33 F.4th 698
2d Cir.2022Background
- Debtor Bret S. DiBattista obtained a Chapter 7 discharge; mortgage servicer Selene Finance continued collection efforts (calls, credit reporting).
- DiBattista (represented by Law Offices of Francis J. O’Reilly) moved to reopen and sought contempt sanctions; the bankruptcy court found Selene in contempt and awarded $9,046.60 in fees/expenses plus $17,500 in compensatory damages.
- Selene appealed to the district court; the district court affirmed the contempt finding but vacated the $17,500 award for clarification and remanded.
- On remand the bankruptcy court reinstated the $17,500 damages; O’Reilly then sought $28,215 in appellate attorneys’ fees for work on the district-court appeal.
- The bankruptcy court denied appellate fees, ruling it lacked authority to award fees for appeals to the district court; the district court affirmed. O’Reilly appealed to the Second Circuit.
- The Second Circuit held the bankruptcy court’s contempt power includes awarding damages and attorneys’ fees (including appellate fees), vacated the district-court judgment, and remanded for the bankruptcy court to determine or justify appellate-fee relief.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a bankruptcy court may award appellate attorneys’ fees incurred in an appeal to the district court as part of contempt relief for violating a discharge injunction | Appellant (O’Reilly/DiBattista): bankruptcy contempt power authorizes compensation for all losses caused by contempt, including appellate fees | Selene: bankruptcy court lacks congressional authority to award fees for appeals to the district court; such fees must be sought from the district court | Held: Yes — the bankruptcy court’s traditional contempt powers (under §105 and §524) include authority to award appellate attorneys’ fees caused by the contemnor’s violation |
| Whether the mere fact of an appeal means appellate fees are not "caused by" the contemnor’s misconduct | O’Reilly: appellate litigation was necessitated by Selene’s willful contempt, so fees are caused by the misconduct | Selene: an appeal is a legal right and not a violation; therefore appellate fees are not compensable by the bankruptcy court | Held: Rejected — following Weitzman, the litigation would not have been necessary but for the contempt, so appellate fees can be "caused by" the violation |
| Whether rules or doctrines (Rule 8020, the American Rule, or policy against chilling appeals) preclude awarding non-frivolous appellate fees as contempt relief | O’Reilly: longstanding equitable contempt exception to the American Rule permits assessing fees against a willful contemnor | Selene: Rule 8020 and the American Rule limit fee awards to frivolous appeals or require district-court action; awarding appellate fees would chill meritorious appeals | Held: Rejected — Rule 8020 does not displace the "old soil" contempt power; Alyeska exception to American Rule permits fees for willful disobedience; policy concerns do not outweigh controlling precedent (Weitzman) |
Key Cases Cited
- Taggart v. Lorenzen, 139 S. Ct. 1795 (2019) (bankruptcy discharge operates as an injunction and §105 authorizes contempt sanctions to enforce it)
- Weitzman v. Stein, 98 F.3d 717 (2d Cir. 1996) (where contemnor willfully violated an injunction, court must articulate persuasive grounds to deny compensation for appellate legal costs)
- Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240 (1975) (exception to the American Rule permits fee awards for willful disobedience of court orders)
- Baker Botts L.L.P. v. ASARCO LLC, 576 U.S. 121 (2015) (describes the American Rule as the default rule allocating litigation costs)
- In re Anderson, 884 F.3d 382 (2d Cir. 2018) (bankruptcy court’s §105 contempt powers complement inherent power to enforce orders)
- MBNA Am. Bank v. Hill, 436 F.3d 104 (2d Cir. 2006) (bankruptcy courts have undisputed power to enforce their orders)
- Bessette v. Avco Fin. Servs., Inc., 230 F.3d 439 (1st Cir. 2000) (bankruptcy courts may award actual damages and attorney fees for §524 violations)
- In re Kalikow, 602 F.3d 82 (2d Cir. 2010) (sanctions decisions reviewed for abuse of discretion)
- Jackson v. Novak (In re Jackson), 593 F.3d 171 (2d Cir. 2010) (district-court orders reviewing bankruptcy decisions are subject to plenary review)