'individual' in § 362(k). The court goes on to note that it is certainly possible for a bankruptcy estate and a creditor to own separate claims against a third party arising out of the same general series of events and broad course of conduct. The Labuzans' claims and those of the bankruptcy trustee are not mutually exclusive. Therefore, "we conclude that § 362(k) automatic-stay-violation claims are not property of the estate as defined in § 541 and Educators Trust, at least to the extent they are not asserted by the trustee. (Again, as noted, whether a trustee has standing to pursue § 362(k) claims is not at issue.)" Therefore, the matter is reversed and remanded.
Facts: In 1996, Logan Johnston and Paula Parker got divorced; Johnston was ordered to pay spousal maintenance. In January 2001, Parker, through her attorney Melvin Sternberger, asked the state court to hold Johnston in contempt for his failure to pay spousal support. On May 14, 2001, Johnston filed chapter 11. The state court was not notified until May 17, 2001 of the bankruptcy. On May 17, 2001, the state court held a hearing on Parker's request to hold Johnston in contempt. At that hearing, Johnston, an attorney, represented himself. After about 15 minutes into the hearing, Johnston notified the state court of his chapter 11 but agreed that the state court could establish the amount he was in arrears on his spousal support. Sternberger said that he did not know whether the chapter 11 stayed the state court proceedings. The court decided to move forward only on the issue of whether Johnston was in contempt. However, on July 13, 2001, the state court issued a minute order holding Johnston in violation of the divorce decree and entered a judgment against him in the amount of almost $90,000. The order also ordered Johnston to pay the money by August 1, 2001 or be jailed until the amount is fully paid. Johnston quickly sought relief from the order in a variety of places he moved to stay the order in the state court, wrote to Sternberger to inform him of the stay, and appealed to the state appellate court. Sternberger fought Johnston in the state appellate court and argued that the stay did not apply. Johnston also sought relief from the order in the bankruptcy court, where he filed a motion to set aside the minute order and filed an adversary proceeding (the "AP") against Parker and Sternberger. The bankruptcy court vacated the minute order concluding that the stay had been violated. Then, the AP went to trial. Johnston ultimately settled with Parker, leaving only Sternberger. The bankruptcy court held that Sternberger had violated the stay and awarded Johnston damages in the amount of around $92,000 for: (i) his inability to work, (ii) his emotional distress, (iii) and his attorneys' fees and costs, which included the costs of prosecuting the AP. Sternberger appealed.
Issue: (i) "whether Sternberger violated the automatic stay and [(ii)] whether the bankruptcy court erred in its calculation of Johnston's damages."
Rule:
(i) Automatic Stay: The automatic stay under § 362(a) does not prevent "'the commencement or continuation of a civil action ... for the establishment or modification of an order for domestic support obligations" or "the collection of a domestic support obligation from property that is not property of the estate.' 11 U.S.C. § 362(b)(2)(A)-(B)." The automatic stay does impose "on non-debtor parties an affirmative duty of compliance."
(ii) Attorneys' Fees: "Under the American Rule, a plaintiff cannot ordinarily recover attorney fees spent to correct a legal injury as part of his damages, even though it could be said he is not made whole as a result." The context and goals of § 362 support this rule and it is the rule that the Ninth Circuit adopted.
Holding: The court (i) is affirmed in its decision that Sternberger violated the automatic stay but (ii) is reversed and remanded in its award of damages.
Reasoning:
(i) Automatic Stay. Sternberger had an affirmative duty to comply with § 362(a). The court did not fault Sternberger for his actions at the May 17, 2001 hearing nor did the court fault Sternberger for the July 13 minute
©2010 Leif M. Clark
