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In re Schwartz-Tallard

United States Court of Appeals, Ninth Circuit

October 14, 2015

IN RE IRENE MICHELLE SCHWARTZ-TALLARD, Debtor, AMERICA'S SERVICING COMPANY, Appellant,
v.
IRENE MICHELLE SCHWARTZ-TALLARD, Appellee

Argued and Submitted En Banc, San Francisco, California June 17, 2015.

Appeal from the Ninth Circuit. Bankruptcy Appellate Panel. BAP No. 11-1429. Kirscher, Pappas, and Dunn, Bankruptcy Judges, Presiding.

SUMMARY[*]

Bankruptcy

Affirming the judgment of the Bankruptcy Appellate Panel, the en banc court held that 11 U.S.C. § 362(k) authorizes an award of attorney's fees reasonably incurred in a debtor's prosecution of a suit for damages to provide redress for a violation of the automatic bankruptcy stay.

When a debtor files for bankruptcy, the Bankruptcy Code imposes an automatic stay on actions against the debtor to collect pre-petition debts. Sternberg v. Johnston, 595 F.3d 937 (9th Cir. 2010), held that § 362(k) allowed a debtor to recover only those fees incurred to end the stay violation itself, not the fees incurred to prosecute a damages action. Agreeing with other circuits, the en banc court held that § 362(k) authorizes recovery of the fees incurred to prosecute a damages action. The en banc court overruled Sternberg to the extent it was inconsistent with the en banc court's opinion.

Concurring in the judgment, Judge Bea, joined by Judge O'Scannlain, concurred in the majority's conclusion that § 362(k) has an unambiguous meaning allowing recovery of attorney's fees incurred in prosecuting a damages action. Judge Bea wrote that the majority's discussion of Congress's plan in enacting the automatic-stay provision was unnecessary.

Dissenting, Judge Ikuta wrote that the statutory text was ambiguous, and the en banc court should have adhered to the better reading set forth in Sternsberg.

Andrew Jacobs (argued), Snell & Wilmer, Tucson, Arizona; Kelly H. Dove, Snell & Wilmer, Las Vegas, Nevada, for Appellant.

Christopher P. Burke (argued), Law Office of Christopher P. Burke, Las Vegas, Nevada, for Appellee.

Daniel L. Geyser (argued), McKool Smith, Dallas, Texas; Tara Twomey, National Association of Consumer Bankruptcy Attorneys, San Jose, California, for Amicus Curiae National Association of Consumer Bankruptcy Attorneys.

Before: Sidney R. Thomas, Chief Judge, and Stephen Reinhardt, Diarmuid F. O'Scannlain, M. Margaret McKeown, William A. Fletcher, Richard C. Tallman, Carlos T. Bea, Milan D. Smith, Jr., Sandra S. Ikuta, Paul J. Watford, and Andrew D. Hurwitz, Circuit Judges. Opinion by Judge Watford; Concurrence by Judge Bea; Dissent by Judge Ikuta.

OPINION

WATFORD, Circuit Judge:

When a debtor files for bankruptcy, the Bankruptcy Code imposes an automatic stay on virtually all actions against the debtor to collect pre-petition debts. 11 U.S.C. § 362(a). To deter violations of the automatic stay and to provide redress for those that do occur, the Code permits injured debtors to sue for " actual damages, including costs and attorneys' fees." § 362(k). With one exception, courts have uniformly held that this provision authorizes an award of all attorney's fees reasonably incurred to remedy a stay violation, including fees incurred in prosecuting the damages action that § 362(k) authorizes. See, e.g., In re Repine, 536 F.3d 512, 522 (5th Cir. 2008); In re Duby, 451 B.R. 664, 674-77 (1st Cir. BAP 2011).

The one exception is our decision in Sternberg v. Johnston, 595 F.3d 937 (9th Cir. 2010). There, we held that § 362(k) allows a debtor to recover only those fees incurred to end the stay violation itself, not the fees incurred to prosecute a damages action. Id. at 947. Thus, under Sternberg, once the stay violation has ended, no fees incurred after that point may be recovered. That holding has been the subject of widespread criticism. Having reconsidered the matter, we conclude that Sternberg misconstrued the plain meaning of § 362(k). To the extent it is inconsistent with this opinion, Sternberg is overruled.

I

This case has a convoluted procedural history, which for our purposes can be briefly summarized. The debtor, Irene Schwartz-Tallard, took out a mortgage on her home in Henderson, Nevada. After filing a Chapter 13 bankruptcy petition, she continued to make her monthly mortgage payments to America's Servicing Company (ASC), the company servicing her loan. Due to a mistake on its part, ASC wrongfully foreclosed on Schwartz-Tallard's home. ASC purchased the home at the foreclosure sale and promptly served Schwartz-Tallard with an eviction notice. Schwartz-Tallard filed a motion in the bankruptcy court requesting relief under 11 U.S.C. ยง 362(k). She sought an order requiring ASC to reconvey title to the home as well as an award of actual damages, punitive damages, and attorney's fees. The bankruptcy court found that ASC's actions constituted a willful violation of the ...


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