616 B.R. 77
Bankr. N.D. Miss.2020Background
- Debtor Sharrell D. Reed filed Chapter 13 on August 31, 2016; plan confirmed January 17, 2017 and included student loans owed to the U.S. Department of Education (serviced by FedLoan and Navient).
- Court previously found the Department in willful contempt (Feb. 13, 2019) and ordered it to cease all communications about the debt.
- Despite the prior order and notice, the Department sent collection letters in July and December 2019 (December letter threatened wage garnishment) and initiated wage garnishment in January 2020.
- Reed filed a second Motion for Citation of Contempt on January 8, 2020; evidentiary hearing held February 25, 2020. The Department presented no witnesses or substantive defense.
- Court stopped the garnishments at the hearing and reserved damages; Reed testified to lost wages, mileage, and incurred $3,900 in attorney’s fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sovereign immunity | §106 abrogates the United States' sovereign immunity for bankruptcy-code remedies; Department not immune | Department did not substantively assert immunity at hearing | Court: §106(a) abrogates sovereign immunity for §362 claims; Department not immune |
| Willful violation of automatic stay | Department repeatedly sent collection letters and garnished wages despite knowledge of the bankruptcy | Department offered no defense; AUSA attempted to notify Department of violations | Court: Three-prong Fifth Circuit test satisfied; Department willfully violated §362 |
| Civil contempt for violating prior order | Department disobeyed the Court’s Feb. 2019 order to cease communications | No defense presented | Court: Department in civil contempt of the prior order and the automatic stay |
| Damages and fees | Reed sought actual damages (lost wages, mileage) and reasonable attorney’s fees ($3,900) | Department did not contest amounts; punitive damages barred against governmental units | Court: Awarded $4,231.67 (lost wages $183.78; mileage $149.27; attorney fees $3,900); punitive damages unavailable under §106(3) |
Key Cases Cited
- Hunsaker v. United States, 902 F.3d 963 (9th Cir. 2018) (discussing sovereign immunity and federal government suits)
- Hoffman v. Connecticut Dep't of Income Maintenance, 492 U.S. 96 (1989) (statutory abrogation of sovereign immunity must be unmistakably clear)
- Atascadero State Hospital v. Scanlon, 473 U.S. 234 (1985) (clarity required for abrogating sovereign immunity)
- In re Repine, 536 F.3d 512 (5th Cir. 2008) (Fifth Circuit three-prong willful-violation test and §362 damages principles)
- Campbell v. Countrywide Home Loans, Inc., 545 F.3d 348 (5th Cir. 2008) (knowledge and intent in stay-violation analysis)
- Jove Eng'g, Inc. v. IRS, 92 F.3d 1539 (11th Cir. 1996) (contempt remedies for stay violations)
- Shipes v. Trinity Indus., 987 F.2d 311 (5th Cir. 1993) (lodestar method for attorney’s fees)
- Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974) (Johnson factors for adjusting lodestar)