It didn’t take long before the lower courts began expanding Lansaw, the Third Circuit’s decision in April allowing damages for emotional distress resulting from a willful violation of the automatic stay under Section 362(k)(1). Zokaites v. Lansaw (In re Lansaw), 853 F.3d 657 (3d Cir. April 10, 2017).
Chief Bankruptcy Judge Eric L. Frank of Philadelphia extended Lansaw to authorize $5,000 in emotional distress damages as one sanction for civil contempt of the automatic stay.
For the second time after the debtor filed a chapter 13 petition, the Philadelphia Parking Authority impounded the man’s car on account of unpaid parking fines. The debtor had scheduled the fines among debts.
After the second impoundment, the debtor based his request for damages on the bankruptcy court’s civil contempt power, not on Section 362(k), which provides that “an individual injured by any willful violation of [the automatic stay] shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.”
In his Aug. 10 opinion, Judge Frank said that the adoption of Section 362(k) in 1984 “supplements, but does not replace the [civil] contempt remedy.” The judge went on to say he could “perceive no material difference between the two (2) remedies (i.e., contempt or Section 362(k)) with respect to the relief available to the Debtor.”
Even if there were no willfulness or specific intent to violate the stay, Judge Frank said that civil contempt sanctions can be imposed as a remedial measure. The debtor need only establish, “by clear and convincing evidence, that the other party violated a specific and definite court order and that the party had knowledge of the order sufficient to put him on notice of the proscribed conduct.”
In the bankruptcy context, Judge Frank said, the automatic stay is the equivalent of a court order. The second time around, there was no dispute about knowledge of the bankruptcy since the authority had been told about the debtor’s chapter 13 case the first time his car was impounded in violation of the automatic stay. Further, he said, knowledge of bankruptcy is equivalent to knowledge of the automatic stay.
Having established grounds for a finding of civil contempt, Judge Frank said the court has “broad discretion in fashioning an appropriate remedy.” In addition to a fine to coerce compliance with the order, he said the court “may also award damages to compensate the aggrieved party for any actual loss suffered, as well as attorney’s fees and costs.”
Since Lansaw held that damages for emotional distress qualify as “actual damages” under Section 362(k), Judge Frank saw “no reason why the same principle should not apply in granting compensatory relief as a remedy for contempt of the automatic stay.” He also cited the circuit’s refusal to “adopt a bright-line rule requiring” corroborating medical evidence of emotional distress, “at least where a stay violation is patently egregious.”
To justify emotional distress damages, Judge Frank cited how the debtor had been out of town caring for his mother, who was ill, when he learned that his car had been impounded a second time. The news required the debtor to cut short his travel plans and resulted in “difficulty sleeping that night.”
The seizure, Judge Frank said, also “caused marital discord.” Consequently, the second violation of the automatic stay justified “$5,000 in damages for the emotional distress he suffered as a result of impoundment of the car.”
In addition, Judge Frank ruled that the sanction would include the debtor’s attorneys’ fees. He called for further proceedings to calculate the fee award.
In a companion opinion also on Aug. 10 dealing with the first stay violation, Judge Frank explained why the parking authority was not entitled to sovereign immunity, except to the extent that the governmental body could not be held liable for punitive damages as a result of Section 106(a)(3). On cross motions for summary judgment, Judge Frank could not rule on liability, one way or the other, because there was a factual dispute regarding the authority’s knowledge of the bankruptcy.
To read ABI’s discussion of Lansaw, click here.
The opinion expanding Lansaw is In re Odom, 15-19111 (Bankr. E.D. Pa. Aug. 10, 2017), and the companion opinion on sovereign immunity is Odom v. Philadelphia Parking Authority (In re Odom), 16-0195 (Bankr. E.D. Pa. Aug. 10, 2017).