In re: Gold Strike Heights Homeowners Association
EC-16-1258-TaBJu
| 9th Cir. BAP | Apr 24, 2017Background
- Gold Strike Heights Homeowners Association filed a Chapter 7 petition on August 20, 2015; a Chapter 7 trustee (Farrar) was appointed.
- Four days after the petition, Don H. Lee and Indian Village Estates filed suit in Calaveras County Superior Court; Lee received actual notice of the bankruptcy about one day later.
- The trustee removed the state-court action to bankruptcy court and moved to dismiss; Lee did not oppose and the court granted dismissal.
- The trustee moved for civil contempt sanctions under 11 U.S.C. § 105(a), seeking approximately $13,000 in fees and costs for addressing the stay violation; Lee and Indian Village Estates opposed as inadvertent/harmless and argued many fees were unnecessary.
- The bankruptcy court found Lee and Indian Village Estates willfully violated the automatic stay, reduced the trustee’s requested fees, and awarded $7,244 in compensatory civil contempt sanctions.
- Lee appealed only the reasonableness/amount of the sanction; the Bankruptcy Appellate Panel affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether trustee may recover sanctions for willful stay violation by contempt under § 105(a) | Lee conceded conduct but argued fees should be limited | Trustee argued fees incurred to void and manage the continuing violation were recoverable | Court: contempt remedy under § 105(a) applies to trustees; willfulness shown and compensatory fees allowable |
| Whether awarded attorneys’ fees were reasonable in amount | Lee argued trustee multiplied proceedings and many fees were unnecessary; $7,244 still excessive | Trustee produced detailed time records showing work to remove, dismiss, and protect estate rights | Court: reviewed records, reduced requested fees, and found $7,244 reasonably related to the violation |
| Whether parties had an agreement in March 2016 that trustee would prepare dismissal (which would make fees unnecessary) | Lee asserted trustee agreed to prepare a stipulation to dismiss in March 2016 | Trustee denied any enforceable agreement; no credible evidence supporting Lee’s claim | Court: credited trustee; found Lee’s evidence not credible and rejection was supported by the record |
| Whether bankruptcy court abused its discretion in sanction amount | Lee urged abuse because court failed to sufficiently curb trustee’s allegedly opportunistic billing | Trustee argued court appropriately balanced unnecessary vs. necessary work and reduced fees accordingly | Court: no abuse of discretion; factual findings and fee reduction were reasonable and supported by record |
Key Cases Cited
- Knupfer v. Lindblade (In re Dyer), 322 F.3d 1178 (9th Cir. 2003) (civil contempt is the remedy for trustee when § 362(k) does not apply and willfulness standard explained)
- Havelock v. Taxel (In re Pace), 67 F.3d 187 (9th Cir. 1995) (chapter 7 trustees excluded from § 362(k) damages; use § 105(a) contempt remedy)
- Eskanos & Adler, P.C. v. Leetien, 309 F.3d 1210 (9th Cir. 2002) (continuing a collection action after notice of stay risks sanctions)
- In re H. Granados Commc’ns, Inc., 503 B.R. 726 (9th Cir. BAP 2013) (attorneys’ fees may be awarded as compensatory contempt sanctions only if they flow from the stay violation)
- Anderson v. City of Bessemer City, NC, 470 U.S. 564 (U.S. 1985) (standard for upholding trial-court factual findings on appeal)
Disposition: Affirmed.