Garth F. Lansaw v.
853 F.3d 657
| 3rd Cir. | 2017Background
- Garth and Deborah Lansaw (debtors) filed bankruptcy on Aug. 16, 2006, triggering the automatic stay under 11 U.S.C. § 362(a).
- Landlord Frank Zokaites, aware of the filing, committed multiple willful stay violations: entering the daycare during business hours and confronting Mrs. Lansaw, chaining and padlocking the premises, removing keys, and contacting the Lansaws’ new landlord to attempt lease termination.
- The Bankruptcy Court (initial 2006 proceeding) found willful stay violations and enjoined further misconduct but left damages unresolved; a later adversary proceeding (2014 trial) revisited damages.
- At the 2014 trial the Lansaws testified about nightmares, fear, depression, medication use, social withdrawal, and observable changes noted by Mr. Lansaw; the Bankruptcy Court found their testimony credible.
- The Bankruptcy Court awarded $7,500 for emotional distress, $2,600 in attorneys’ fees, and $40,000 in punitive damages; the District Court affirmed, and Zokaites appealed.
Issues
| Issue | Lansaw's Argument | Zokaites's Argument | Held |
|---|---|---|---|
| Whether "actual damages" under § 362(k)(1) includes emotional‑distress damages | § 362(k)(1) allows recovery for emotional harm caused by willful stay violations | "Actual damages" should be limited to pecuniary/financial harm; emotional damages not authorized without explicit text | "Actual damages" includes emotional‑distress damages arising from willful stay violations |
| Sufficiency of evidence to support emotional‑distress award | Lansaws’ credible testimony about nightmares, fear, medication, and behavioral change is sufficient, especially given egregious conduct | Medical records or expert testimony required; award is speculative without corroboration | No bright‑line rule for medical proof; credible testimony can suffice where violations are egregious — award of $7,500 affirmed |
| Availability of punitive damages under § 362(k)(1) and constitutionality of amount | Punitive damages appropriate to punish and deter egregious willful violations; $40,000 justified by reprehensibility and defendant's ability to pay | Punitive award excessive and unnecessary for deterrence (no further contact post‑violations) | Punitive damages permitted; $40,000 comports with due process (4:1 ratio to compensatory award acceptable) |
| Whether damages awards were estate property (offset/waiver issue) | Lansaws sought individual recovery for injuries caused by stay violations | Awards are property of the bankruptcy estate and should be offset against defendant's claims | Argument waived on appeal; not decided here |
Key Cases Cited
- FAA v. Cooper, 566 U.S. 284 (2012) (interpretation of "actual damages" may or may not include emotional distress depending on statutory context)
- Dawson v. Washington Mut. Bank, F.A., 390 F.3d 1139 (9th Cir.) (emotional‑distress damages are recoverable under § 362(h)/(k))
- Lodge v. Kondaur Capital Corp., 750 F.3d 1263 (11th Cir.) (endorsing emotional‑distress recovery under § 362)
- Fleet Mortg. Grp., Inc. v. Kaneb, 196 F.3d 265 (1st Cir.) (recognizing emotional damages as "actual damages" under § 362)
- Aiello v. Providian Fin. Corp., 239 F.3d 876 (7th Cir.) (skeptical of emotional damages under § 362 but left limited possibility open)
- CGB Occupational Therapy, Inc. v. RHA Health Servs., Inc., 499 F.3d 184 (3d Cir.) (punitive damages under bankruptcy context must comport with due process)
- State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003) (guideposts for evaluating punitive damages)
- Bolden v. Se. Pa. Transp. Auth., 21 F.3d 29 (3d Cir.) (no categorical requirement of medical evidence to prove emotional distress)
- Cortez v. Trans Union, LLC, 617 F.3d 688 (3d Cir.) (declining to require specific corroborating evidence for emotional‑distress claims)