America's Servicing Co. v. Schwartz-Tallard (In Re Schwartz-Tallard)
765 F.3d 1096
| 9th Cir. | 2014Background
- Schwartz-Tallard filed Chapter 13 and continued mortgage payments; ASC moved and the bankruptcy court temporarily lifted the automatic stay and later orally reinstated it.
- ASC sold Schwartz-Tallard’s home at a trustee’s sale on May 20, 2009, despite the bankruptcy court’s oral reinstatement; a written reinstatement order was entered later (June 3, 2009).
- Schwartz-Tallard obtained a bankruptcy-court judgment finding ASC willfully violated the automatic stay and awarded damages, attorneys’ fees, and reconveyance of the property.
- ASC appealed the bankruptcy-court order to the district court; ASC reconveyed the property the day after filing its notice of appeal but continued the appeal challenging the stay finding and damages.
- Schwartz-Tallard sought to recover attorneys’ fees she incurred defending ASC’s appeal; the bankruptcy court denied that request under Sternberg; the BAP awarded the fees; the Ninth Circuit majority affirmed, dissent would reverse.
Issues
| Issue | Plaintiff's Argument (Schwartz-Tallard) | Defendant's Argument (ASC) | Held |
|---|---|---|---|
| Whether attorneys’ fees for defending a creditor’s appeal of a stay-violation finding qualify as “actual damages” under 11 U.S.C. § 362(k)(1) | Fees defending the appeal were incurred to enforce the automatic stay and to remedy the stay violation, so they are recoverable as § 362(k)(1) "actual damages." | Fees for post-violation appellate defense are like fees pursuing a damage award and are not recoverable under Sternberg and the American Rule. | Majority: Fees are recoverable because Schwartz-Tallard was defending the stay finding (not pursuing damages) and thus remedying the violation; affirmed BAP. Dissent: Sternberg controls and bars recovery because the violation ended when property was reconveyed. |
| Whether Sternberg v. Johnston bars recovery of appellate-defense fees in this factual setting | Sternberg does not apply because that case denied fees for fees spent prosecuting an adversary damages action, whereas here fees were incurred defending a finding of stay violation on appeal. | Sternberg’s rule—recoverable fees are limited to those needed to enforce/remedy the stay and not to post-remedy litigation—controls and bars the award. | Majority: Sternberg is distinguishable and does not preclude awarding fees for defending an adverse appeal of the stay-violation finding. Dissent: Sternberg governs and precludes these fees once the stay violation was remedied. |
Key Cases Cited
- Sternberg v. Johnston, 595 F.3d 937 (9th Cir. 2010) (limits recoverable § 362(k)(1) fees to those tied to enforcing/remedying the stay; denies fees for prosecuting a damages action)
- In re Burley, 738 F.2d 981 (9th Cir. 1984) (explains BAP’s role as an Article I adjunct and appellate review relationship)
- Hillis Motors, Inc. v. Hawaii Auto. Dealers’ Ass’n, 997 F.2d 581 (9th Cir. 1993) (automatic stay effects an immediate freeze of the status quo)
- Miller v. Gammie, 335 F.3d 889 (9th Cir. 2003) (panel precedent rule; prior-panel decisions bind later panels unless distinguishable)
- Fogerty v. Fantasy, Inc., 510 U.S. 517 (1994) (describes the American Rule and that fee-shifting requires clear statutory authority)
- Northern Pipeline Constr. Co. v. Marathon Pipe Line Co., 458 U.S. 50 (1982) (limits on Article I tribunals exercising Article III judicial power)
- Beard v. Walsh (In re Walsh), 219 B.R. 873 (9th Cir. BAP 1998) (BAP decision awarding appellate-defense fees; later rejected in Sternberg)