496 B.R. 355
Bankr. M.D. Penn.2013Background
- Debtor Lisa M. Iskric filed Chapter 7 on June 28, 2012; Commonwealth Financial Systems, Inc. (CFS) was listed as her sole unsecured creditor.
- A state court had earlier entered a civil judgment against Iskric and, after discovery disputes, a June 14, 2012 state-court contempt order directed issuance of a bench warrant for her arrest.
- Iskric received her Chapter 7 discharge on October 15, 2012; CFS had notice of the bankruptcy (341 notice) and the Discharge Order.
- CFS did not move to vacate the state contempt order or terminate the bench warrant; Iskric was arrested February 17, 2013 and held four days in county jail.
- Iskric sued in bankruptcy court alleging willful violation of the automatic stay and violation of the discharge injunction; CFS failed to answer and the court entered a default judgment as to liability.
- The court held an evidentiary hearing on damages and attorney’s fees and awarded damages for both the stay and discharge violations, plus attorney’s fees and punitive damages, totaling $88,480.00.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper service on corporate defendant | Service by first-class mail to CFS CEO was proper under Rule 7004(b)(3) | (No responsive pleading; implicit dispute not preserved) | Service to named CEO at corporate address was valid; court had personal jurisdiction |
| Violation of automatic stay (§362) | CFS knew of the bankruptcy and allowed continuation of civil contempt process that produced a bench warrant and arrest | Continuation was tied to state contempt warrant; criminal-action exception could apply | CFS willfully violated the automatic stay from notice (≈ July 16, 2012) until discharge (Oct. 15, 2012); state contempt was civil, not criminal, so no exception |
| Violation of discharge injunction (§524) | After discharge, CFS failed to terminate the warrant and thus continued to collect on a discharged debt | (No defense preserved) | CFS violated the discharge injunction from Oct. 15, 2012 through the damages hearing; bankruptcy court may sanction under §105 and contempt power |
| Damages/remedies (actual, emotional, fees, punitive) | Seeks actual lost wages, emotional distress, attorney’s fees, and punitive damages for willful stay and discharge violations | (No responsive opposition) | Awards for stay violation: $1,740 lost wages, $10,000 emotional distress, $2,500 attorneys’ fees, $30,000 punitive. Same amounts awarded for discharge violation; total default judgment $88,480 |
Key Cases Cited
- Mar. Elec. Co., Inc. v. United Jersey Bank, 959 F.2d 1194 (3d Cir. 1991) (court may judicially notice its docket entries)
- Comdyne I, Inc. v. Corbin, 908 F.2d 1142 (3d Cir. 1990) (factual allegations in complaint are taken as true after default judgment except damages)
- Omni Capital Int’l, Ltd. v. Rudolf Wolff & Co., Ltd., 484 U.S. 97 (U.S. 1987) (proper service is prerequisite to personal jurisdiction)
- In re Lansdale Family Rests., Inc., 977 F.2d 826 (3d Cir. 1992) (willful stay violation requires knowledge of the bankruptcy)
- Int’l Union, United Mine Workers of Am. v. Bagwell, 512 U.S. 821 (U.S. 1994) (distinguishing civil and criminal contempt; contemnor may purge civil contempt)
- Bessette v. Avco Fin. Servs., Inc., 230 F.3d 439 (1st Cir. 2000) (bankruptcy courts may use contempt power to provide monetary relief for §524 violations)
- Solfanelli v. CoreStates Bank, N.A., 203 F.3d 197 (3d Cir. 2000) (punitive damages for stay violations are available in appropriate circumstances)
- F.T.C. v. Lane Labs–USA, Inc., 624 F.3d 575 (3d Cir. 2010) (prima facie elements for contempt and ambiguities resolved for the charged party)