In re Leiba
DECISION
This matter comes before the Court on the motion of the debtor, Brian C. Leiba (the “Debtor”), for sanctions against Ieilda Vickers-Baker (“Vickers-Baker”) for violation of the automatic stay pursuant to 11 U.S.C. § 362(k). Because Vickers-Baker violated the automatic stay by commencing and continuing a state court action to collect on a pre-petition debt, and because she acted willfully after receiving notice of the Debtor’s bankruptcy filing, causing damages to the Debtor, the motion for sanctions is granted.
JURISDICTION
This Court has jurisdiction of this core proceeding pursuant to 28 U.S.C. § 157(b)(2)(A), (G), and (O), 28 U.S.C. § 1334, and the Eastern District of New York standing order of reference dated August 28, 1986, as amended by order dated December 5, 2012. This decision constitutes the Court’s findings of fact and conclusions of law to the extent required by Federal Rule of Bankruptcy Procedure 7052.
BACKGROUND
The following facts are not in dispute.
The Debtor filed this case on March 10, 2014. (Chapter 7 Voluntary Petition, 14-41062-CEC, ECF No. 1.) The Debtor’s schedules included an unsecured claim by Vickers-Baker. (Schedule F, 14-41062-CEC, ECF No. 1.) The Debtor also attached a mailing matrix to his petition which included Vickers-Baker at 198-16 118th Avenue, St. Albans, New York 11412. (Chapter 7 Voluntary Petition, 14-41062-CEC, ECF No. 1.) On March 12, 2014, the Bankruptcy Noticing Center mailed out Official Form 9A, which is a Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors, & Deadlines (the “Notice”). (BNC Certificate of Mailing— Meeting of Creditors Notice Date 03/12/2014, 14-41062-CEC, ECF No. 5.) The Notice was mailed to Vickers-Baker at the St. Albans address. Id. The Notice provided general information about the bankruptcy filing, including the following information about the automatic stay:
Creditors May Not Take Certain Actions: In most instances, the filing of the bankruptcy case automatically stays certain collection and other actions against the debtor and the debtor’s property. Under certain circumstances, the stay may be limited to 30 days or not exist at all, although the debtor can request the court to extend or impose a stay. If you attempt to collect a debt or take other action in violation of the Bankruptcy Code, you may be penalized. Consult a lawyer to determine your rights in this case.
Id. On the back of the Notice, further explanations are provided, including more information about the automatic stay under the section entitled “Creditors Generally May Not Take Certain Action”:
Prohibited collection actions are listed in Bankruptcy Code § 362. Common examples of prohibited actions include contacting the debtor by telephone, mail or otherwise to demand repayment; taking actions to collect money or obtain property from the debtor; repossessing thedebtor’s property; starting or continuing lawsuits or foreclosures; and garnishing or deducting from the debtor’s wages. Under certain circumstances, the stay may be limited to 30 days or not exist at all, although the debtor can request the court to extend or impose a stay.
Id. Additionally, the Notice provided the date, time, and location of the meeting of creditors. Id.
On June 26, 2014, the Debtor appeared for an adjourned meeting of creditors (the “Meeting of Creditors”).
On September 22, 2014, the Debtor’s counsel sent a letter to Vickers-Baker informing her that the state court action was a violation of the automatic stay and that proceeding with the action would result in sanctions (the “Letter”). (Mot. For Sanctions for Violation of the Automatic Stay, 14-41062-CEC, ECF No. 26 at ¶ 4; Affidavit Re: costs and attorney’s fees, 14-41062-CEC, ECF No. 42 at 4.) The Debt- or’s counsel sent the Letter to Vickers-Baker via certified mail, return receipt requested, to Vickers-Baker’s St. Albans address. (Mot. For Sanctions for Violation of the Automatic Stay, 14-41062-CEC, ECF No. 26 at 6 and ¶ 5.) The Letter was returned as unclaimed. Id. Because Vick-ers-Baker failed to discontinue her prosecution of the state court action, the Debt- or’s counsel was required to appear in Queens Civil Court on September 29, 2014 and November 17, 2014. (Aff. Re: costs and attorney’s fees, 14-41062-CEC, ECF No. 42 at ¶ 2(ii).)
On November 22, 2014, the Debtor’s counsel filed the motion for sanctions against Vickers-Baker with a notice of hearing scheduled for December 16, 2014 (the “Motion”). (Mot. For Sanctions for Violation of the Automatic Stay, 14-41062-‘CEC, ECF No. 26). On December 5, 2014, Mr. Karamvir Dahiya (“Dahiya”) filed a notice of appearance on behalf of Vickers-Baker. (Notice of Appearance and Request for Notice, 14-41062-CEC, ECF No. 30.) Dahiya did not file opposition prior to the December 16, 2014 hearing. At the hearing, Dahiya appeared and requested an opportunity to submit opposi
On February 18, 2015, the Debtor’s counsel filed an affidavit regarding costs and attorney’s fees (the “Affidavit of Damages”). (Aff. Re: costs and attorney’s fees, 14-41062-CEC, ECF No. 42.) On March 12, 2015, Dahiya filed an affirmation in opposition to the Affidavit of Damages (the “Opposition”). (Affirmation in Opp’n regarding damages etc., 14-41062-CEC, ECF No. 47.)
DISCUSSION
1. THE ACTIONS TAKEN BY VICK-ERS-BAKER VIOLATED THE STAY
It is axiomatic that the automatic stay is triggered by filing a bankruptcy petition. 11 U.S.C. § 362. Among the actions automatically stayed is “the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title....” 11 U.S.C. § 362(a)(1). Here, there is no doubt that Vickers-Baker violated the automatic stay. The Debtor filed his petition on March 10, 2014 and Vick-ers-Baker commenced the state court action on June 6, 2014, after the automatic stay went into effect. (Chapter 7 Voluntary Petition, 14-41062-CEC, ECF No. 1; Mot. For Sanctions for Violation of the Automatic Stay, 14-41062-CEC, ECF No. 26 at ¶ 3.) The claims asserted by Vick-ers-Baker in the state court action were based on pre-petition claims against the Debtor and the action could have been commenced before the commencement of the Debtor’s bankruptcy case. (Aff. Re: documents served on debtor 6.26.14, 14-41062-CEC, ECF No. 31 at 6.) Vickers-Baker commenced the action after the automatic stay went into effect by filing the summons and complaint upon the Debtor and then continued the action by serving, or causing service of, those documents upon the Debtor, at the meeting of creditors held pursuant to § 341 in this case. (Aff. Re: documents served on debtor 6.26.14, 14-41062-CEC, ECF No. 31 at 4.)
Vickers-Baker not only violated the automatic stay by commencement and continuation of the state court action, but also by her failure to discontinue the state court action. “It is well settled that a creditor has an affirmative duty under § 362 to take the necessary steps to discontinue its collection activities against a debtor.” In re Crawford,
2. THE STAY VIOLATION WARRANTS SANCTIONS
If a violation of the automatic stay is willful, an individual debtor may seek relief pursuant to § 362(k) of the Bankruptcy code, which provides that “an 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.” 11 U.S.C. § 362(k)(l).
While a party’s knowledge of the filing is “immaterial to a determination of whether the stay was violated,” it is relevant to whether the violation was willful. Siskin v. Complete Aircraft Servs., Inc. (In re Siskin),
Finally, the Debtor must demonstrate that he incurred damages. “A court may award attorneys’ fees pursuant to section 362(h) [now 362(k) ] even if the debtor has suffered no other compensable harm.” In re Robinson,
Attorneys’ fees and costs recoverable under § 362(k) must be reasonable and necessary. In re Robinson,
A motion for sanctions pursuant to § 362(k) should not be the opening salvo in response to a violation of the automatic stay, and here it was not. The Debtor’s counsel first attempted to resolve Vickers-Baker’s violation of the automatic stay by sending her a letter via certified mail in
Dahiya argues that some of the fees are unreasonable and that the Debtor failed to prove his losses through “competent evidence.” (Affirmation in Opp’n regarding damages etc., 14-41062-CEC, ECF No. 47 at ¶ 8.) Dahiya first focuses on the fact that the Debtor’s counsel likely was only paid a few hundred dollars and that the record of the case does not reflect any payment by the Debtor to his counsel. Id at ¶ 9. The amount paid by the Debtor to his counsel is not relevant for purposes of calculating damages under § 362(k), as the calculation of damages is based on counsel’s time spent as a consequence of the automatic stay violation and is not capped by any fee paid to counsel in connection with the filing. See In re Robinson,
3. VICKERS-BAKER’S OBJECTIONS TO THE MERITS OF THE MOTION ARE UNTIMELY AND LACK MERIT
Dahiya’s objections to the merits of the Motion are untimely, but even if considered, lack merit and are, indeed, borderline sanctionable. Dahiya filed his notice of appearance on behalf of Vickers-Baker on December 5, 2014, eleven days before the first hearing on the Motion. (Notice of Appearance and Request for Notice, 14-41062-CEC, ECF No. 30.) Dahiya did not file written opposition. At the initial hearing on December 16, 2014, Dahiya requested time to file opposition. At that hearing, the Court granted Dahiya’s oral request, but set a schedule for further submissions, and made it clear that it would “strictly enforce these deadlines, and any papers that are not filed on the dates ... when they were supposed to be filed will not be considered.” (Hr’g Tr. 35:23-35:25, December 16, 2014, 14-41062-CEC, ECF No. 53.)
On December 22, 2014, the Court entered a scheduling order which stated that any opposition to the Motion shall be filed by January 16, 2015 and which stated that
The Court granted the Motion, and issued an order directing the Debtor’s counsel to file an affidavit regarding the damages incurred with respect to the Motion. (Order Granting Mot. For Sanctions, 14-41062-CEC, ECF No. 39.) That order gave Vickers-Baker an opportunity to object to any of the proposed items of damages sought by the Debtor’s counsel, but also stated that the Court would not at that point consider any opposition to the merits of the Motion. Id. After the Debt- or’s counsel filed the Affidavit of Damage, Dahiya filed the Opposition, which, for the first time in writing, raised objections to the merits of the Motion. (Affirmation in Opp’n regarding damages etc., 14-41062-CEC, ECF No. 47.)
Dahiya argues that he was not served with the Motion or subsequent filings in connection with the Motion and that the Motion should be dismissed with prejudice. (Affirmation in Opp’n regarding damages etc., 14-41062-CEC, ECF No. 47 at ¶ 2.) The Motion was filed on November 22, 2014. Dahiya filed his notice of appearance on December 5, 2014. The Debtor’s counsel had no obligation to serve Dahiya prior to the filing of Dahiya’s notice of appearance in the proceeding. Moreover, Dahiya was aware of the Motion as he appeared before the Court on the return date, at which time he requested, and was granted, an opportunity to file opposition to the Motion. Dahiya fails to explain his failure to comply with the Court’s December 22, 2014 scheduling order, which was mailed to Vickers-Baker and which was electronically noticed to Dahiya in compliance with the Eastern District of New York Local Bankruptcy Rule 9036-1 and 9036-2. (BNC Certificate of Mailing with Application/Notice/Order Notice Date 12/25/2014, 14-41062-CEC, ECF No. 33.) Dahiya also fails to explain why dismissal with prejudice would be warranted.
Dahiya also asserts that the Debt- or himself invited Vickers-Baker to sue him and serve papers upon him, and that the stay violation ended after Vickers-Baker “walked away.” (Affirmation in Opp’n regarding damages etc., 14-41062-CEC, ECF No. 47 at ¶ 4.) Dahiya’s assertion that the Debtor invited Vickers-Baker to sue him is wholly unsupported and Da-hiya fails to include an affidavit by Vick-ers-Baker to allege that such an invitation was extended. Even if Dahiya’s factual allegations are true, the Debtor’s consent to service would not be sufficient to annul the stay, as debtors may not waive the automatic stay. Commerzanstalt v. Telewide Sys.,
Finally, Dahiya urges the Court to review Church of the Holy Trinity v. United States,
CONCLUSION
Sanctions pursuant to 11 U.S.C. § 362(k) are warranted in this instance because Vickers-Baker, having actual knowledge of the Debtor’s bankruptcy filing, willfully violated the automatic stay, causing damages consisting of attorney’s fees incurred to defend the Debtor and stop the stay violation. A separate order will issue.
Notes
. While the Motion states that the meeting of creditors occurred on August 8, 2014, the Debtor’s counsel subsequently asserted a corrected date of June 26, 2014.
. Prior to the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, § 362(k) was designated § 362(h).
. A provision added to the Bankruptcy Code by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 states that: “A monetary penalty may not be imposed on a creditor for a violation of a stay in effect under section 362(a) (including a monetary penalty imposed under section 362(k)) ... unless the conduct that is the basis of such violation or of such failure occurs after such creditor receives notice effective under this section of the order for relief.” 11 U.S.C. § 342(g)(2). In order to impose sanction on a party who violated the stay, that party must have had notice of the order of relief prior to taking actions in violation of the stay. It is undisputed that Vickers-Baker had actual knowledge of the Debtor's bankruptcy filing prior to causing service of the state court summons and complaint upon the Debtor, thereby satisfying § 342(g)(2)’s prerequisite to issuing sanctions. (Indeed, Vickers-Baker admitted that she read the Notice and that she appeared at the courthouse on the date of the meeting of creditors because the Debtor had allegedly failed to provide Vickers-Baker with his address. (Hr’g Tr. 5:14-6:9, February 5, 2015, 14-41062-CEC, ECF No. 52.)).