Lead Opinion
ORDER
The opinion and dissent in the above-captioned matter filed on April 16, 2014 and published at
The parties shall have fourteen (14) days from entry of the superseding opinion to file petitions for rehearing or petitions for rehearing en banc in the above-captioned matter.
IT IS SO ORDERED.
OPINION
The issue on appeal is whether a debtor in bankruptcy can recover, as damages, attorneys’ fees for defending against a creditor’s appeal of a finding that the creditor violated the automatic stay. The Bankruptcy Code provides that “an individual injured by any willful violation of a stay ... shall recover actual damages, including costs and attorneys’ fees.” 11 U.S.C. § 362(k)(1). We recently held that a debtor’s attorneys’ fees for work on an adversary proceeding seeking damages for a stay violation were not actual damages under § 362. Sternberg v. Johnston,
In this case, we are asked to apply § 362(k)(l) to a set of facts different than that addressed in Sternberg. Unlike in Sternberg, where a debtor filed an adversary proceeding in pursuit of damages, the debtor in this case is seeking attorneys’ fees incurred in defense of America’s Servicing Company’s (“ASC”) appeal of the bankruptcy court’s determination that ASC had violated the automatic stay. Because the attorneys’ fees at issue in this case were incurred for a different purpose than those in Sternberg, Sternberg does not prohibit the awarding of the attorneys’ fees at issue here. Moreover, following the reasoning in Sternberg, the fees at issue in this case fall within the meaning of “actual damages” in § 362(k)(l). Therefore, we affirm the Bankruptcy Appellate Panel (“BAP”) and grant Schwartz-Tal-lard’s request for an award of attorneys’ fees.
I. FACTS
ASC serviced a mortgage on Schwartz-Tallard’s home. On March 30, 2007, Sehwartz-Tallard filed for Chapter 13 bankruptcy, but continued to make mortgage payments. ASC believed Sehwartz-Tallard had fallen behind on her payments, and moved for relief from the automatic stay to foreclose on the property. On April 6, 2009, following ASC’s motion, the bankruptcy court lifted the automátic stay. Sehwartz-Tallard moved to reinstate the stay and the bankruptcy court orally granted the motion on May 13, 2009. ASC did not appear at the hearing. On May 20, 2009, ASC caused Schwartz-Tallard’s home to be sold at a trustee’s sale. It was not until June 3, 2009 — after the property had been sold — that the bankruptcy court entered the written order reinstating the stay.
On June 9, 2009, Sehwartz-Tallard filed a motion asserting that ASC had violated the automatic stay in her Chapter 13 bankruptcy, and seeking sanctions. Sehwartz-Tallard presented evidence that she was current on her mortgage payments through March 2009, but that ASC returned her April 2009 payment with a letter stating that her loan was in foreclo
On February 10, 2010, the bankruptcy court ruled that ASC had violated the stay and awarded Schwartz-Tallard damages, including attorneys’ fees and punitive damages. The bankruptcy court ordered that the property be put back into Schwartz-Tallard’s name within two days of the order (by February 12, 2010). On March 2, 2010, ASC appealed that order to the United States District Court for the District of Nevada. The next day, on March 3, 2010, ASC reconveyed the property to Schwartz-Tallard, thereby, according to ASC, remеdying the stay violation. On appeal, the district court affirmed the bankruptcy court’s finding that ASC had violated the stay, and largely affirmed the bankruptcy court’s damages award.
Schwartz-Tallard then moved to recover the attorneys’ fees incurred in litigating ASC’s appeal to the district court. These are the fees at issue in this appeal. The bankruptcy court denied the motion, and Schwartz-Tallard appealed to the BAP. The BAP held that Schwartz-Tallard’s attorneys’ fees for defending ASC’s appeal were actual damages under § 362(k)(l). ASC now appeals.
II. ANALYSIS
A. Standard of Review
We review the BAP’s conclusions of law and statutory construction de novo, meaning we independently review the decision of the bankruptcy court. In re Su,
B. Sternberg
The Bankruptcy Code provides that “an individual injured by any willful violation of a stay ... shall recover actual damages, including costs and attorneys’ fees.” 11 U.S.C. § 362(k)(1). However, in Sternberg we held that not all attorneys’ fees associated with a stay violation are recoverable under § 362(k)(l).
In Sternberg, the debtor in bankruptcy’s ex-wife sought to have a state court hold the debtor in contempt for non-payment of spousal support.
In Sternberg, we reviewed the damages award and held that the debtor could not recover attorneys’ fees incurred prosecuting the adversary proceeding under § 362(k)(l). Id. at 948. We stated that “the proven injury is the injury resulting from the stay violation itself. Once the violation has ended, any fees the debtor incurs after that point in pursuit of a damage award would not be to compensate for ‘actual damages’ under § 362(k)(l).” Id. at 947. The outcome, we held, was consistent with the “financial and non-financial” purposes of the stay. Id. The financial purpose of the stay, as we explained, is to give the debtor time to put his finances back in order, allowing creditors to be satisfied to the extent possible and preventing creditors from pursuing their own remedies at each other’s expense. Id. at 948. The stay is “meant to help the debt- or deal with his bankruptcy for the benefit of himself and his creditors alike. We have never said the stay should aid the debtor in pursuing his creditors, even those creditors who violate the stay. The stay is a shield, not a sword.” Id. The non-financial goal of the stay is to create a “breathing spell” for the debtor, and we reasoned that more litigation was not consistent with that end. Id. Therefore, we concluded that “a damages action for a stay violation is akin to an ordinary damages action, for which attorney fees are not available under the American Rule.” Id.
The Sternberg decision overruled prior BAP preсedent holding that “actual damages” under § 362(k)(l) were meant to return the debtor to the position the debt- or was in before the stay violation, and that ‘“the attorneys’ fees and costs incurred in prosecuting an adversary proceeding arising from a violation of the automatic stay are recoverable.’ ” Id. at 947, citing Beard v. Walsh (In re Walsh),
C. Analysis
The issue here is whether the attorneys’ fees Schwartz-Tallard seeks relate to her “enforcing the automatic stay and remedying the stay violation,” Stern-berg,
Sternberg specifically held that any fees a debtor incurs “in pursuit of a damage award ” are not covered.
Our decision here is consistent with both the financial and non-financial purposes of the automatic stay that we emphasized in Sternberg. As to the financial purpose of preserving a debtor’s resources for creditors, ASC’s appeal compelled Schwartz-Tallard to spend money on litigation that would otherwise have been available to creditors. Awarding her attorneys’ fees under § 362(k)(l) eliminates this problem. As to the non-financial goal of allowing the debtor time to reorganize her finances, we noted in Sternberg that “[m]ore litigation is hardly consistent with the concept of a ‘breathing spell.’ ”
III. CONCLUSION
Because the debtor was not pursuing a damages award, but rather defending ASC’s appeal of a previous finding of stay violation and thereby “remedying the stay violation,” Sternberg,
AFFIRMED.
Notes
. The district court reversed and remanded the bankruptcy court’s award of attorneys’ fees, but not because it found attorneys' fees were not warranted by § 362(k)(l). Rather, it remanded for the bankruptcy court to make a determination of actual fees expended or charged in connection with enforcing the stay and remedying the stay violation. America's Servicing Co. v. Schwartz-Tallard,
. Schwartz-Tallard asks us to re-consider the wisdom of Sternberg, arguing that it is an outlier among the circuits and has received substantial criticism for both its statutory construction and policy analysis. See In re Repine,
. This fact was made clear throughout the appeal from the bankruptcy court and in this proceeding. In ASC’s brief on appeal of the stay violation order, it argued that "the foreclosure sale ... was not a violation of the automatic stay.” Brief of ASC at 8, In re Schwartz-Tallard, No. 10-cv-00292 (D.Nev.2010). Similarly, in the district court, counsel for ASC opened his argument by stating that "If the Court decides there was a stay and my client violated it....” Transcript of Evidentiary Hearing at 7, In re Schwartz-Tallard, No. 10-cv-00292 (D.Nev.2010). In its published order, the district court noted and rejected these contentions, holding that the foreclosure sale of Schwartz-Tallard’s home "was an immediate violation of the stay” and ASC's contrary position "was not a persuasive argument.” America’s Servicing Company v. Schwartz-Tallard,
. The dissent argues that ASC did not attempt to reclaim Schwartz-Tallard’s home in its appeal. Dissent at 1106-08. This is correct as a description of ASC’s legal strategy and literal argument. But that fact does not bear the weight that the dissent’s analysis places on it. Because ASC explicitly challenged the finding that the stay existed at the time of its foreclosure, and challenged whether its foreclosure sale had violated any stay, Schwartz-Tallard’s defense of that action was a continuation of her efforts to "enforce the automatic stay.” See Sternberg,
As Sternberg recognized, "Without a doubt, Congress intended § 362(k)(l) to permit recovery as damages of fees incurred to prevent violation of the automatic stay.”
We read Sternberg in light of its plain language: Fees are available for "efforts to enforce the automatic stay,” which logically includes defending appeals that challenge a
. In reaching its conclusion, the BAP relied in part on In re Walsh,
Dissenting Opinion
dissenting:
I respectfully dissent. Our decision in Sternberg, properly read, controls this case and requires reversal. However, even if it did not control, we should still reverse.
I.
Schwartz-Tallard voluntarily petitioned for Chapter 13 bankruptcy in March 2007 in the Bankruptcy Court for the District of Nevada. In February 2009, America’s Servicing Company (ASC), a creditor of Schwartz-Tallard’s, contended that she failed to make payments on a note held by ASC. ASC moved the bankruptcy court to lift the automatic stay so it could foreclose upon property Schwartz-Tallard owned in which ASC held a security interest. On April 6, 2009, the bankruptcy court vacated the automatic stay so ASC could foreclose on the property.
Schwartz-Tallard moved to reinstate the stay for the property on May 6, 2009. She argued she had not failed to make payments on the note so the lifting of the stay was erroneous, and requested swift relief from the bankruptcy court because ASC had announced it would sell the property on May 20, 2009. On May 13, 2009, the bankruptcy court held a hearing and orally granted Schwartz-Tallard’s motion to reinstate the stay as to the property. The bankruptcy court did not enter a written order memorializing the reinstatement of the stay (the Reinstatement Order), however, until June 3, 2009. In the interim, ASC sold the property in a foreclosure sale on May 20, 2009.
On June 9, 2009, Schwartz-Tallard moved the bankruptcy court to sanction ASC for the sale, which had occurred despite the oral order reinstating the stay. The bankruptcy court heard the motion on January 7, 2010. During the long period between when the Reinstatement Order was entered on the docket and the hearing on the sanctions motion, ASC did not convey the property back to Schwartz-Tal-lard. At the hearing, the bankruptcy court ordered the property returned to Schwartz-Tallard, and ASC acceded. The bankruptcy court ordered sanctions imposed for a number of reasons, including ASC’s improper motion in February 2009 to set aside the automatic stay, ASC’s sale of the property on May 20, 2009 despite the oral grant of reinstatement on May 13, and for ASC’s failure to reconvey the property after the Reinstatement Order was entered onto the docket. The bankruptcy court also awarded Schwartz-Tal-lard attorneys’ fees and fees for emotional damages. The bankruptcy court entered an order on February 17, 2010 directing the property to be put back to Schwartz-Tallard’s name and memorializing the sanctions and attorneys’ fees (Conveyance and Sanctions Order).
On March 2, 2010, ASC filed a notice of appeal from the Conveyance and Sanctions Order. ASC finally рut the property back in Schwartz-Tallard’s name on March 3, 2010.
ASC filed its appellate brief in the district court on May 10, 2010, in which ASC attacked the Conveyance and Sanctions Order on five grounds. First, ASC argued that the bankruptcy court’s oral order of May 13, 2009 did not take effect immediately, so “any sanctions based upon [the bankruptcy court’s conclusion in the Conveyance and Sanctions Order that the foreclosure sale of May 20, 2009 violated the stay] must be reversed.” Second, ASC argued that it had not been required to undo the foreclosure sale and reconvey the
Critically, all five of these arguments attacked the amount and propriety of the sanctions and fees awarded to Schwartz-Tallard. ASC never argued that Schwartz-Tallard actually defaulted on her note, as it had originally argued in February 2009. ASC did not attack the validity of the Reinstatement Order. That meant ASC never challenged the bankruptcy court’s conclusion in the Conveyance and Sanctions Order that the property should be conveyed back to Schwartz-Tallard. If ASC’s appeal had been wholly successful, it would not have owed Schwartz-Tallard any money. But ASC would not have retaken Schwartz-Tallard’s property.
Schwartz-Tallard filed an answering brief on June 3, 2010. In her brief, she stated that ASC’s “main argument is that the Bankruptcy Court did not follow the proper procedure in awarding sanctions and damages under F.R.B.P. 9011.” She did not defend the bankruptcy court’s judgment ordering the property returned to her.
The district court issued an order on September 14, 2010. In that order, the court affirmed most of the Conveyance and Sanctions Order, but rejected some of the attorneys’ fees calculations made by the bankruptcy court. On remand, the bankruptcy court reassessed those attorneys’ fees.
On February 16, 2011, Schwartz-Tallard moved for additiоnal attorneys’ fees before the bankruptcy court. She argued that ASC owed her $10,103.00 for attorneys’ fees she incurred by defending ASC’s appeal of the Conveyance and Sanctions Order. In an oral hearing on July 12, 2011, the bankruptcy court rejected her motion, holding that Schwartz-Tallard was “not entitled to [those] fees for the sole reason that I believe that Sternberg [v. Johnston,
In Sternberg, we considered the scope of “actual damages” under 28 U.S.C. § 362(k)(1). Section 362(k)(l) allows “an individual injured by any willful violation of [the automatic] stay ... [to] recover actual damages, including costs and attorneys’ fees ...” We concluded that “actual damages” does not include attorneys’ fees expended by the debtor for the prosecution of an advеrsary proceeding to recover damages suffered from a violation of the stay. Sternberg,
Schwartz-Tallard appealed the bankruptcy court’s denial of the $10,103.00 in appellate attorneys’ fees she sought. The bankruptcy court had suggested at the
Schwartz-Tallard’s appeal proceeded before the Bankruptcy Appellate Panel (BAP). In her brief, Schwartz-Tallard offered two possible distinctions of Stern-berg, but mostly focused on her argument that our decision in that case “ha[d] been sharply criticized by other courts.” ASC disagreed with Schwartz-Tallard’s distinctions, but pointed out that Schwartz-Tal-lard had basically “concede[d] that Stern-berg is binding.” Thus far, the bankruptcy court and even the parties seemed to agree that Schwartz-Tallard could not recover attorneys’ fees for defending ASC’s appeal of the Conveyance and Sanctions Order under our decision in Sternberg.
But then the BAP issued its decision. In re Schwartz-Tallard,
After attempting to distinguish this case from Sternberg, the BAP held that Schwartz-Tallard is entitled to attorneys’ fees for her defense of ASC’s appeal, because the defense of the appeal “was consistent with the goals of the automatic stay identified by the court in Sternberg,” and ASC’s appeal “deprive[d] [Schwartz-Tal-lard] of the benefits of her automatic stay,” so her “defense of the bankruptcy court’s decision was an extension of her efforts to enforce her automatic stay.” Id. The BAP suggested that Schwartz-Tallard was entitled to attorneys’ fees because ASC’s stay violation was not remedied until ASC lost its appeal. Id. at 350 (“[o]f course, in Sternberg, the point at which the stay violation had been ‘remedied’ was clear.... In contrast, here, while the Property was finally reconveyed to [Schwartz-Tallard] the day after ASC filed its notice of appeal, [Schwartz-Tallard] was forced to defend that appeal to validate the bankruptcy court’s ruling”). The BAP also relied on its prior decision of In re Walsh, where it held that “[c]learly, fees and costs experienced by an injured party in resisting the [stay] violator’s appeal are part of the damages resulting directly from the stay violation.” Id., quoting In re Walsh,
The majority now affirms the BAP. The basic structure of the majority’s opinion is the same as the BAP’s. First, the majority attempts to distinguish Sternberg. The majority states that there we “specifically held” “that any fees a debtor incurs ‘in pursuit of a damage award’ are not covered” by section 362(k)(l). Majority Op. at 1101. Here, however, the majority asserts that Schwartz-Tallard “was not pursuing a damage award,” was “remedying the stay violation,” and “was not using the stay as a sword.” Majority Op. at 1101. The majority then explains why Schwartz-Tallard is entitled to attorneys’ fees: it believes awarding these fees is consistent with the plain language of section 362(k)(l), and in the absence of Stern-berg ’s limitations, awarding those fees “is consistent with both the financial and non-financial purposes of the automatic stay that we emphasized in Sternberg.” Id. at 1102.
The majority errs in several respects, but the most significant of its mistakes is its failure to recognize that Sternberg controls this case. The majority characterizes the holding of Sternberg as “any fees a debtor incurs ‘in pursuit of a damage award’ are not covered” as “actual damages” under section 362(k)(l). Majority Op. at 1101-02, quoting Sternberg,
On March 3, 2010, ASC returned the property to Schwartz-Tallard. That ended and remedied the violation of the automatic stay. On May 10, 2010, ASC filed its opening brief in the appeal. By not seeking to retake Schwartz-Tallard’s property then, ASC waived its right to do so. By May 10, 2010, at the latest, it was both evident to Schwartz-Tallard and legally true that ASC’s appeal was not related to enforcing the automatic stay or remedying the stay violation. Instead, the only possible result of Schwartz-Tallard’s defense of ASC’s appeal was to maintain the sanctions she had been awarded by the bankruptcy court. Attorneys’ fees expended to that end are not actual damages under Sternberg.
A.
In Sternberg, we interpreted 11 U.S.C. § 362(k)(1), which allows an individual injured by a willful violation of the automatic stay “actual damages, including costs and attorneys’ fees.” We determined that a debtor “can recover as actual damages only those attorney fees related to enforcing the automatic stay and remedying the stay violation.”
In this case, the parties were returned to the status quo when Schwartz-Tallard received her property back from ASC. That occurred on the date ASC recon-veyed the property, March 3, 2010. Once the status quo was re-established, the violation of the stay ended. Id.; Hillis,
ASC appealed the Conveyance and Sanctions Order that required it to return the property to Schwartz-Tallard on March 2, 2010. In that appeal, ASC conceivably could have argued that the Reinstatement Order was erroneous, and that the property should revert. But it did not do so. In its appeal brief to the district court, filed on May 10, 2010, ASC sought only to reduce or reverse the award of damages owed to Schwartz-Tallard. By failing to attack the Reinstatement Order or otherwise argue that Schwartz-Tallard had defaulted on her note and was not entitled to the property, ASC waived any argument that could have led to retaking the property under the Nevada Local Rules and the Federal Rules of Bankruptcy Procedure. D. Nev. L.R. 8018 (“[p]rac-
After ASC waived any attempt to retake Schwartz-Tallard’s property, the appeal was limited to whether and in what amount ASC owed Sehwartz-Tallard damages. This is made particularly clear by the substance of Schwartz-Tallard’s answering brief, filed on June 3, 2010. In that brief, for which Sehwartz-Tallard seeks attorneys’ fees in this appeal, Sehwartz-Tallard defended the bankruptcy court’s award of sanctions, but never argued (because ASC had never argued to the contrary) that the property should remain with her. Thus, on May 10, 2010, the stay violation had been remedied by the Conveyance and Sanctions Order, because the status quo had been returned, and ASC could no longer disrupt that status quo. All litigation Sehwartz-Tallard engaged in after May 10, 2010 was not “related to enforcing the automatic stay and remedying the stay violation.” Sternberg,
B.
The majority confuses this simple analysis. First, the majority contorts language in Sternberg to improperly distinguish between “pursuit” and “defense” of an award of damages for a violation of the automatic stay. Second, in its fourth footnote, the majority opinion leads inextricably to a clear conflict with Sternberg.
1.
The majority ignores the holding in Sternberg, and instead misinterprets the next sentence of our decision. Majority Op. at 1099-1100. In that sentence, we stated that “[o]nce the violation has ended, any fees the debtor incurs after that point in pursuit of a damage award would not be to compensate for ‘actual damages’ under § 362(k)(l).”
But this analysis is wrong. The discussion of the “pursuit of a damage award” is not the “specific[ ] h[olding]” of Sternberg, which is more properly characterized as I have stated above: “actual damages” is an amount awarded to compensate for “proven injury,” which in turn “is the injury resulting from the stay violation itself.”
Further, the majority (and the BAP) are wrong to conclude that Schwartz-Tallard was “forced” to defend ASC’s appeal. Had Schwartz-Tallard not defended the appeal, she would have lost the damages properly awarded to her for ASC’s violation of the automatic stay. But she would have retained her property. As of May 10, 2010, Schwartz-Tallard was in the same position as the debtor in Sternberg: had the debtor, Johnston, not sued the violators of the automatic stay in an adversary proceeding, he may not have ever received the damages award owed him. The adversary proceeding he filed, considered in this respect, was “an extension of [his] efforts to enforce [his] automatic stay.” Schwartz-Tallard,
2.
The majority’s error is made plainest in its fourth footnote. The majority states in opposition to my reasoning that “[b]ecause ASC explicitly challenged the finding that the stay existed at the time of its foreclosure, and challenged whether its foreclosure sale had violated any stay, Schwartz-Tallard’s defense of that action was a continuation of her efforts to enforce the automatic stay.” Majority Op. at 1101 n. 4 (citation omitted). But regardless of ASC’s challenge to the finding that a stay existed when it foreclosed, the appeal could not lead to a retaking of Schwartz-Tallard’s property, because ASC waived any argument to that effect by its brief filed on May 10, 2010. That meant, by definition, the appeal had nothing to do with enforcing the automatic stay or remedying the stay violation, because the stay had been reinstated on March 3, 2010 when ASC returned the property to Schwartz-Tallard.
The majority’s reasoning leads to a statement that is obviously at odds with Sternberg. According to the majority, “[preventing violation of the automatic stay should contain at least litigation against stay violators in the bankruptcy courts to obtain a declaration of stay violation, and the defense of findings of stay violation on appeal.” Id. at 1101. In Stern-berg itself, Johnston, the debtor, filed an adversary proceeding against Sternberg, seeking an order that he had violated the automatic stay.
The rest of the majority’s footnote fares no better. The majority states that under my theory, “efforts in the bankruptcy court to enforce the stay would be ineffective, because a stay violator could seek to
Ultimately, the logic of the majority opinion does not follow. Both this case and Sternberg are governed by section 362(k)(l). How can the same statutory text require a bankruptcy court to award attorneys’ fees to Sehwartz-Tallard but bar a bankruptcy court from awarding attorneys’ fees to Johnston?
Sternberg controls this appeal. Our disposition should be quite simple under our holding in that case. Sehwartzr-Tallard was entitled to “actual damages” for ASC’s violation of the automatic stay. The violation of the stay ended after the status quo when Sehwartz-Tallard took back her property on March 3, 2010. Schwartz-Tallard’s defense of the appeal was not related to remedying the stay violation after ASC waived any claim to the property in its appellate brief in the district court, on May 10, 2010. Any attorneys’ fees Sehwartz-Tallard paid after that date are not “an amount awarded to compensate for proven injury or loss,” because the fees did not “result[ ] from the stay violation itself.” Id. I would reverse the BAP because of its misinterpretation of Stern-berg.
III.
But strangely enough, even if the majority is correct that Sternberg is not controlling, we should still reverse the BAP. If Sternberg does not control the outcome of this case, then there is no Ninth Circuit precedent governing this appeal, and we independently interpret the relevant statute to determine whether to award Sehwartz-Tallard the attorneys’ fees she seeks. The BAP apparently realized this and sought such an independent basis in its own precedent of In re Walsh,
A.
If Sternberg does not control, although I would hold it does, we would have to assess independently whether to award Sehwartz-Tallard attorneys’ fees for her defense of the appeal from the Reconveyance and Sanctions Order. This is a question of statutory interpretation of section 362(k)(l), so we start with the text of the statute itself. In re Blixseth,
Although the plain language of the statute includes attorneys’ fees as “actual damages,” the term “actual damages” itself “is an ambiguous phrase.” Sternberg,
B.
The text of section 362(k)(l) does not explicitly address the award of attorneys’ fees to litigants like Schwartz-Tallard. Awarding such fees is “a bold departure from traditional practice” and so usually requires “explicit statutory language and legislative comment.” Fogerty,
Legislative history that “is at best ambiguous ... is clearly insufficient to alter the accepted meaning of the statutory term,” “[pjarticularly in view of the ‘American Rule’ that attorney’s fees will not be awarded absent ‘explicit statutory authority.’ ” Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Human Resources,
C.
The majority first claims that the “plain language of [section 362(k)(l) ] includes attorneys’ fees in the definition of actual damages,” and states that “there is no reason to contort that language” to avoid awarding attorneys’ fees. Majority Op. at 1102. Though the majority is correct that the text of section 362(k)(l) allows attorneys’ fees as part of actual damages, it incorrectly concludes that this supports its holding. The question in this appeal is whether these attorneys’ fees are actual damages, an “ambiguous phrase.” Sternberg,
The majority’s only other legal basis for awarding these attorneys’ fees is that “the fees incurred defending ... an appeal meet [the] Congressional purpose” behind section 362(k)(l) in that its “decision here is consistent with both the financial and non-financial purposes of the automatic stay that we emphasized in Sternberg.” Majority Op. at 1102. An inference from legislative purpose can never be “explicit statutory language and legislative comment,” Fogerty,
Indeed, the majority wrongly concludes that allowing Schwartz-Tallard to collect the attorneys’ fees is “consistent with both the financial and non-financial purposеs of the automatic stay that we emphasized in Sternberg.” Majority Op. at 1102.
Allowing attorneys’ fees would not further the financial goals of the automatic stay recognized in Sternberg. ASC was a creditor of Schwartz-Tallard. “We have never said the stay should aid the debtor in pursuing his creditors, even those creditors who violate the stay.” Sternberg,
Nor does awarding attorneys’ fees further the noneconomic purpose of the stay recognized in Sternberg. “More litigation is hardly consistent with the concept of a ‘breathing spell.’ ” Id. By defending against ASC’s appeal, Schwartz-Tallard only created more litigation “attenuated from the actual bankruptcy.” Id.
I understand that my suggestion that Schwartz-Tallard could have simply not defended ASC’s appeal may seem unfair, but it is perfectly consistent with the “breathing spell” inherent in the automatic stay. It is also consistent with our recognition that the American Rule disfavors granting attorneys’ fees “even though it could be said [the debtor] is not made whole as a result.” Id. at 947.
Thus, I do not believe the supposed purposes of the automatic stay divined by the majority clearly weigh in favor of Schwartz-Tallard. Like many disputes over statutory purposes, the majority’s argument and what it calls Sternberg’s “policy analysis,” Majority Op. at 1100 n. 2, “at most confronts us with competing policy arguments,” which are not enough to overcome the background “American Rule” that each party bears its own costs. Hardisty,
IV.
Although the majority errs in affirming the BAP, the majority is correct in its footnote to deem the BAP’s reliance on the decision in Walsh “improper.” Majority Op. at 1102 n. 5. I agree with the majority
A.
The Constitution vests the “judicial power of the United States” in the Supreme Court and inferior courts. U.S. Const, art. Ill, § 1. The federal judges subject to Article III “hold their Offices during good Behavior,” which means they have lifetime tenure unless impeached, and their “Compensation [ ] shall not be diminished during their Continuance in Office.” Id.
Congress has the power to create certain other federal tribunals under its constitutionally delegated powers found in Article I. One type of federal tribunal acts as an “adjunct” to the Article III federal courts, a term used by the Supreme Court to describe the role of certain administrative agencies and the magistrate courts. N. Pipeline Constr. Co. v. Marathon Pipe Line Co.,
But Congress does not have plenary authority to create federal tribunals. Congress cannot grant jurisdiction over cases that are rightfully within the “judicial power of the United States” described in Article III to an Article I tribunal without violating the Constitution and its separation of powers рrinciple. N. Pipeline,
Under the Bankruptcy Reform .Act of 1978, Congress dramatically altered the existing bankruptcy system to modernize the bankruptcy laws. S. REP. No. 95-989, at 1 (1978), 78 U.S.C.C.A.N. 5787. Congress replaced the bankruptcy “referees” from the Bankruptcy Act of 1898 with bankruptcy “judges” with far more power to resolve bankruptcy disputes. Id. at 2-3. The Reform Act also authorized the judicial councils of the circuits to order the chief judge of the circuit to designate panels of three bankruptcy judges to hear appeals from judgments, orders, and decrees of each bankruptcy court. Pub.L. No. 95-598, title II, § 201, adding 28 U.S.C. § 160. These “bankruptcy appellate panels,” composed of bankruptcy judges, had jurisdiction of appeals from all final judgments, orders, and decrees of bankruptcy courts, as well as interlocutory judgments, orders, and decrees, if the panel granted leave. Id., title II, § 241, adding 28 U.S.C. § 1482. Under the 1978 Act, if a Judicial Council of a circuit authorized a BAP, all appeals from decisions of bankruptcy judges had to be heard by that BAP, unless all parties stipulated to have the appeal taken to the court of appeals. Thomas E. Carlson, The Case for Bankruptcy Appellate Panels, 1990 B.Y.U. L. REV. 545, 546-47. Only the Judicial Councils of the First and Ninth Circuits
B.
In Northern Pipeline, the Supreme Court struck down the composition and jurisdiction of the bankruptcy courts enacted under the 1978 Act.
In light of Northern Pipeline, the Judicial Conference of the United States issued a model “Emergency Rule” that was adopted by all of the district courts in the Ninth Circuit. See In re Burley,
The Bankruptcy Appellate Panel of the First Circuit reviewed the constitutionality of the BAP soon after Northern Pipeline, and concluded that although Northern Pipeline itself had not struck down review of bankruptcy decisions by the BAP, under the principles the Supreme Court recognized, BAP review “violates Article Ill’s command that the judicial power must be vested in Article III courts.” In re Dartmouth House Nursing Home,
A few months later, we reviewed а decision from the BAP that was entered after Northern Pipeline. Burley,
In response to Northern Pipeline, and soon after we had affirmed the constitutionality of the BAP in Burley, Congress passed the “Bankruptcy Amendments and Federal Judgeship Act of 1984.” Pub.L. No. 98-353. Under that statute, the BAP could only hear an appeal from a bankruptcy judge if “all thе parties” consented, and the court of appeals had appellate jurisdiction over any final decision, judgment, order or decree issued by the BAP. Id. at § 104, inserting 28 U.S.C. § 158. In August 1984, our Judicial Council of the Circuit reestablished our BAP pursuant to the new statute, but no other circuit joined us. Thomas A. Wiseman, Jr., The Case Against Bankruptcy Appellate Panels, 4 Geo. Mason L.Rev. 1, 2 (1995).
Because we were the only circuit to create a BAP, Congress modified the bankruptcy appeals statute in 1994 to require that the judicial council of each circuit establish a BAP unless the council decided that it did not have sufficient judicial resources or that the creation of the BAP would create undue delay or increased costs. 28 U.S.C. § 158(b). Since 1994, we have been joined by the First, Sixth, Eighth and Tenth Circuits. Jonathan Remy Nash & Rafael I. Pardo, An Empirical Investigation into Appellate Structure and the Perceived Quality of Appellate Review, 61 Vand. L.Rev. 1745, 1757 (2008).
The Judicial Council of the Ninth Circuit has continued the BAP’s service after the 1994 statutory modifications. See Judicial Council of the Ninth Circuit, “Amended Order Continuing the Bankruptcy Appellate Panel of the Ninth Circuit” (effective November 18, 1988; as amended May 4, 2010). Under current Ninth Circuit BAP practice, seven active bankruptcy judges from districts within the Ninth Circuit are authorized to serve on the BAP. Each appeal is heard by a panel of three judges, but no judge can hear an appeal originating from his or her district. Bankruptcy Appellate Panel of the Ninth Circuit Lit. Manual § III. An appeal from the bankruptcy court automatically goes to the BAP unless any party timely elects for the district court to hear the appeal. 28 U.S.C. § 158(c)(1). In certain exceptional bankruptcy cases filed after the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, parties can bypass both the BAP and district court and appeal directly to the Court of Appeals. See Blausey v. U.S. Trustee,
C.
Because the BAP is an Article I tribunal, we have consistently recognized that its decisions cannot bind us, or in fact any Article III court. In re Silverman,
Relatedly, we vacate any BAP decisions and judgments based on reasoning that we have overruled or rejected. See, e.g., In re Ransom,
This discussion of the BAP’s subordinate role is not academic. The control we exercise over the BAP and its decisions is necessary to justify the very existence of that court. See, e.g., N. Pipeline,
D.
In 1998, the BAP issued its decision in In re Walsh, which stated that “if appellate fees and costs are” not awarded, “then the injured party is not made whole,” and thus held that “[c]learly, fees and costs experienced by the injured party in resisting the [stay] violator’s appeal are part of the damages resulting directly from the stay violation” under the predecessor to section 362(k)(l).
In the present appeal, the BAP cited and relied on Walsh’s precise holding, explaining that “Sternberg admittedly rejected the BAP’s determination in Walsh that § 362(k)’s predecessor, § 362(h), required an injured party to be made whole. At the same time, Sternberg did not invalidate Walsh’s finding that damages incurred on appeal are actual damages directly resulting from the stay violation itself.” Schwartz-Tallard,
E.
The BAP’s citation to a precedent we specifically rejected is not only unacceptable under our precedent and its own deci-sional law. Ransom,
This constitutional concern is particularly evident in the two classes of BAP decisions that we do not review on appeal. As Judge Norris observed, we do not review the BAP when the losing party does not appeal the adverse decision from the panel, and when the BAP decides a non-final bankruptcy order under its interlocutory jurisdiction. Burley,
First, not all BAP cases are appealed by the losing party. Id. at 990-92 (Norris, J., dissenting). In those circumstances, there is “no direct article III control over [the] individual case[].” Id. at 992 (Norris, J., dissenting). If the BAP were not to follow federal law as stated in our decisiоns, and if the party subject to that decision were to lack the resources to rectify the BAP’s error, that party would be bound erroneously by an Article I tribunal.
Second and more worrisome, the BAP has jurisdiction over some interlocutory bankruptcy orders that we do not have appellate jurisdiction to review. Id. at 992-93 (Norris, J., dissenting); see also In re Lievsay,
I do not contend that the BAP is consistently ignoring our opinions, or that it has done so in a case we have not reviewed. But all subordinate courts must follow the authoritative decisions of higher courts. See, e.g., United States v. McCalla,
V.
The majority incorrectly holds that our decision in Sternberg does not control this case. I am convinced to the contrary. Even if the majority were correct, however, it cites no persuasive basis for awarding attorneys’ fees to Schwartz-Tallard.
The BAP’s decision to ignore our binding precedent raises serious threats to the separation of powers. The majority, the BAP, and some out-of-circuit judges, cited at Majority Op. at 1100 n. 2, fundamentally disagree with our holding in Sternberg. If they are correct, the proper outlet for review of our decision is our court en banc or the Supreme Court. The BAP is a subordinate court, bound to follow our decisions, and as a three judge panel, we must follow prior panel precedent, whether or not the decisions were decided incorrectly or have been criticized by other courts. Miller v. Gammie,