FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
IN THE MATTER OF: RUPANJALI No. 13-35291
SNOWDEN,
Debtor, D.C. No.
2:12-cv-01095-
RSL
RUPANJALI SNOWDEN, Debtor,
Appellant,
v.
CHECK INTO CASH OF WASHINGTON
INC.,
Appellee.
IN THE MATTER OF: RUPANJALI No. 13-35322
SNOWDEN,
Debtor, D.C. No.
2:12-cv-01095-
RSL
CHECK INTO CASH OF WASHINGTON
INC.,
Appellant, OPINION
v.
RUPANJALI SNOWDEN, Debtor,
Appellee.
2 IN RE: SNOWDEN
Appeal from the United States District Court
for the Western District of Washington
Robert S. Lasnik, District Judge, Presiding
Argued and Submitted
June 5, 2014—Seattle, Washington
Filed September 12, 2014
Before: Alfred T. Goodwin, M. Margaret McKeown,
and Paul J. Watford, Circuit Judges.
Opinion by Judge McKeown;
Concurrence by Judge Watford
SUMMARY*
Bankruptcy
The panel affirmed in part and reversed in part the district
court’s affirmance of the bankruptcy court’s judgment
awarding a chapter 7 debtor damages and attorneys’ fees for
a creditor’s willful violation of the automatic stay under
11 U.S.C. § 362(k)(1).
The panel affirmed the district court’s affirmance of the
decisions of the bankruptcy court on emotional distress and
punitive damages. The panel held that the emotional distress
damages award was proper because the debtor suffered
*
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: SNOWDEN 3
significant emotional harm, clearly established the significant
harm, and demonstrated a causal connection between that
significant harm and the violation of the automatic stay. The
panel concluded that the bankruptcy court applied the correct
legal standard for awarding punitive damages by considering
whether the creditor recklessly or callously disregarded the
law or rights of others. In addition, the award of punitive
damages was not an abuse of discretion.
The panel reversed the district court’s order affirming the
bankruptcy court’s award of attorneys’ fees. The panel stated
that under Sternberg v. Johnston, 595 F.3d 937 (9th Cir.
2010), attorneys’ fees under § 362(k) are limited to fees
relating to enforcing the automatic stay and remedying the
stay violation, not the fees incurred by the debtor in
prosecuting the bankruptcy adversary proceeding seeking
damages for the stay violation. The panel concluded that
here, the stay violation did not end when the creditor sent an
e-mail conditionally offering partial reimbursement;
accordingly, the debtor was entitled to fees incurred in
remedying the stay violation after receiving the e-mail, and
the stay violation ended when the bankruptcy court found a
violation of the automatic stay. The panel remanded for a
recalculation of attorneys’ fees.
The panel affirmed the district court’s affirmance of the
bankruptcy court’s denial of sanctions.
Concurring, Judge Watford agreed that the attorneys’ fees
award must be vacated. He wrote that Sternberg construed
§ 362(k)(1)’s authorization of fee awards more narrowly than
Congress likely intended. Judge Watford agreed with the
Fifth Circuit that § 362(k)(1) allows a plaintiff to recover
attorneys’ fees incurring both in remedying a violation of the
4 IN RE: SNOWDEN
automatic stay and in bringing an action to recover the “actual
damages” caused by that violation.
COUNSEL
Christina L. Henry (argued) and Jacob DeGraaff, Henry,
DeGraaff, & McCormick, P.S., Seattle, Washington, for
Appellant.
Amit D. Ranade (argued) and Alexander M. Wu, Hillis Clark
Martin & Peterson P.S., Seattle, Washington, for Appellee.
OPINION
McKEOWN, Circuit Judge:
This is the story of how a bankruptcy filing listing a $575
payday loan snowballed into a violation of the automatic stay,
and protracted litigation, which left a stressed borrower with
attorneys’ fees and emotional distress. When the automatic
stay that accompanies a bankruptcy filing is violated, the
bankruptcy petitioner is entitled to recover damages and
attorneys’ fees. 11 U.S.C. § 362(k)(1). The issue we
consider is whether a bankruptcy petitioner can collect
attorneys’ fees incurred litigating the violation of the
automatic stay after the violator sends an e-mail conditionally
offering partial reimbursement. We conclude that such fees
are recoverable under § 362(k)(1). The bankruptcy laws do
not permit a stay violator to undermine the remedies available
under § 362(k) by forcing a bankruptcy petitioner to accept a
conditional offer in lieu of pursuing fair compensation and
attorneys’ fees.
IN RE: SNOWDEN 5
BACKGROUND AND PROCEDURAL HISTORY
Rupanjali Snowden took out a $575 payday loan1 from
Check Into Cash of Washington (“CIC”) to make ends meet
for herself and her daughter. Before payment was due,
Snowden put a stop payment on the check. On the same day,
Snowden advised CIC’s Sequim, Washington office that she
was “thinking about filing for bankruptcy,” and provided her
bankruptcy attorney’s phone number. She was advised that
she should let CIC know if she decided to file. When
Snowden told CIC that she could not repay the loan, CIC said
that she must call CIC every day, otherwise the company
would call her “references.” Snowden complied, calling CIC
every day until the day she filed for bankruptcy because she
“didn’t want to be embarrassed.”
Snowden was employed as a hospital nurse. CIC
employees called her at work numerous times asking why she
had not yet repaid the loan. Snowden referred them to her
attorney and asked that they stop calling her at work, but the
calls persisted. These calls affected her work performance
and were “very frustrating” because every time Snowden
heard her name over the loudspeaker she would, “run to the
phone thinking . . . [her daughter had] an emergency.” CIC
advised Snowden that it would not cash the check securing
the loan.
1
“‘Payday’ loans are short-term consumer loans (usually [fewer] than
31 days) secured by a consumer’s post-dated check. The payday industry
targets low to medium income consumers as well as individuals who have
no savings, and live paycheck to paycheck.” Bridge Fund Capital Corp.
v. Fastbucks Franchise Corp., 622 F.3d 996, 999 n.1 (9th Cir. 2010).
6 IN RE: SNOWDEN
In an effort to get her financial house in order, Snowden
filed her Chapter 7 bankruptcy petition without directly
advising CIC. She listed CIC as an unsecured creditor with
a $575 claim. When Snowden checked her bank account a
little over a month after the bankruptcy filing, she saw that it
was overdrawn. The bank advised her that CIC had cashed
the check securing the payday loan. Instead of honoring the
automatic stay, and after a number of harassing phone calls
to Snowden at the hospital, CIC used an electronic funds
transfer to debit Snowden’s bank account for the amount due,
overdrawing her account by $816.88, including bank charges.
When Snowden found out about the overdraft, she went
into a tailspin because her finances had careened out of
control at the moment when she thought she was finally
getting them together. “[T]he number just panicked [her],”
and she was “out of [her] mind.” She worried that every
other creditor would “do the same thing [CIC] did,” which
“was very overwhelming.” Snowden “had to borrow to pay
those [overdraft] fees, and had to tell her daughter she could
not afford to buy tennis shoes for her as promised or pay for
a haircut.” Snowden testified that she “was going nuts,”
“could not concentrate,” was “agitated,” and felt “miserable.”
Snowden went to CIC’s Sequim office to sort out the
situation and was told someone would contact her, but no one
did. She left there “feeling really sick to [her] stomach . . .
[because she] just didn’t want to deal with this anymore.”
Snowden testified that, on the way to CIC, she ran into her
daughter’s babysitter, Christy Smith, and “broke down . . .
crying.” Smith, however, testified that the run-in never
occurred and that Snowden falsified an e-mail in Smith’s
name mirroring Snowden’s account of their run-in. Smith
testified that Snowden offered her $600 in exchange for
IN RE: SNOWDEN 7
favorable testimony. Snowden, on the other hand, testified
that Smith wrote the e-mail and denied that she offered her
any money.
In April 2009, Snowden filed a motion for sanctions in
the United States Bankruptcy Court for the Western District
of Washington, alleging that CIC willfully violated the
automatic stay provision of the bankruptcy code, 11 U.S.C.
§ 362, and seeking a return of the funds and overdraft fees,
emotional distress and punitive damages, and attorneys’ fees.
Throughout the proceedings, CIC disputed that it violated the
automatic stay.
CIC rejected Snowden’s request to settle the case for
$25,000. Instead, in an e-mail affirmatively claiming it was
without fault, CIC proposed repaying Snowden the loan
amount, bank fees, and three hours of attorneys’ fees, a total
of $1,445. Understandably, Snowden did not jump at this
suggestion because the $1,445 did not compensate her for the
emotional distress CIC had caused.
The case proceeded to trial. Ultimately, the bankruptcy
court rejected CIC’s defenses, found a willful violation of the
automatic stay, and awarded emotional distress damages of
$12,000 as well as the $575 loan amount, $370 in bank fees,
$12,000 in punitive damages, and $2,538.55 in attorneys’
fees, totaling $27,483.55.2 It denied Snowden’s request for
a fee award in the court’s inherent authority or under
11 U.S.C. § 105(a). The court found Snowden’s testimony on
emotional distress credible though it could not “resolve the
contradiction between Ms. Smith and Ms. Snowden” and
2
The bankruptcy court noted the stipulation that CIC previously paid the
loan amount, bank fees, and punitive damages awards.
8 IN RE: SNOWDEN
concluded that “[c]ashing of the check upended both
[Snowden’s] finances and her efforts to manage her affairs
. . . as did [CIC’s] ongoing refusal to rectify the situation that
it created.” The court also awarded punitive damages,
determining that “CIC point[ed] to no policy directing its
local offices to forward bankruptcy notices to headquarters or
corporate collection or instructing how to check for
bankruptcy,” which “qualifies under the authorities . . . as
reckless disregard for the rights of customers who file for
bankruptcy relief.” The court determined that Snowden was
entitled only to attorneys’ fees incurred up to May 20, 2009,
the date on which CIC sent its e-mail.
CIC appealed the bankruptcy court’s emotional distress
and punitive damages, and fees awards. The district court
determined that although the bankruptcy court cited the
controlling case, In re Dawson, 390 F.3d 1139 (9th Cir.
2004), it did not apply the proper standard for emotional
distress damages. The district court found, however, that the
bankruptcy court applied the appropriate punitive damages
standard and indicated that it would be inclined to affirm the
judgment were it not for the error regarding emotional
distress damages. The district court remanded for a
determination of emotional distress damages under the
appropriate standard and for a reevaluation of punitive
damages in light of any change in the emotional distress
damages award.
The district court also affirmed on Snowden’s cross-
appeal of the attorneys’ fees award and the failure to impose
sanctions under the bankruptcy court’s inherent authority or
under § 105(a). The district court classified the May 20, 2009
e-mail as a “tender” that would have remedied the stay
violation. It therefore concluded that Sternberg v. Johnston,
IN RE: SNOWDEN 9
595 F.3d 937 (9th Cir. 2010), “le[ft] little to discuss” because
it limited attorneys’ fees solely to those fees “associated with
remedying the stay violation.” Id. at 945. Like the
bankruptcy court, the district court reasoned that any damages
accrued after May 20, 2009 were not associated with
remedying the stay violation because if Snowden had
accepted the amount mentioned in CIC’s e-mail, the violation
would have ended.
On remand, the bankruptcy court did not alter its
judgment, even though it reconsidered the trial record in light
of the district court’s decision. The bankruptcy court noted
that it found Snowden’s testimony more credible than
Smith’s, and that Snowden had clearly established significant
emotional distress because “a reasonable person in precarious
financial circumstances who[] had to endure what Ms.
Snowden did, after filing bankruptcy, going through the stress
that normally attends that process and beginning to build a
structure on which she could go forward with her life, had the
repeated calls at work, then had the beginnings of the
financial structure she was rebuilding kicked out from
underneath . . . would [suffer] substantial emotional distress.”
Following round two in the bankruptcy court, CIC again
appealed the emotional distress and punitive damages awards
to the district court. Snowden cross-appealed the sanctions
decision and the attorneys’ fees determination under
Sternberg, and she sought to recover fees incurred on appeal.
In this second appeal to the district court, the court
determined that its prior rulings on attorneys’ fees and
sanctions remained the law of the case. It also denied
Snowden attorneys’ fees incurred as a result of the appeal
because those fees were not incurred in an effort to enforce
the stay, but in pursuit of a damages award for a stay
10 IN RE: SNOWDEN
violation. In effect, the second appeal left in place the
bankruptcy court’s original order.
CIC now appeals the emotional distress and punitive
damages awards, and Snowden cross-appeals the attorneys’
fees and sanctions rulings.
ANALYSIS
I. Emotional Distress Damages
Section 362(k) permits an award of emotional distress
damages if the bankruptcy petitioner “(1) suffer[s] significant
harm, (2) clearly establish[es] the significant harm, and (3)
demonstrate[s] a causal connection between that significant
harm and the violation of the automatic stay (as distinct, for
instance, from the anxiety and pressures inherent in the
bankruptcy process).” Dawson, 390 F.3d at 1149. CIC takes
issue only with the bankruptcy court’s findings on the second
prong, arguing that Snowden did not clearly establish
significant emotional harm but only “[f]leeting or trivial
anxiety or distress.” See id. at 1149. Reviewing the decision
of the district court de novo, we review for clear error the
bankruptcy court’s findings of fact and for an abuse of
discretion the bankruptcy court’s decision whether to award
damages and how much to award. Id. at 1145, 1150. We
affirm.
On remand, the bankruptcy court evaluated the evidence
supporting Snowden’s claim for emotional distress damages
under the correct standard of proof, namely whether she
“clearly establish[ed]” that she suffered significant emotional
harm. See id. at 1149. Although “the circumstances
surrounding the violation make it obvious that a reasonable
IN RE: SNOWDEN 11
person would suffer significant emotional harm,” id. at 1151,
CIC contests whether Snowden “in fact suffered significant
emotional harm.” Discrediting Smith’s testimony, the
bankruptcy court found Snowden credible and determined
that “Snowden did suffer significant and substantial
emotional distress as a result of CIC’s actions in cashing the
check and in continuing to call her post-petition. Cashing of
the check upended both her finances and her efforts to
manage her affairs . . . as did [CIC’s] ongoing refusal to
rectify the situation that it created.”
When asked why her declaration in support of the motion
for sanctions did not include any information about the
harassing telephone calls, Snowden replied “I did not know
I was supposed to tell them. I didn’t know it was such a big
thing . . . . It is a big thing, because when you come out of
the room, it’s a burden to leave everything behind . . . and to
walk to the phone to answer the phone every time. I don’t
know if you’ve ever seen a nurse work. . . . Not only are you
leaving that room to come answer the phone, you’re putting
a patient on hold. . . . That’s a big thing.” CIC seizes on the
statement, “I didn’t know it was such a big thing,” to claim
that Snowden did not subjectively suffer emotional distress.
In view of the context explaining why the phone calls indeed
were “a big thing” and the testimony about her emotional
distress, the district court did not err in confirming the
emotional distress damages award.
II. Punitive Damages
Section 362(k) provides for punitive damages “in
appropriate circumstances.” 11 U.S.C. § 362(k)(1). An
award of punitive damages requires “some showing of
reckless or callous disregard for the law or rights of others.”
12 IN RE: SNOWDEN
In re Bloom, 875 F.2d 224, 228 (9th Cir. 1989). CIC is
incorrect that the bankruptcy court erroneously applied the
“willful violation” standard rather than the “reckless
disregard” standard. The bankruptcy court explained that
punitive damages were “appropriate in the context of a stay
violation when there’s a reckless and callous disregard for the
law or the rights of others or where the conduct is malicious,
wanton, or oppressive.” The bankruptcy court therefore
applied the correct legal standard.
The court’s award of punitive damages was not an abuse
of discretion. See Pavon v. Swift Transp. Co., Inc., 192 F.3d
902, 909 (9th Cir. 1999). The bankruptcy court supported the
award with findings that CIC failed to provide a policy or
employee training about how to address debt collection
following a bankruptcy filing. The bankruptcy court
reasonably concluded that CIC demonstrated reckless and
callous disregard for the law.
III. Attorneys’ Fees
“The filing of a bankruptcy petition immediately gives
rise to an automatic stay.” Sternberg, 595 F.3d at 940 (citing
11 U.S.C. § 362). Section 362(k)(1) provides that “an
individual injured by any willful violation of a stay . . . shall
recover actual damages, including costs and attorneys’ fees,
and, in appropriate circumstances, may recover punitive
damages.” 11 U.S.C. § 362(k)(1).
In Sternberg, we held that attorneys’ fees under § 362(k)
are limited to “those attorney fees related to enforcing the
automatic stay and remedying the stay violation, not the fees
incurred in prosecuting the bankruptcy adversary proceeding
in which he pursued his claim for those damages.” 595 F.3d
IN RE: SNOWDEN 13
at 940. In that case, an Arizona state court presiding over a
divorce proceeding entered judgment against an individual
who was also involved in bankruptcy proceedings. Id. at
941–42. The Arizona court required immediate payment of
the judgment without determining whether there was any
non-estate property or requesting that the bankruptcy court
determine whether the automatic stay applied to its order. Id.
Simultaneously with filing an appeal, the petitioner
commenced an adversary proceeding in the bankruptcy court
arguing that collection on the judgment was a willful
violation of the automatic stay. Id. The petitioner was
successful in the adversary proceeding and received a
damages award, which included attorneys’ fees. Id. at 942.
We affirmed the finding that the automatic stay was
violated, but concluded that the petitioner was not entitled to
attorneys’ fees from “the subsequent adversary proceeding in
which [the petitioner] sought to collect damages for the stay
violation.” Id. at 945. We interpreted § 362(k)(1) “against
the backdrop of the ‘American Rule,’” under which parties
are presumed to bear their own litigation costs. Id. at 945–47.
We also relied on the plain meaning of “actual damages” as
“[a]n amount awarded . . . to compensate for a proven injury
or loss; damages that repay actual losses.” Id. at 947 (citing
Black’s Law Dictionary 416 (8th ed. 2004) (internal
quotation marks omitted)). We reasoned 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).”3 Id. “We remand[ed]
3
Sternberg acknowledged that the decision created a circuit split with
the Fifth Circuit, see In re Repine, 536 F.3d 512, 522 (5th Cir. 2008),
which rejected the argument that § 362(k) “does not provide for a
14 IN RE: SNOWDEN
to the district court with instructions to remand to the
bankruptcy court to determine which fees are properly
allocable to efforts to enforce the automatic stay and prevent
enforcement of the state court order that violated the stay.”
Id. at 948.
Sternberg established a brightline rule that attorneys’ fees
incurred in an attempt to collect damages once the stay
violation has ended are not recoverable. Id. However, the
issue remains whether the e-mail CIC sent to Snowden ended
the violation. To answer this question, we look to whether
the petitioner is using “[t]he stay [a]s a shield, not a sword.”
Id. at 948. As we explained in Sternberg, the limitation on
recovery of attorneys’ fees was aimed at reducing incentives
for further litigation while providing a bankruptcy petitioner
a remedy for the stay violation. Id.
Our more recent decision in In re Schwartz-Tallard, No.
12-60052, 2014 WL 4251571 (9th Cir. Aug. 29, 2014), is
instructive. There, we permitted recovery of attorneys’ fees
incurred in defending an appeal from the decision of the
bankruptcy court finding a violation of the automatic stay.
2014 WL 4251571, at *3–4. We held that the debtor was
entitled to fees because she “was forced to defend [the]
appeal to validate the bankruptcy court’s ruling that [the
creditor] had violated the stay, and to preserve her right to
collect the pre-remedy damages awarded by the bankruptcy
court. In other words, unlike in Sternberg, Schwartz–Tallard
was not using the stay as a sword, but as a shield from stay
violation.” Id. at *3 (first alteration in original) (internal
quotation marks omitted).
successful claimant to collect the fees incurred in prosecuting their
action,” id. See Sternberg, 595 F.3d at 948.
IN RE: SNOWDEN 15
Here, the district court affirmed the bankruptcy court’s
rationale that although CIC never admitted a stay violation,
Snowden’s “losses would have been righted and the violation
would have come to an end” had she accepted the $1,445
tender. We review that conclusion for an abuse of discretion.
The bankruptcy court’s determination that the May 20, 2009
e-mail marked the end of the stay violation was an abuse of
discretion because the court failed to identify “the correct
legal standard for decision of the issue before it.” See United
States v. Hinkson, 585 F.3d 1247, 1251 (9th Cir. 2009) (en
banc). Having violated the automatic stay attendant to
Snowden’s bankruptcy filing, CIC had an affirmative
obligation to return any property it had wrongfully seized
from the bankruptcy estate. In re Abrams, 127 B.R. 239,
242–43 (B.A.P. 9th Cir. 1994). Instead of returning that
property with no strings attached, CIC responded to
Snowden’s offer to settle the case with an e-mail containing
implied conditions. Snowden’s attorney delivered her
demand for $25,000 only by voice mail, so we do not know
the exact terms of the offer. But the most logical inference,
given the size and timing of the demand (it came just a week
after Snowden filed a motion for sanctions seeking
comprehensive relief from CIC) is that it represented an offer
to settle all of Snowden’s claims.
By declining the sum presented in CIC’s e-mail, Snowden
was using the stay not as a sword but as a shield. CIC
contested that it violated the automatic stay and made it clear
that giving Snowden the $1,445 was not an admission of a
violation of the automatic stay. CIC unsuccessfully
maintained that position throughout the litigation in the
bankruptcy court. Snowden had to proceed with the litigation
to establish a violation of the automatic stay; put differently,
she had to go to court to end the stay violation. See
16 IN RE: SNOWDEN
Schwartz-Tallard, 2014 WL 4251571, at *4 (“[T]he
additional litigation resulted from [the violator’s] continued
attempts to justify its stay-violating behavior—not from the
debtor’s conduct.”); Sternberg, 595 F.3d at 948. The fees
Snowden incurred in remedying the stay violation after
receiving CIC’s e-mail fall squarely under the admonition
that “[w]ithout a doubt, Congress intended § 362(k)(1) to
permit recovery as damages fees incurred to [end] violation
of the automatic stay.” Sternberg, 595 F.3d at 946.
Permitting the violator to short-circuit the remedies
available under § 362(k)(1) by making a conditional offer to
return the property wrongfully seized in violation of the
automatic stay would undermine the remedial scheme of
§ 362(k). See Sternberg, 595 F.3d at 947–48. The automatic
stay prevents further litigation in order to provide a
“breathing spell” from creditors and preserves the petitioner’s
resources for creditors. Id. at 948. Attorneys’ fees under
§ 362(k)(1) “deter stay violators from continuing to disturb
the breathing spell the stay aims to create.” Schwartz-
Tallard, 2014 WL 4251571, at *4.
Had Snowden accepted the $1,445 and sought damages
for emotional distress in a separate action, her recovery may
have been precluded because CIC never admitted a violation
of the stay—not to mention the reality that any settlement
would have included a standard release of liability. A
bankruptcy appellate panel of this court has declined to find
that an automatic stay violation is remedied by a Rule 68
offer of judgment, noting that “[i]n retrospect, [the creditor]
may regret not having explicitly included attorney’s fees in its
offer of judgment and having offered a sum that would have
been sufficient to make the debtor think very hard about
whether continued litigation is worthwhile.” In re Campion,
IN RE: SNOWDEN 17
294 B.R. 313, 315, 318 (B.A.P. 9th Cir. 2003) (internal
quotation marks omitted). Although the district court
characterized the e-mail as a “tender,” CIC never followed up
with a formal offer or terms of settlement. Since a Rule 68
offer of settlement does not remedy the stay violation, the
single e-mail from CIC hardly serves to stop the train and cut
off fees.
Because CIC did not return the property it had wrongfully
seized from Snowden on May 20, 2009, the bankruptcy court
chose the wrong date to mark the end of the stay violation.
The proper date is December 10, 2009, when the bankruptcy
court found a violation of the automatic stay. The litigation
leading up to that ruling “relate[d] to [Snowden] ‘enforcing
the automatic stay and remedying the stay violation.’” See
Schwartz-Tallard, 2014 WL 4251571, at *3 (quoting
Sternberg, 595 F.3d at 940). Therefore, we reverse the
district court’s determination limiting fees to those incurred
before May 20, 2009, and we remand for a recalculation of
attorneys’ fees.
Snowden cannot automatically recover all the fees she
incurred before the end of the stay violation. Under
Sternberg, she can recover only those fees related to
remedying the stay violation itself. 595 F.3d at 940.
Presumably some fees incurred before December 10, 2009,
are therefore not recoverable, as they would have related to
Snowden’s damages claims rather than her efforts to end the
stay. “All fees related to proving [Snowden’s] damages are
disallowed under the American Rule.” Id. at 948.
18 IN RE: SNOWDEN
IV. Sanctions
Snowden cross-appeals the bankruptcy court’s failure to
issue a sanctions award under its inherent authority, which
“allows a bankruptcy court to deter and provide compensation
for a broad range of improper litigation tactics.” In re Dyer,
322 F.3d 1178, 1196 (9th Cir. 2003). “Because of their very
potency, inherent powers must be exercised with restraint and
discretion,” Chambers v. NASCO, Inc., 501 U.S. 32, 44
(1991); therefore, “[s]anctions are justified when a party acts
for an improper purpose.” Fink v. Gomez, 239 F.3d 989, 992
(9th Cir. 2001) (emphasis omitted).
The bankruptcy court declined to find any bad faith in
CIC’s approach to Snowden’s bankruptcy litigation. Based
on the record documenting the litigation tactics, the
bankruptcy court did not abuse its discretion in denying
sanctions under its inherent authority. See Eskanos & Adler,
P.C. v. Leetien, 309 F.3d 1210, 1213 (9th Cir. 2002).
Snowden also appeals the bankruptcy court’s failure to
issue sanctions under 11 U.S.C. § 105(a), which vests
bankruptcy courts with powers “necessary or appropriate to
carry out the provisions” of the bankruptcy code. Because a
remedy was available to Snowden under § 362(k), no
additional remedy was available under § 105(a). See In re
Roman, 283 B.R. 1, 14–15 (B.A.P. 9th Cir. 2002).
CONCLUSION
We affirm the district court’s order affirming the
decisions of the bankruptcy court on emotional distress and
punitive damages, and sanctions. We reverse the district
court’s order affirming the award of attorneys’ fees and
IN RE: SNOWDEN 19
remand for a calculation of attorneys’ fees related to
remedying the stay violation, including those fees incurred
after May 20, 2009.
The parties shall bear their own costs on appeal.
AFFIRMED in part; REVERSED in part;
REMANDED.
WATFORD, Circuit Judge, concurring:
I join the court’s opinion and write separately to add a
few words on the attorney’s fees issue.
I agree with my colleagues that the fees award must be
vacated, but it’s hard to fault either the bankruptcy court or
the district court for that. Our court has made calculating
attorney’s fees under 11 U.S.C. § 362(k)(1) unnecessarily
complicated. The problem stems from our decision in
Sternberg v. Johnston, 595 F.3d 937 (9th Cir. 2010), where
we construed § 362(k)(1)’s authorization of fee awards more
narrowly than Congress likely intended.1 Read most
naturally, the statute allows a plaintiff to recover attorney’s
fees incurred both in remedying a violation of the automatic
stay and in bringing an action to recover the “actual damages”
caused by that violation. That’s the sensible reading of the
statute the Fifth Circuit adopted. In re Repine, 536 F.3d 512,
1
Section 362(k)(1) provides: “Except as provided in paragraph (2), 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.”
20 IN RE: SNOWDEN
522 (5th Cir. 2008). In Sternberg, however, we rejected that
reading and held instead that § 362(k)(1) imposes a temporal
limit on the plaintiff’s right to recover attorney’s fees, such
that no fees may be recovered for any work performed after
the stay violation has ended. 595 F.3d at 947. Thus, under
our reading of § 362(k)(1), if the stay violation ends before
the plaintiff ever files an action to recover her “actual
damages,” none of the fees incurred in prosecuting the suit
may be awarded. I don’t think that’s the regime Congress
contemplated.
Nonetheless, as a three-judge panel, we’re bound by the
rule in Sternberg, which requires us to vacate the award at
issue here. Check Into Cash violated the automatic stay by
wrongfully withdrawing $575 from Ms. Snowden’s bank
account. Our task under Sternberg is to determine when the
stay violation ended. As the court notes, when a creditor
violates the stay by wrongfully seizing the debtor’s property,
the stay violation usually doesn’t end until the creditor returns
the property to the debtor. See In re Abrams, 127 B.R. 239,
242–43 (B.A.P. 9th Cir. 1991). That didn’t occur on May 20,
2009, as the bankruptcy court held, because Check Into Cash
didn’t send Snowden a check on that date for $575 plus the
overdraft fees she was charged. It offered to return those
funds, but with strings attached: Check Into Cash styled its
offer as a “counteroffer” to Snowden’s $25,000 settlement
demand, so accepting the offer would have required Snowden
to release her claims for emotional distress and punitive
damages. Check Into Cash’s conditional, strings-attached
offer to return the property it had wrongfully seized—an offer
Snowden understandably rejected—did not end the stay
violation.
IN RE: SNOWDEN 21
I agree with the court that the stay violation ended by
December 10, 2009, when the bankruptcy court ordered the
return of Snowden’s wrongfully seized property. Although
Check Into Cash did not actually pay Snowden the $575 plus
overdraft fees until some months later, by December 10,
2009, it no longer contested its obligation to pay those sums.
Nor did Check Into Cash contest that it had actually violated
the stay. Cf. In re Schwartz-Tallard, __ F.3d __, 2014 WL
4251571 at *4 (9th Cir. Aug. 29, 2014) (stay violation hasn’t
ended if defendant continues to contest whether a stay
violation actually occurred). After the bankruptcy court’s
December 10, 2009, ruling, Check Into Cash contested only
whether Snowden was entitled to recover emotional distress
and punitive damages as a result of the stay violation.
So, under Sternberg, we are left to remand this case to the
bankruptcy court with instructions to (1) calculate the portion
of Snowden’s pre-December 10, 2009, attorney’s fees
attributable to her efforts to recover the $575 plus overdraft
fees, and (2) disallow all remaining fees. This impractical
(and inevitably somewhat arbitrary) exercise is sure to invite
further litigation. That Sternberg requires such an odd,
resource-consuming exercise, not dictated by the plain text of
§ 362(k)(1), is another reason to question the soundness of
Sternberg’s holding.