America's Servicing Co. v. Schwartz-Tallard (In Re Schwartz-Tallard)
803 F.3d 1095
9th Cir.2015Background
- Debtor Irene Schwartz-Tallard filed Chapter 13 and continued mortgage payments; America’s Servicing Company (ASC) mistakenly foreclosed, purchased the property, and evicted her during the bankruptcy automatic stay.
- Bankruptcy court found a willful stay violation, ordered reconveyance, and awarded damages and attorney’s fees; ASC reconveyed and unsuccessfully appealed the damages award to the district court.
- After prevailing on appeal, Schwartz-Tallard sought under 11 U.S.C. § 362(k) reimbursement for roughly $10,000 in additional fees incurred defending ASC’s appeal; the bankruptcy court denied recovery citing Sternberg v. Johnston.
- The Bankruptcy Appellate Panel reversed; a divided Ninth Circuit panel affirmed in part but was split on whether the stay persisted through appeal.
- The Ninth Circuit (en banc panel decision by Judge Watford) overruled Sternberg and held § 362(k) authorizes recovery of reasonable attorney’s fees incurred prosecuting or defending a § 362(k) damages action, including on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 362(k) permits recovery of attorney’s fees incurred prosecuting a damages action (including on appeal) | § 362(k)’s text “actual damages, including costs and attorneys’ fees” unambiguously includes fees for litigating damages actions; fees reasonably incurred are mandatory and necessary to enable suits | Sternberg: fees are recoverable only to end the stay violation, not for prosecuting the damages action; once violation ends, later fees are not recoverable | The court overruled Sternberg and held § 362(k) authorizes recovery of reasonable attorney’s fees incurred prosecuting or defending a § 362(k) damages action, including appellate fees |
| Whether prevailing debtor may recover fees incurred defending a § 362(k) award on appeal | Prevailing-party principle: fees at first instance include appellate defense fees | ASC argued fees after reconveyance (alleged end of violation) are not recoverable under Sternberg | Court held debtor ordinarily may recover reasonable fees incurred in defending the judgment on appeal under § 362(k) |
| Interpretation approach: plain text vs. reliance on historical practice/ policy | Text is clear; historical contempt practice supports reading that fees for damages actions are recoverable | Sternberg favored a narrower textual reading consistent with American Rule backdrop | Court relied on plain statutory text and historical practice to confirm Congress intended fee recovery for damages litigation |
| Practical administrability of fee awards under Sternberg | Sternberg causes factbound, costly parsing of time spent ending stay vs. pursuing damages; encourages more litigation | Sternberg proponents argue adherence to American Rule and textual limits avoids unwarranted fee shifting | Court found Sternberg’s rule administratively burdensome and inconsistent with § 362(k)’s language; reasonableness review controls abuse |
Key Cases Cited
- In re Repine, 536 F.3d 512 (5th Cir.) (courts award fees for stay-violation remedies, including related litigation)
- In re Duby, 451 B.R. 664 (1st Cir. BAP) (same: fees for enforcing or remedying stay violations include litigation fees)
- Sternberg v. Johnston, 595 F.3d 937 (9th Cir. 2010) (prior Ninth Circuit rule limiting recoverable fees to those incurred to end the stay; overruled)
- Baker Botts L.L.P. v. ASARCO LLC, 135 S. Ct. 2158 (2015) (discussion of typical fee-shifting statutory language and prevailing-party paradigms)
- Summit Valley Indus., Inc. v. Carpenters, 456 U.S. 717 (1982) (statutory specificity is required to depart from the American Rule)