616 B.R. 429
Bankr. S.D. Ala.2020Background
- Debtor Donald T. Glenn filed Chapter 13 on April 19, 2018; AAFES had been offsetting his retirement benefits prepetition and resumed postpetition offsets beginning July 2018.
- AAFES filed a proof of claim on June 27, 2018; offsets ceased in May–June 2018 but recommenced thereafter.
- Glenn or his spouse made several calls to a phone number on a credit-card bill that did not correspond to the notice contact on AAFES’s proof of claim; debtor’s counsel made no pre-suit contact with AAFES or its claim agent.
- Glenn filed an adversary complaint December 20, 2018; AAFES promptly stopped offsets and refunded the withheld funds shortly after receiving effective notice.
- Debtor’s counsel claimed 28.6 hours at a conceded rate of $225/hr (requesting more initially); the only unresolved issue after settlement was the attorney-fee award.
- The Court found the stay violation willful but reduced fees to reflect lack of pre-suit mitigation, awarding 7 hours × $225 = $1,575.00.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a fee award under §362(k) is warranted for AAFES’s postpetition offsets | Offsets were willful; counsel’s fees and costs are recoverable under §362(k) | AAFES’s offsets violated the stay but remedied promptly; fee amount should be limited | Court: Stay violation was willful and compensable under §362(k), but fee amount limited due to mitigation failure |
| Proper hourly rate for counsel | $300/hr initially; later conceded $225/hr | Did not materially contest $225/hr | Court accepted $225/hr as reasonable |
| Whether total hours claimed were necessary | Counsel: 28.6 hours reasonably incurred | AAFES: Many hours unnecessary because creditor would have remedied promptly | Court: Hours excessive; reasonable time to resolve with minimal mitigation = 7 hours |
| Effect of counsel’s failure to attempt pre-suit resolution on fee award | Fees should be fully awarded under §362(k) because of willful violation | Lack of pre-suit contact made much of the work unnecessary; fees should be reduced | Court: Lack of mitigation justified reducing award to hours that would have been reasonably incurred to remedy the violation (7 hrs) |
Key Cases Cited
- United States v. Whiting Pools, 462 U.S. 198 (broad scope of bankruptcy estate)
- Jove Eng’g, Inc. v. I.R.S., 92 F.3d 1539 (willfulness requires knowledge of the stay and intentional act)
- Hensley v. Eckerhart, 461 U.S. 424 (lodestar approach for fee calculation)
- Johnson v. Ga. Hwy. Express, Inc., 488 F.2d 714 (factors for adjusting lodestar)
- Grant v. George Schumann Tire & Battery Co., 908 F.2d 874 (applying §330 standard to fee awards)
- Fleet Mortg. Group, Inc. v. Kaneb, 196 F.3d 265 (creditor liability for setoff despite bankruptcy notice)
- Dillard v. City of Greensboro, 213 F.3d 1347 (circuit guidance on fee determinations)
- Fogerty v. Fantasy, Inc., 510 U.S. 517 (American Rule context for fee-shifting)
- Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240 (foundational statement of the American Rule)