FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN RE: IRENE MICHELLE SCHWARTZ- No. 12-60052
TALLARD,
Debtor, BAP No.
11-1429
AMERICA’S SERVICING COMPANY, OPINION
Appellant,
v.
IRENE MICHELLE SCHWARTZ-
TALLARD,
Appellee.
Appeal from the Ninth Circuit
Bankruptcy Appellate Panel
Kirscher, Pappas, and Dunn, Bankruptcy Judges, Presiding
Argued and Submitted
March 14, 2014—San Francisco, California
Filed April 16, 2014
Before: J. Clifford Wallace and Ronald M. Gould, Circuit
Judges, and Paul C. Huck, Senior District Judge.*
*
The Honorable Paul C. Huck, Senior District Judge for the U.S.
District Court for the Southern District of Florida, sitting by designation.
2 IN RE: SCHWARTZ-TALLARD
Opinion by Judge Huck;
Dissent by Judge Wallace
SUMMARY**
Bankruptcy
Affirming the Bankruptcy Appellate Panel’s reversal of
the bankruptcy court’s decision, the panel held that a
bankruptcy debtor was not precluded from recovering, as
damages, attorneys’ fees for defending against a creditor’s
appeal of a finding that the creditor violated the automatic
stay.
The panel distinguished Sternberg v. Johnston, 595 F.3d
937 (9th Cir. 2010), which held that a debtor’s attorneys’ fees
for work on an adversary proceeding seeking damages for a
stay violation were not actual damages and thus were not
recoverable under 11 U.S.C. § 362(k)(1) (providing that “an
individual injured by any willful violation of a stay . . . shall
recover actual damages, including costs and attorneys’ fees”).
The panel held that the attorneys’ fees in this case were
incurred for a different purpose than those in Sternberg and
fell within the meaning of “actual damages” in § 362(k)(1)
because they related to the debtor’s enforcing of the
automatic stay and remedying of the stay violation. The
panel further wrote that the BAP’s use of precedent expressly
rejected in Sternberg was improper.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
IN RE: SCHWARTZ-TALLARD 3
Dissenting, Judge Wallace wrote that Sternberg
controlled and required reversal. He also wrote that the
BAP’s reliance upon one of its own cases, notwithstanding
the Ninth Circuit’s previous rejection of the statement of law
at issue, was an attack on Article III of the Constitution.
COUNSEL
Andrew Martin Jacobs (argued), Snell & Wilmer L.L.P.,
Tucson, Arizona; Kelly Harrison Dove, Snell & Wilmer
L.L.P., Las Vegas, Nevada, for Appellant.
Christopher P. Burke (argued), Chris P. Burke & Associates,
Las Vegas, Nevada, for Appellee.
OPINION
HUCK, District Judge:
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, 595 F.3d 937, 948 (9th Cir.
2010). In Sternberg, 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
4 IN RE: SCHWARTZ-TALLARD
in pursuit of a damage award would not be to compensate for
‘actual damages’ under § 362(k)(1).” Id. at 947.
In this case, we are asked to apply § 362(k)(1) 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)(1). Therefore, we affirm the
Bankruptcy Appellate Panel (“BAP”) and grant Schwartz-
Tallard’s request for an award of attorneys’ fees.
I. FACTS
ASC serviced a mortgage on Schwartz-Tallard’s home.
On March 30, 2007, Schwartz-Tallard filed for Chapter 13
bankruptcy, but continued to make mortgage payments. ASC
believed Schwartz-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 automatic stay. Schwartz-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
IN RE: SCHWARTZ-TALLARD 5
bankruptcy court entered the written order reinstating the
stay.
On June 9, 2009, Schwartz-Tallard filed a motion
asserting that ASC had violated the automatic stay in her
Chapter 13 bankruptcy, and seeking sanctions. Schwartz-
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 foreclosure. Schwartz-Tallard also established
that when the bankruptcy court reinstated the stay, she sent
ASC the payments for April and May 2009, and enclosed a
letter notifying ASC of the stay’s reinstatement.
Inexplicably, ASC rejected the payments, still asserting that
the property was in foreclosure.
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, remedying 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.1
1
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)(1). Rather, it remanded for the bankruptcy court
to make a determination of actual fees expended or charged in connection
6 IN RE: SCHWARTZ-TALLARD
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)(1). 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, 290 F.3d 1140,
1142 (9th Cir. 2002).
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)(1).
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. 595 F.3d at 940. The state
court was aware of the debtor’s bankruptcy and had not yet
with enforcing the stay and remedying the stay violation. America’s
Servicing Co. v. Schwartz-Tallard, 438 B.R. 313, 321 (D. Nev. 2010).
These are not the attorneys’ fees at issue in the instant appeal.
IN RE: SCHWARTZ-TALLARD 7
resolved the issue of whether the contempt proceedings
violated the stay. Nonetheless, the state court entered an
order holding the debtor in violation of the divorce decree,
and granting a specific monetary judgment for the debtor’s
ex-wife. Id. at 941. The debtor sought relief from the order
in two ways: by filing a motion asking the bankruptcy court
to vacate the state court’s stay-violating order, and by
initiating an adversary proceeding against his ex-wife and her
counsel for not acting to remedy the state court’s order. Id.
The bankruptcy court granted the debtor’s motion and
vacated the state court order. Id. at 942. The adversary
proceeding later went to trial in the bankruptcy court to
determine whether the debtor’s ex-wife and her counsel had
violated the stay, and, if so, the appropriate damages. Id.
The bankruptcy court ruled in favor of the debtor’s ex-wife
and her counsel; the debtor appealed; the district court
reversed and found that the ex-wife and her counsel had
violated the stay. Id. On remand, the bankruptcy court
awarded damages, and the debtor’s ex-wife’s counsel
appealed the damages award. Id.
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)(1). 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)(1).” 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
8 IN RE: SCHWARTZ-TALLARD
remedies at each other’s expense. Id. at 948. The stay is
“meant to help the debtor 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 precedent
holding that “actual damages” under § 362(k)(1) were meant
to return the debtor to the position the debtor 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), 219 B.R. 873, 878 (9th
Cir. B.A.P. 1998); Havelock v. Taxel (In re Pace), 159 B.R.
890, 900 (9th Cir. B.A.P. 1993), vacated in part on other
grounds by 67 F.3d 187 (9th Cir. 1995).2
2
Schwartz-Tallard asks us to re-consider the wisdom of Sternberg in
light of the fact 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, 536 F.2d 512, 522 (5th Cir. 2008) (awarding attorneys’
fees under section 362(k) to a debtor seeking damages); In re Webb, 472
B.R. 665, *16 (B.A.P. 6th Cir. 2012) (unpublished) (same); In re Duby,
451 B.R. 664, 676-77 (B.A.P. 1st Cir. 2011) (same and criticizing
Sternberg). However, we are bound by the decisions of prior panels so
long as those decisions cannot be fairly distinguished. Miller v. Gammie,
335 F.3d 889, 900 (9th Cir. 2003) (en banc); In re Southern California
Sunbelt Developers, Inc., 608 F.3d 456, 464 (9th Cir. 2010)
(distinguishing Sternberg and holding that it does not bar a fee award
under a different bankruptcy statute).
IN RE: SCHWARTZ-TALLARD 9
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,” Sternberg, 595 F.3d
at 940, or whether they are more akin to prosecuting an
adversary proceeding in pursuit of a claim for damages.
Schwartz-Tallard’s defense of ASC’s appeal differs
fundamentally from the independent damages action in
Sternberg. Here, ASC appealed not only the damages award,
but also the bankruptcy court’s determination that the stay
had been violated. In re Schwartz-Tallard, 473 B.R. 340, 349
(B.A.P. 9th Cir. 2012) (“[Schwartz-Tallard] was required to
defend the bankruptcy court’s decision, not only to protect the
award of damages, but also to uphold the bankruptcy court’s
determination that ASC had, indeed, violated the stay.”)
Sternberg specifically held that any fees a debtor incurs “in
pursuit of a damage award” are not covered. 595 F.3d at 947
(emphasis added). But here, the debtor was not pursuing a
damage award—she had already been awarded damages for
the breach of the stay. She was, however, “remedying the
stay violation,” within the meaning of Sternberg. Id. at 940.
But for ASC’s appeal, Schwartz-Tallard’s litigation of this
matter would have been complete. Finally, even though the
property was reconveyed to Schwartz-Tallard before the
parties litigated the appeal, the appeal put both
Schwartz-Tallard’s damages award as well as the finding that
the stay had been violated in jeopardy. As the BAP noted,
Schwartz-Tallard “was forced to defend [the] appeal to
validate the bankruptcy court’s ruling that ASC had violated
the stay, and to preserve her right to collect the pre-remedy
damages awarded by the bankruptcy court.” In re Schwartz-
Tallard, 473 B.R at 350. In other words, unlike in Sternberg,
10 IN RE: SCHWARTZ-TALLARD
Schwartz-Tallard was not using the stay as a sword, but as a
shield from stay violation. Sternberg, 547 F.3d at 948.
Because we hold that Sternberg does not apply to a
situation where a debtor defends herself when a creditor who
had violated the automatic stay appeals that finding,
Schwartz-Tallard is entitled to recover her attorneys’ fees as
“actual damages” under 11 U.S.C. § 362(k)(1). The plain
language of the statute includes attorneys’ fees in the
definition of actual damages, and in the absence of
Sternberg’s limitations, there is no reason to contort that
language to avoid this result. As we said in Sternberg,
“Without a doubt, Congress intended § 362(k)(1) to permit
recovery as damages fees incurred to prevent violation of the
automatic stay.” 595 F.3d at 946. Where, as here, the debtor
is defending an appeal that seeks to eliminate the finding that
the stay was violated, we hold that the fees incurred
defending such an appeal meet that Congressional purpose
and are included in § 362(k)(1)’s definition of actual
damages.
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)(1) 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.’” 595 F.3d at 948. Here, unlike in Sternberg, the
additional litigation resulted from ASC’s continued attempts
to justify its stay-violating behavior—not from the debtor’s
IN RE: SCHWARTZ-TALLARD 11
conduct. Awarding Schwartz-Tallard fees as damages under
§ 362(k)(1) furthers the non-economic goal of the automatic
stay—it should act to deter stay violators from continuing to
disturb the breathing spell the stay aims to create.3
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, 595 F.3d at 940, Sternberg does not prohibit the
awarding of attorneys’ fees at issue here. The decision of the
BAP, which reversed and remanded the bankruptcy court’s
decision denying Schwartz-Tallard’s request for an award of
attorneys’ fees, is
AFFIRMED.
3
In reaching its conclusion, the BAP relied in part on In re Walsh, 219
B.R. 873 (B.A.P. 9th Cir. 1998). See In re Schwartz-Tallard, 473 B.R.
340, 350 (B.A.P. 9th Cir. 2012). However, in Sternberg, we rejected
Walsh’s reading of § 362(k)(1) to mean that the “actual damages”
available to the injured party would necessarily make the injured party
whole. Id. at 878. Walsh’s holding—that fees expended resisting the stay
violator’s appeal were available under § 362(k)(1) as actual
damages—was based in part upon the reasoning we later expressly
rejected in Sternberg. Therefore, the BAP’s use of Walsh to explain the
proper application of § 362(k)(1) is improper in view of Sternberg. See
In re Burley, 738 F.2d 981, 986 (9th Cir. 1984) (holding that the role of
the BAP is as an adjunct to the circuit court, and explaining the
importance of that relationship to the constitutionality of the BAP). In
reaching our conclusion today, we do not rely on the partially abrogated
Walsh decision.
12 IN RE: SCHWARTZ-TALLARD
WALLACE, Circuit Judge, dissenting:
I dissent. Our decision in Sternberg, properly read,
controls this case and requires reversal. However, even if it
did not control, we should still reverse.
Although these errors are significant, they solely affect
the outcome of this case. More troubling is the BAP’s
decision to rely upon one of its own cases, notwithstanding
the fact that we had previously rejected the statement of law
at issue. The implications of such cavalier disregard by the
BAP for its subordinate status within the federal judiciary are
far-ranging, and merit much greater attention than the
majority bestows on them.
I.
America’s Servicing Company (ASC) violated the
automatic stay in Schwartz-Tallard’s Chapter 13 bankruptcy
case. The bankruptcy court issued an order awarding
Schwartz-Tallard damages for ASC’s willful violation. ASC
then returned Schwartz-Tallard’s property, but appealed from
that order on procedural grounds to the district court. The
district court mostly affirmed the damages award. Schwartz-
Tallard now seeks to recover the attorneys’ fees she expended
in defending the bankruptcy court’s judgment in that appeal.
Not convincing the bankruptcy court of her attorneys’ fees
position, she chose to appeal, this time to the BAP, which
ruled in her favor. In re Schwartz-Tallard, 473 B.R. 340
(B.A.P. 9th Cir. 2012). ASC appeals from the BAP.
This case is governed by 11 U.S.C. § 362(k)(1), which
allows “an individual injured by any willful violation of [the
automatic] stay . . . [to] recover actual damages, including
IN RE: SCHWARTZ-TALLARD 13
costs and attorneys’ fees . . .” The BAP held under section
362(k)(1) that Schwartz-Tallard was entitled to the attorneys’
fees she paid defending against ASC’s appeal. Schwartz-
Tallard, 473 B.R. at 347–50. First, the BAP attempted to
distinguish this case from our decision in Sternberg v.
Johnston, where we rejected the argument that “actual
damages” under section 362(k)(1) cover attorneys’ fees
expended for the prosecution of an adversary proceeding to
recover damages suffered from a violation of the automatic
stay. 595 F.3d 937, 945–48 (9th Cir. 2009). The BAP
concluded that the defense of an opposing party’s appeal “is
fundamentally different” from the affirmative damages action
filed by the debtor in Sternberg. Schwartz-Tallard, 473 B.R.
at 349. Unlike in Sternberg, said the BAP, Schwartz-Tallard
was “not using the automatic stay as a sword to pursue
damages from ASC.” Id.
After attempting to distinguish this case from Sternberg,
the BAP held that Schwartz-Tallard is entitled to her
attorneys’ fees, because her 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-Tallard] 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 (“Of 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
14 IN RE: SCHWARTZ-TALLARD
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, 219 B.R.
873, 878 (B.A.P. 9th Cir. 1998).
The majority now affirms the BAP’s position. The basic
structure of the majority’s opinion is the same as that of the
BAP. First, the majority attempts to distinguish Sternberg.
The majority states that we “specifically held” in that case
“that any fees a debtor incurs ‘in pursuit of a damage award’
are not covered” by section 362(k)(1). Majority Op. at 9
(emphasis in original). 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 9–10. The majority then
explains why, in its view, Schwartz-Tallard is entitled to
attorneys’ fees: it believes awarding these fees is consistent
with the plain language of section 362(k)(1), and in the
absence of Sternberg’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 10–11.
II.
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)(1). Majority Op. at 9–10, quoting
Sternberg, 595 F.3d at 947 (emphasis in original). But that is
not the holding of Sternberg. Had the majority correctly
IN RE: SCHWARTZ-TALLARD 15
applied the actual holding, the majority would have reversed
the BAP.
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 stated that the text of the statute did not
define “actual damages,” which we considered an ambiguous
phrase. Id. In order to define the term, we turned to Black’s
Law Dictionary, which defines “actual damages” as “an
amount awarded to compensate for a proven injury or loss.”
Id., quoting BLACK’S LAW DICTIONARY 416 (8th ed. 2004).
The next sentence is the holding of Sternberg: “the proven
injury [and thus, actual damages under section 362(k)(1)] is
the injury resulting from the stay violation itself.” Id. We
later made clear that under our precedent the automatic stay
“is designed to effect an immediate freeze of the status quo.”
Id. at 948, quoting Hillis Motors, Inc. v. Hawaii Auto.
Dealers’ Ass’n, 997 F.2d 581, 585 (9th Cir. 1993).
In this case, the parties were returned to the status quo
when Schwartz-Tallard received her property back from
ASC. That occurred either on the date when the court ordered
the property reconveyed, February 12, 2010, or when ASC
actually reconveyed the property, March 3, 2010. See, e.g., In
re Dawson, 390 F.3d 1139, 1151 (9th Cir. 2004) (stating that
“California rescission law empowers a court to undo a
transaction and restore the parties to the status quo ante. That
is precisely what the bankruptcy court did here–the court
undid the foreclosure and thereby placed the parties in the
positions they occupied before the” stay violation). Once the
status quo was re-established, the violation of the stay ended.
16 IN RE: SCHWARTZ-TALLARD
Id. If Schwartz-Tallard’s “proven injury” is “the injury
resulting from the stay violation itself,” Sternberg, 595 F.3d
at 947, she can only recover damages suffered before the
status quo was re-established by the reconveyance of her
property.
B.
The majority confuses this simple and correct analysis.
The majority ignores the dictionary definition that underlies
our holding in Sternberg, and proceeds to misinterpret the
next sentence of our decision. Majority Op. at 7. 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)(1).” 595 F.3d at 947. The majority contorts
this statement by emphasizing the phrase “pursuit of a
damage award.” The majority distinguishes that “pursuit”
from “defense” of a damages award. Majority Op. at 9. The
majority argues that if not for ASC’s appeal, “Schwartz-
Tallard’s litigation of this matter would have been complete.”
Id. Citing the BAP, the majority also states that Schwartz-
Tallard “was forced to defend [the] appeal to validate the
bankruptcy court’s ruling,” and thus “Schwartz-Tallard was
not using the stay as a sword.” Id. at 9–10.
Contrary to the majority, 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.” 595 F.3d at 947. In
addition, the correct interpretation of the Sternberg sentence
the majority focuses on compounds its error: “once the
IN RE: SCHWARTZ-TALLARD 17
violation [of the automatic stay has ended, i.e., by March 3,
2010 at the latest] 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)(1).” Id. That should end the
discussion and we should reverse.
A closer analysis of the facts here serves to illustrate
further the majority’s error. In ASC’s appeal initiated on
March 3, 2010, ASC did not attempt to reclaim Schwartz-
Tallard’s property, so even if the district court vacated the
damages award or held that ASC had not violated the
automatic stay, Schwartz-Tallard would not have to convey
the property to ASC. Instead, ASC argued that the February
12, 2010 order awarding Schwartz-Tallard damages for the
stay violation was procedurally and legally improper.
Whether or not Schwartz-Tallard defended the appeal, she
would have kept her property, maintaining the status quo
from before ASC violated the automatic stay. ASC’s appeal
could not disrupt the proper status quo.1 Thus Schwartz-
Tallard was not “remedying the stay violation,” Majority Op.
at 9, which had already been remedied and could not have
been disturbed by ASC’s appeal.
It is true that if Schwartz-Tallard had not defended the
appeal, she would have lost the damages properly awarded to
her for ASC’s violation of the automatic stay. But the same
was true in Sternberg: had Johnston, the debtor in that case,
not sued the violators of the automatic stay in an adversary
1
Perhaps if ASC had sought to reclaim the property in its appeal, and
thus to take Schwartz-Tallard’s property in violation of the automatic stay,
Schwartz-Tallard would be entitled to attorneys’ fees for her defense of
that appeal. But that was not the basis for ASC’s appeal, and those are not
the facts of this case.
18 IN RE: SCHWARTZ-TALLARD
proceeding, he may not have ever received the damages
award owed him. The adversary proceeding he filed was, just
as the BAP stated in this case, “an extension of [his] efforts
to enforce [his] automatic stay.” Schwartz-Tallard, 473 B.R.
at 349. Nonetheless, we held in Sternberg that a party can
only recover “actual damages,” “even though it could be said
he is not made whole as a result.” 595 F.3d at 947.
Our Sternberg statement that the automatic “stay is a
shield, not a sword,” id. at 948, does not change our holding
denying damages to a party once it has been returned to the
status quo, even if it has to take legal action to recover or
defend damages properly owed. Under the logic of the
majority opinion, it is impossible to understand how the
statutory text of section 362(k)(1), which governs both this
case and Sternberg, requires a bankruptcy court to award
attorneys’ fees to Schwartz-Tallard, but bars a bankruptcy
court from awarding attorneys’ fees to Johnston. It simply
does not follow.
Sternberg controls this appeal. Our disposition should be
quite simple under our holding in that case. Schwartz-Tallard
was entitled to “actual damages” for ASC’s violation of the
automatic stay. The violation of the stay ended when the
status quo was re-established: when Schwartz-Tallard took
back her property, which was March 3, 2010 at the latest.
Any attorneys’ fees Schwartz-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.” Sternberg, 595 F.3d at 947. I would reverse
the BAP because of its misinterpretation of Sternberg.
IN RE: SCHWARTZ-TALLARD 19
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, then there is no Ninth Circuit
precedent governing this appeal, and thus there must be an
independent legal basis to award Schwartz-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, 219 B.R. 873 (B.A.P. 9th Cir. 1998). Schwartz-
Tallard, 473 B.R. at 350. The majority cannot take refuge in
Walsh, as it has correctly abandoned the BAP’s improper
reliance on that decision because we overruled it in
Sternberg. Majority Op. at 11 n.3. Of course, we all agree the
BAP improperly relied on Walsh. But the legal sources on
which the majority does rely are also not sufficient to grant
Schwartz-Tallard attorneys’ fees.
A.
If Sternberg does not control, although I would hold it
does, the majority then must independently address whether
to award Schwartz-Tallard attorneys’ fees for her defense of
the appeal from the bankruptcy court. We must start with the
statute: here, we must interpret the statute that allows “an
individual injured by any willful violation of a stay . . . [to]
recover actual damages, including costs and attorneys’ fees
. . . ” 11 U.S.C. § 362(k)(1).
As we recognized in Sternberg, even though the statute
specifically allows an individual injured by a stay violation to
recover damages that include attorneys’ fees, “Congress
legislates against the backdrop of the ‘American Rule,’”
whereby “parties are to bear their own attorney’s fees.”
20 IN RE: SCHWARTZ-TALLARD
595 F.3d at 945–46, citing Fogerty v. Fantasy, Inc., 510 U.S.
517, 533 (1994). Because of that backdrop, we can only grant
attorneys’ fees when Congress uses “explicit statutory
language.” Id. at 948. We require explicit language in a
statute to award attorneys’ fees to a party even if the statute
does explicitly award attorneys’ fees to another class of
litigants. Id. at 948 (suggesting that explicit statutory
language is required to award attorneys’ fees for “litigation
attenuated from the actual bankruptcy”); Hardisty v. Astrue,
592 F.3d 1072, 1076–77 (9th Cir. 2010) (a statute that
“creates an exception to the American rule” for a single
circumstance does not “extend[] fee-shifting to” other related
situations, and “[i]n the absence of clear statutory text
authorizing fee-shifting, we decline to become a ‘roving
authority’ awarding attorneys’ fees”) (citation omitted).
B.
In this case, therefore, the majority must decide whether
to award attorneys’ fees to Schwartz-Tallard even though this
award is not explicitly addressed in section 362(k)(1). “Such
a bold departure from traditional practice” usually requires
“explicit statutory language and legislative comment.”
Fogerty, 510 U.S. at 534; see also Fulfillment Servs., Inc. v.
United Parcel Serv., Inc., 528 F.3d 614, 624 (9th Cir. 2008)
(explaining that “[h]ad Congress aspired to such a radical
departure [from the American Rule], it no doubt would have
so indicated with explicit language to that effect”).
Legislative history that “is at best ambiguous . . . is
clearly insufficient to alter the accepted meaning of the
statutory term,” “[p]articularly in view of the ‘American
Rule’ that attorney’s fees will not be awarded absent ‘explicit
statutory authority.’” Buckhannon Bd. & Care Home, Inc. v.
IN RE: SCHWARTZ-TALLARD 21
W. Va. Dep’t of Health & Human Resources, 532 U.S. 598,
607–08 (2001); accord Kwai Fun Wong v. Beebe, 732 F.3d
1030, 1044 (9th Cir. 2013) (en banc) (holding that
“legislative history cannot supply a ‘clear statement’”). In
other areas where we require an “unequivocal[] express[ion]”
of legislative intent, we do not generally allow “inferences
from . . . statutory purpose” to constitute that unequivocal
expression. See, e.g., Alaska v. E.E.O.C., 564 F.3d 1062,
1066 (9th Cir. 2009). Indeed, we have specifically held that
when a party seeking attorneys’ fees argues that the
“purpose” of a statute supports awarding attorneys’ fees, we
will not award attorneys’ fees if the cited statutory purpose
reduces to “competing policy arguments,” because “[s]uch a
debate is not enough to overcome the absence of statutory
text authorizing supersession of the American Rule.”
Hardisty, 592 F.3d at 1079.
C.
The majority first claims that the “plain language of
[section 362(k)(1)] 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 10. Though the majority is correct that the
text of section 362(k)(1) 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. The plain language of the
statute does not state that attorneys’ fees expended after the
status quo is re-established and thus the violation of the
automatic stay is rectified are recoverable as actual damages.
As we have recognized, if the plain text of a statute “creates
an exception to the American rule,” we do not expand that
text to award attorneys’ fees in a related circumstance not
22 IN RE: SCHWARTZ-TALLARD
explicitly covered by the statute. Id. at 1076–77; see also
Sternberg, 595 F.3d at 948 (refusing to award attorneys’ fees
for “litigation attenuated from the actual bankruptcy” even
though section 362(k)(1) specifically authorizes some
attorneys’ fees). There is not “explicit statutory language” in
section 362(k)(1) to support the majority’s conclusion.
Fogerty, 510 U.S. at 534.
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)(1) 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 10. This
inference from legislative purpose can never be “explicit
statutory language and legislative comment,” Fogerty,
510 U.S. at 534, and is thus insufficient to demonstrate
Congressional intent to deviate from the American Rule.
Alaska, 564 F.3d at 1066.
Indeed, the majority wrongly concludes that allowing
Schwartz-Tallard to collect the attorneys’ fees is “consistent
with both the financial and non-financial purposes of the
automatic stay that we emphasized in Sternberg.” Majority
Op. at 10.
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, 595 F.3d at 948. If
Schwartz-Tallard had not defended ASC’s appeal, she would
never have been able to recover the damages her creditor
owed her, but the “stay is a shield, not a sword.” Id. The
IN RE: SCHWARTZ-TALLARD 23
economic purpose of the stay, to give Schwartz-Tallard time
to put her finances back in order, would not be served if she
were encouraged to continue to retrieve money from her
creditor.
Nor does awarding attorneys’ fees further the non-
economic 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 8 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, 592 F.3d at
1079. Thus, even if Sternberg does not control the outcome
of this case, I would still reverse the BAP because there is no
“explicit statutory language and legislative comment”
authorizing a departure from the traditional practice that
Schwartz-Tallard should bear her own attorneys’ fees.
Fogerty, 510 U.S. at 534.
24 IN RE: SCHWARTZ-TALLARD
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 11 n.3.
I agree with the majority on this point for a fundamental
reason: the BAP cannot rely upon any of its own precedent
that we have overruled without creating serious constitutional
problems.
A.
The Constitution vests the “judicial power of the United
States” in the Supreme Court and inferior courts. U.S. Const.
art. III, § 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., 458 U.S. 50, 77 (1982) (plurality),
describing Crowell v. Benson, 285 U.S. 22 (1932)
(administrative agencies) and United States v. Raddatz,
447 U.S. 667 (1980) (magistrate courts). For instance, the
magistrate courts are subject to the Article III district courts
in the district in which they are located. “[T]he district court
has plenary discretion whether to authorize a magistrate to
hold an evidentiary hearing,” and “the magistrate acts
IN RE: SCHWARTZ-TALLARD 25
subsidiary to and only in aid of the district court,” so that “the
entire process takes place under the district court’s total
control and jurisdiction.” Raddatz, 447 U.S. at 681.
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 principle. N. Pipeline, 458 U.S. at 63–64 (plurality).
Likewise, if Congress vests “essential attributes” of the
judicial power to an Article I adjunct that is not subject to
searching review by an Article III court and that can issue
binding and enforceable final judgments, the enacting law
also violates the Constitution. Id. at 85–86 (plurality).
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). 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
26 IN RE: SCHWARTZ-TALLARD
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 authorized the BAP,
and our circuit did so only for certain district courts. Id. at
547.
B.
In Northern Pipeline, the Supreme Court struck down the
composition and jurisdiction of the bankruptcy courts enacted
under the 1978 Act. 458 U.S. at 77 (plurality); id. at 91–92
(Rehnquist, J., concurring). In that fractured decision, a four-
justice plurality concluded that the bankruptcy courts as
constituted exercised jurisdiction over cases properly
assigned to the Article III federal courts under the
Constitution, id. at 63–76, and that the bankruptcy courts
possessed too much power, with too little scrutiny by Article
III federal courts, to be constitutionally acceptable adjuncts.
Id. at 84–87. Justices Rehnquist and O’Connor concurred
with both propositions, though on narrower grounds. Id. at
90–91 (Rehnquist, J., concurring) (without wholly addressing
the general framework for adjudication of Congressional
authority to create Article I courts, nonetheless agreeing that
Article I tribunals cannot adjudicate certain types of common
law actions and that the bankruptcy courts under the 1978
Reform Act were not constitutionally acceptable adjuncts
because the only way for review by an Article III court was
through “traditional appellate review”). Because the Court
agreed that the decision involved an “unprecedented question
of interpretation of [Article III],” it applied the rule only
prospectively, and did not disturb previous orders of the
bankruptcy courts. Id. at 87–88 (plurality).
IN RE: SCHWARTZ-TALLARD 27
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, 738 F.2d 981, 984 n.2 (9th Cir. 1984).
Under the Rule, “the district courts refer[red] all bankruptcy
cases and proceedings to bankruptcy judges, who make
recommendations and enter certain orders and judgments on
behalf of the district court, subject to later district court
review.” Id.
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 III’s command that the judicial
power must be vested in Article III courts.” In re Dartmouth
House Nursing Home, 30 B.R. 56, 62 (B.A.P. 1st Cir. 1983).
The First Circuit affirmed, not because the BAP violated the
Constitution, but instead because it held that the Emergency
Rule promulgated by the Judicial Council of the First Circuit
“had the implicit effect of withdrawing from [the BAP] their
earlier conferred authority to hear appeals.” Massachusetts v.
Dartmouth House Nursing Home, 726 F.2d 26, 29 (1st Cir.
1984).
A few months later, we reviewed a decision from the
BAP that was entered after Northern Pipeline. Burley,
738 F.2d at 985–87. We focused on the constitutionality of
the BAP because unlike in the First Circuit, our order
adopting the Emergency Rule “expressly provid[ed] that the
BAP shall” continue to hear appeals if the underlying
bankruptcy order was entered before Northern Pipeline went
into effect. Id. at 985 n.3. Unlike the BAP of the First Circuit,
28 IN RE: SCHWARTZ-TALLARD
we concluded that the bankruptcy appellate panels were not
unconstitutional. This was because, unlike in Northern
Pipeline, the Article III court of appeals, rather than the BAP,
retained the “essential attributes of the judicial power.” Id. at
985. We may overturn the BAP’s decisions “more freely”
than the district courts could overturn the bankruptcy courts
under the 1978 Bankruptcy Act, and thus “effectively” review
their decisions de novo. Id. at 985–86. We concluded that the
BAP meets the constitutional requirements for an adjunct
tribunal, because we review their decisions de novo, retain
full power to make final decisions, and retain control over the
BAP through the discretionary choice to establish the panel
by order of the Judicial Council of the Circuit. Id.
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 the 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 re-
established 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).
IN RE: SCHWARTZ-TALLARD 29
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 In re Blausey, 552 F.3d 1124, 1129–30
(9th Cir. 2009). The BAP has jurisdiction over certain
interlocutory orders. 28 U.S.C. §§ 158(a)(2), (a)(3) & (c)(1).
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, 616 F.3d 1001,
1005 n.1 (9th Cir. 2010) (“we treat the BAP’s decisions as
persuasive authority given its special expertise in bankruptcy
30 IN RE: SCHWARTZ-TALLARD
issues”) (emphasis added); In re Cardelucci, 285 F.3d 1231,
1234 (9th Cir. 2002) (“this Court is not bound by a [BAP]
decision”); Bank of Maui v. Estate Analysis, Inc., 904 F.2d
470, 472 (9th Cir. 1990) (stating that “it must be conceded
that BAP decisions cannot bind the district courts themselves.
As article III courts, the district courts must always be free to
decline to follow BAP decisions and to formulate their own
rules within their jurisdiction”). The BAP has also long
recognized that our decisions are binding on them, rather than
the other way around. See, e.g., In re Ball, 185 B.R. 595,
597–98 (B.A.P. 9th Cir. 1995) (“[w]e will not overrule our
prior rulings unless a Ninth Circuit Court of Appeals
decision, Supreme Court decision or subsequent legislation
has undermined those rulings”).
Relatedly, we vacate any BAP decisions and judgments
based on reasoning that we have overruled or rejected. See,
e.g., In re Ransom, 302 F. App’x 567 (9th Cir. 2008) (“Under
[a Ninth Circuit case] which came down after the bankruptcy
appellate panel had ruled, the provisions of the confirmed
plan have preclusive effect. [The Ninth Circuit case] controls.
It expressly overruled the bankruptcy appellate panel decision
in this case. Accordingly, the judgment of the bankruptcy
appellate panel is vacated”) (citation omitted).
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, 458 U.S. at 87 (plurality); id. at
91 (Rehnquist, J., concurring). If an Article I tribunal were to
“exercise jurisdiction over all matters related to those arising
under the bankruptcy laws,” id. at 76 (plurality), or infringe
upon “essential attributes of the judicial power” without
sufficient scrutiny by an Article III court, id. at 86–87
IN RE: SCHWARTZ-TALLARD 31
(plurality), we would have to “emphatic[ally]” reassert “the
integrity of the system of separated powers and the role of the
Judiciary in that system” by striking down the offending
Article I tribunal, even if its infringements “may seem
innocuous at first blush” and only “chip away at the authority
of the Judicial Branch.” Stern v. Marshall, 131 S. Ct. 2594,
2620 (2011).
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)(1). 219 B.R. 873, 878 (B.A.P.
9th Cir. 1998). In Sternberg, we specifically rejected this
interpretation of the statute. 595 F.3d at 947 (“The
Bankruptcy Appellate Panel, for example, seems to view
‘actual damages’ as requiring an award that returns a debtor
to the position he was in before the stay violation occurred.
See Beard v. Walsh (In re Walsh), 219 B.R. 873, 878 (9th Cir.
BAP 1998) (rejecting an alternative reading of the statute
under which, according to the BAP, ‘the injured party is not
made whole’). . . . In contrast, we conclude that the plain
meaning of ‘actual damages’ points to a different result”)
(alterations omitted).
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
32 IN RE: SCHWARTZ-TALLARD
Walsh’s finding that damages incurred on appeal are actual
damages directly resulting from the stay violation itself.”
Schwartz-Tallard, 473 B.R. at 350 n.12.
In fact, we specifically overruled Walsh, even mentioning
it by name. Sternberg, 595 F.3d at 947. We also specifically
rejected the broader holding of Walsh that “actual damages”
required “an award that returns a debtor to the position he
was in before the stay violation occurred.” Id. The BAP was
flatly wrong.
E.
The BAP’s citation to a precedent we specifically rejected
is not only unacceptable under our precedent and its own
decisional law. Ransom, 302 F. App’x at 567; In re Ball,
185 B.R. at 597–98. The reliance on such precedent is an
attack on Article III of the Constitution. N. Pipeline, 458 U.S.
at 86–87 (plurality). For an Article I tribunal to rely on
precedent that we have expressly rejected may infringe upon
the “essential attributes of [our] judicial power.” Id.
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,
738 F.2d at 989–93 (Norris, J., dissenting). If the BAP were
to deviate from our authoritative decisions, and instead were
to apply its own law in either of these two circumstances, it
would very likely trammel essential attributes of our judicial
power and thus violate the Constitution.
IN RE: SCHWARTZ-TALLARD 33
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 decisions, 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, 118 F.3d 661, 663 (9th
Cir. 1997) (per curiam) (dismissing an appeal from a BAP
decision on an interlocutory order). If the BAP were to ignore
our precedent in such a case, the losing party would have no
recourse to rectify the error until the bankruptcy court issued
a final order, and could be bound for years by this improper
interpretation of federal law by an Article I tribunal. That, I
suggest, would clearly violate the separation of powers
doctrine by infringing upon our judicial power under Article
III.
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, 545 F.3d 750, 753 (9th Cir. 2008) (stating
that to the extent the defendant seeks to “set aside or
disregard United States Supreme Court precedent, we simply
cannot accommodate him. As the Supreme Court has
expressly stated, ‘it is this Court’s prerogative alone to
overrule one of its precedents,’” citing State Oil Co. v. Khan,
522 U.S. 3, 20 (1997)). The BAP, which is a subordinate
34 IN RE: SCHWARTZ-TALLARD
tribunal created by Congress and authorized by our Judicial
Council of the Circuit, must be particularly careful to follow
our precedents, and must never ignore them in favor of its
own decisions, lest it infringe upon the essential attributes of
our judicial power, created by the higher law of the United
States Constitution. In such a case the correcting power
would be action by the Judicial Council of the Circuit.
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 8 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, 335 F.3d 889, 900 (9th Cir. 2003) (en banc). I
dissent.