Although the conduct was “egregious,” an award of $50,000 in punitive damages for a willful violation of the stay was “excessive” because actual damages were only $1,500, according to an opinion by Judge Jane S. Restani of the U.S. Court of International Trade, sitting by designation in the Middle District of Alabama.
The case involved a creditor who improperly garnished $666 from a chapter 13 debtor’s wages. The bankruptcy judge imposed the $50,000 punitive damage award to deter recurrence of the creditor’s “deplorable” conduct.
On appeal, Judge Restani upheld the bankruptcy court’s findings of fact that the creditor’s actions amounted to a willful violation of the automatic stay, thus invoking Section 362(k) and the debtor’s right to recover actual damages, attorneys’ fees, and, “in appropriate circumstances,” punitive damages.
In her Aug. 4 opinion, Judge Restani set aside the punitive damage award as “excessive and potentially in violation of the Fourteenth Amendment,” because the amount was over 30 times more than the actual harm. She remanded the case for the bankruptcy judge to reassess punitive damages.
As Judge Restani mentioned in a footnote, the bankruptcy judge recognized the “excessive ratio” of punitive to actual damages. The bankruptcy judge, however, included attorneys’ fees to “significantly alter the ratio and bring it to a more reasonable level.” Judge Restani said the punitive damage award was excessive, “regardless.”
The bankruptcy judge later imposed about $29,000 in attorneys’ fees.
To read ABI’s discussion of the bankruptcy court’s decision, click here.