518 B.R. 202
Bankr. N.D.N.Y.2014Background
- Debtor Terry Hall filed Chapter 7 on Jan. 16, 2014; his original counsel (Esce) disclosed a flat $850 fee in a Rule 2016(b) statement covering “all aspects” of the case.
- After bankruptcy counsel change, Selbach filed a motion for sanctions under 11 U.S.C. § 362(k) for two billing statements sent by Syracuse Community Health Center after notice of the bankruptcy.
- The court previously found Health Center willfully violated the automatic stay by sending those two billing statements.
- Damages hearing was limited by the court to attorney’s fees (Debtor’s failure to timely disclose exhibits/witnesses precluded emotional-distress proof).
- Selbach sought $3,880 in fees; Health Center objected as excessive and pointed to a rejected $550 settlement offer.
- Both Esce and Selbach failed timely to comply with § 329(a) / Fed. R. Bankr. P. 2016(b); Selbach later filed a disclosure showing a fee‑sharing arrangement with Esce (25:75) that differed by settlement vs. court award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Health Center willfully violated the automatic stay | Selbach: two postpetition billing statements violated § 362 and were willful | Health Center: (not disputed at damages stage) | Court had already held Health Center willfully violated the stay |
| Entitlement to actual damages (emotional distress and fees) | Debtor sought emotional distress and attorney’s fees as actual damages under § 362(k) | Health Center argued emotional-distress proof lacking; disputed fee reasonableness | Emotional-distress claim precluded by Debtor’s failure to comply with court order; relief limited to attorney’s fees |
| Reasonableness and necessity of requested attorney’s fees ($3,880) | Selbach: fees incurred were necessary to prosecute the motion; requested $275/hr (attorney) and $150/hr (legal assistant) | Health Center: hours are excessive, entries inadequate, and settlement offer shows litigation motivated by counsel’s fee structure | Court applied lodestar, disallowed excessive/redundant/time related to counsel’s own procedural failures, reduced hours and awarded $755 in fees |
| Effect of failure to timely file Rule 2016(b) disclosures and fee‑sharing arrangement | Selbach/Esce: arrangement justified referral and sharing for prosecution of motion | Health Center: lack of disclosure concealed fee structure and incentivized litigation; disclosure violations justify reduction | Court held nondisclosure critical; Esce barred from sharing award (no supplemental 2016(b)); Selbach’s untimely disclosure justified further reduction of awarded fees |
Key Cases Cited
- In re Ortiz, 496 B.R. 144 (Bankr. S.D.N.Y.) (separate Rule 2016(b) statement required for each attorney)
- In re Buckner, 350 B.R. 874 (Bankr. D. Idaho) (failure to disclose subjects counsel to sanctions)
- In re Laferriere, 286 B.R. 520 (Bankr. D. Vt.) (strict approach to disclosure violations)
- Cohn v. United States Trustee (In re Ostas), 158 B.R. 312 (N.D.N.Y.) (court may deny/reduce fees for disclosure failures)
- In re Voll, 512 B.R. 132 (Bankr. N.D.N.Y.) (analysis of attorney’s fees as actual damages under § 362(k) and lodestar approach)
- Watkins v. Guardian Loan Co. (In re Watkins), 240 B.R. 668 (Bankr. E.D.N.Y.) (exclude excessive/redundant hours)
- In re Prusan, 495 B.R. 203 (Bankr. E.D.N.Y.) (reasonableness/necessity of fees for stay violations)
- In re Robinson, 228 B.R. 75 (Bankr. E.D.N.Y.) (balance deterrence of stay violations against discouraging meritless fee-driven litigation)
- Sucre v. MIC Leasing Corp. (In re Sucre), 226 B.R. 340 (Bankr. S.D.N.Y.) (use § 330 standards and lodestar for § 362(k) fee awards)
- Dawson v. Washington Mut. Bank (In re Dawson), 390 F.3d 1139 (9th Cir.) (emotional distress damages where violations are sufficiently egregious)