IN RE IRENE MICHELLE SCHWARTZ-TALLARD, Debtor, AMERICA’S SERVICING COMPANY, Appellant, v. IRENE MICHELLE SCHWARTZ-TALLARD, Appellee.
No. 12-60052
BAP No. 11-1429
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
October 14, 2015
Before: Sidney R. Thomas, Chief Judge, and Stephen Reinhardt, Diarmuid F. O’Scannlain, M. Margaret McKeown, William A. Fletcher, Richard C. Tallman, Carlos T. Bea, Milan D. Smith, Jr., Sandra S. Ikuta, Paul J. Watford, and Andrew D. Hurwitz, Circuit Judges.
Appeal from the Ninth Circuit Bankruptcy Appellate Panel Kirscher, Pappas, and Dunn, Bankruptcy Judges, Presiding
Argued and Submitted En Banc June 17, 2015—San Francisco, California
Filed October 14, 2015
OPINION
Opinion by Judge Watford;
Concurrence by Judge Bea;
Dissent by Judge Ikuta
SUMMARY*
Bankruptcy
Affirming the judgment of the Bankruptcy Appellate Panel, the en banc court held that
When a debtor files for bankruptcy, the Bankruptcy Code imposes an automatic stay on actions against the debtor to collect pre-petition debts. Sternberg v. Johnston, 595 F.3d 937 (9th Cir. 2010), held that
Concurring in the judgment, Judge Bea, joined by Judge O’Scannlain, concurred in the majority’s conclusion that
Dissenting, Judge Ikuta wrote that the statutory text was ambiguous, and the en banc court should have adhered to the better reading set forth in Sternberg.
COUNSEL
Christopher P. Burke (argued), Law Office of Christopher P. Burke, Las Vegas, Nevada, for Appellee.
Daniel L. Geyser (argued), McKool Smith, Dallas, Texas; Tara Twomey, National Association of Consumer Bankruptcy Attorneys, San Jose, California, for Amicus Curiae National Association of Consumer Bankruptcy Attorneys.
WATFORD, Circuit Judge:
When a debtor files for bankruptcy, the Bankruptcy Code imposes an automatic stay on virtually all actions against the debtor to collect pre-petition debts.
The one exception is our decision in Sternberg v. Johnston, 595 F.3d 937 (9th Cir. 2010). There, we held that
I
This case has a convoluted procedural history, which for our purposes can be briefly summarized. The debtor, Irene Schwartz-Tallard, took out a mortgage on her home in Henderson, Nevada. After filing a Chapter 13 bankruptcy petition, she continued to make her monthly mortgage payments to America’s Servicing Company (ASC), the company servicing her loan. Due tо a mistake on its part, ASC wrongfully foreclosed on Schwartz-Tallard’s home. ASC purchased the home at the foreclosure sale and promptly served Schwartz-Tallard with an eviction notice. Schwartz-Tallard filed a motion in the bankruptcy court requesting relief under
None of that relief is now at issue. ASC did not challenge the reconveyance order; soon after the bankruptcy court issued the order, ASC complied with it. While ASC did challenge the damages award by pursuing an appeal in the district court, the district court ultimately upheld the award, and ASC chose not to seek further review in this court.
After successfully defending the damages award on appeal, Schwartz-Tallard returnеd to the bankruptcy court and asked it to award her, under
Schwartz-Tallard appealed, and the Bankruptcy Appellate Panel (BAP) reversed. It concluded that Sternberg does not bar an award of attorney’s fees to a debtor who successfully defends a
II
We find it unnecessary to resolve the issue that divided the three-judge panel. Rather than decide whether Sternberg’s holding extends to the facts of this case, we think the better course is to jettison Sternberg’s erroneous interpretation of
A
When Congress enacted the Bankruptcy Code in 1978, it included the automatic stay provision now found in
Perhaps to eliminate any doubt about the source of a court’s authority to remedy violations of the automatic stay, Congress enacted
(1) Except as provided in paragraph (2), an individual injured by any willful violation of a stay provided by this section shall recоver actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.
(2) If such violation is based on an action taken by an entity in the good
faith belief that subsection (h) applies to the debtor, the recovery under paragraph (1) of this subsection against such entity shall be limited to actual damages.
In some respects the statute strengthened the remedies previously available to debtors injured by willful stay violations. It makes an award of actual damages and attorney’s fees mandatory, and grants bankruptcy courts the discretion to impose punitive damages in appropriate cases.
B
Both parties agree that
If that much is true, and we agree that it is, the question becomes: Did Congress intend to authorize recovery of attorney’s fees incurred in litigation for one purpose (ending the stay violation) but not for another (recovering damages)? We see nothing in the statute that suggests Congress intended to cleave litigation-related fees into two categories, one recoverable by the debtor, the other not. The statute says “including costs and attorneys’ fees,” with no limitation on the remedy for which the fees were incurred. To uphold Sternberg’s interpretation of
Sternberg concluded that such a limitation should be inferred because the statute makes attorney’s fees recoverable only as a component of the debtor’s “actual damages,” not as attorney’s fees as such. Section
Sternberg’s reading of
We do not think the language of
We do not have legislative history that speaks directly to Congress’ purpose in enacting
That legislative plan can be carried out, of course, only if injured debtors are actually able to sue to recover the damages that
Finally, if we needed further reason to reject Sternberg’s reading of
For these reasons,
III
Having determined that
The judgment of the Bankruptcy Appellate Panel is AFFIRMED.
BEA, Circuit Judge, joined by O’SCANNLAIN, Circuit Judge, concurring in the judgment:
I concur in the majority’s conclusion that
“If a court, employing traditional tools of statutory construction, ascertains that Congress had an intention on the precise question at issue, that intention is the law and must be given effect.” Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843 n.9 (1984). If the language of the statute is unambiguous, that is the end of the inquiry. See City of Arlington v. FCC, 133 S. Ct. 1863, 1868 (2013) (“‘If the intent of Congress is clear, that is the end of the matter; for the court . . . must give effect to the unambiguously expressed intent of
Engaging in gratuitous speculation of what “Congress’ plan” must have been when it enacted
“If the statutory language is unambiguous, in the absence of a clearly expressed legislative intent to the contrary, that language must ordinarily be regarded as conclusive.” Reves v. Ernst & Young, 507 U.S. 170, 177 (1993) (internal quotation marks omitted). “[E]ven the most formidable argument concerning the statute’s purposes could not overcome the clarity [of] the statute’s text.” Kloeckner v. Solis, 133 S. Ct. 596, 607 n.4 (2012). “The purposes of a law must be ‘collected chiefly from its words,’ not ‘from extrinsic circumstances.‘” King v. Burwell, 135 S. Ct. 2480, 2503 (2015) (Scalia, J., dissenting) (quoting Sturges v. Crowninshield, 17 U.S. (4 Wheat.) 122, 202 (1819) (Marshall, C.J.)); see also Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 568 (2005) (“As we have repeatedly held, the authoritative statement is the statutory text, not the legislative history or any other extrinsic material.“).
Here, the majority finds the language of
IKUTA, Circuit Judge, dissenting:
I prefer the result reached by the majority, which reads
“The starting point in discerning congressional intent is the existing statutory text.” Lamie v. U.S. Trustee, 540 U.S. 526, 534 (2004). The statutory text here states, “[A]n individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.”
As explained in Sternberg, a number of states have adopted a similar approach to cases in which attorneys’ fees are part of the damages incurred from tortious conduct. Id. at 946. In suits to recover attorneys’ fees for malpractice, or to obtain the benefits due under an insurance policy, state courts have allowed the plaintiff to recover only the damages the plaintiff actually incurred from the underlying tort, but not the attorneys’ fees incurred to bring the action for damages. Id. Indeed, the majority acknowledges that the phrase “shall recover actual damages,” standing alone, is best read as conveying “Congress’ intent to adhere to the default rule precluding an award of attorney’s fees incurred in prosecuting the damages action itself.” Maj. Op. at 9.
When the language of a statute is ambiguous, canons of statutory interpretation are useful rules of thumb to help courts determine the meaning оf legislation. See Conn. Nat. Bank v. Germain, 503 U.S. 249, 253 (1992). The most relevant canon here is that “Congress legislates against the backdrop of the ‘American Rule.‘” Sternberg, 595 F.3d at 945–46 (citing Fogerty v. Fantasy, Inc., 510 U.S. 517, 533 (1994)). In other words, statutes regarding attorneys’ fees should be read with a presumption in favor of the American Rule, except when a statutory purpose to the contrary is evident. See Fogerty, 510 U.S. at 534. This principle supports the conclusion that Congress did not intend to allow the debtor to recover the fees incurred in the action itself. Indeed, as the majority acknowledges, when Congress intends to abrogate the American Rule, it typically uses different lаnguage. Maj. Op. at 9. Most statutes that deviate from the American Rule do not provide a cause of action for “actual damages, including costs and attorneys’ fees,” but instead authorize the award of “a reasonable attorney’s fee” to a “prevailing party.” Maj. Op. at 9. Thus, Congress knows how to include language abrogating the American Rule, and it chose different language for
In reaching the opposite conclusion, the majority does not apply these ordinary principles of statutory construction. Except for making the conclusory statement that the “explicit language of
Turning to legislative history, the majority acknowledges that there is none, so it proposes some of its own. Mаj. Op. at 10–11. It speculates that Congress’ purpose must have been to protect debtors: After all, the automatic stay prevents creditors from collecting from a debtor who has declared bankruptcy, and interpreting
Finally, the majority turns toward the difficulties that have resulted from Sternberg’s reading of
Although I understand the impulse to improve Congress’s legislative efforts, our role is a modest one, and we should simply do our best to give effect to the plain language of the text. Congress is always free to correct our interpretation. Therefore, I reluctantly dissent.