573 B.R. 819
Bankr. E.D. Cal.2017Background
- Debtors Robert and Stephanie Achterberg filed Chapter 7 on December 1, 2008 and received a discharge in March 2009.
- Creditors Trade Association (CTA) obtained a default judgment in San Francisco state court in February 2009 after the bankruptcy filing; the bankruptcy court held that judgment void as entered in violation of the automatic stay.
- CTA had actual notice of the bankruptcy and discharge by March 2009 but did not vacate or otherwise correct the state-court record; the judgment remained in public records and appeared on credit reports.
- In 2015 the Achterbergs sought to buy a home; the void judgment endangered escrow, forcing them to pay a $1,250 extension and to retain counsel to press CTA to vacate the judgment.
- CTA only moved to vacate the judgment days after being served with the adversary complaint (filed July 2015); the debtors then sued for stay and discharge injunction violations, seeking actual, attorneys’, emotional, and punitive damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CTA’s state-court default judgment violated the automatic stay | The judgment was entered and maintained after the bankruptcy filing and thus violated §362(a); CTA had notice and therefore its continued maintenance was a willful violation | CTA claimed the file had been closed/sent to storage and the judgment was not linked, implying lack of knowing action when judgment issued | Court: Judgment issued post-petition was void; CTA had notice and its continued inaction was a knowing/willful violation of the automatic stay |
| Whether CTA violated the discharge injunction under §524(a) | The discharge voided the debt and enjoined collection; keeping the judgment of record and allowing credit-report effects violated the injunction | CTA offered no credible reason for failing to vacate; argued public-record reporting came from court, not CTA | Court: CTA knew of discharge and violated the discharge injunction by allowing the void judgment to remain and impair debtors’ fresh start |
| Damages recoverable (actual damages, attorneys’ fees, emotional distress) | Debtors sought economic loss (escrow extension), emotional distress, and statutorily-mandated attorneys’ fees and costs under §362(k) | CTA argued fees beyond the date it vacated the judgment were unnecessary and should not be recoverable | Court: Awarded $1,250 escrow extension, $1,850 emotional distress, and $18,261.29 attorneys’ fees/costs as actual damages (total actual damages $21,361.29) because §362(k) mandates recovery of fees/costs, including litigation to obtain damages |
| Whether punitive damages and contempt sanctions were appropriate | Debtors sought punitive damages for reckless/callous conduct and contempt for willful stay/discharge violations | CTA denied willfulness and malice; pointed to claimed storage error and limited remedial conduct | Court: Found reckless/callous disregard, awarded $15,000 punitive damages, and held CTA’s conduct constituted contempt for violating the stay and discharge injunction |
Key Cases Cited
- Goichman v. Bloom, 875 F.2d 224 (9th Cir.) (willful stay violation requires knowledge of stay and intentional proscribed act)
- In re Schwartz, 954 F.2d 569 (9th Cir.) (acts in violation of the automatic stay are void, not voidable)
- Far Out Prods., Inc. v. Oskar, 247 F.3d 986 (9th Cir.) (Ninth Circuit treats judgments obtained in violation of the stay as void)
- In re Lusardi, 329 F.3d 1076 (9th Cir.) (post-petition transfers/sales during a bankruptcy are void even if parties lack knowledge)
- In re Dyer, 322 F.3d 1178 (9th Cir.) (civil contempt standard for stay violations and incorporation of willfulness test)
- In re Dawson, 390 F.3d 1139 (9th Cir.) (emotional distress may be recoverable as actual damages for stay violations)
- America's Servicing Co. v. Schwartz-Tallard, 803 F.3d 1095 (9th Cir.) (attorneys’ fees for prosecuting §362(k) claims are recoverable)
- State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (U.S. Sup. Ct.) (guideposts for assessing constitutional reasonableness of punitive damages)
- BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (U.S. Sup. Ct.) (limits and proportionality considerations for punitive damages)