Hunsaker v. United States

• Decision Date: 30 August 2018
• Docket Number: No. 16-35991,16-35991
• Citation: 902 F.3d 963
• Parties: Jonathan Eldon HUNSAKER; Cheryl Lynn Hunsaker, Plaintiffs-Appellants, v. UNITED STATES of America, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

902 F.3d 963

Jonathan Eldon HUNSAKER; Cheryl Lynn Hunsaker, Plaintiffs-Appellants,

v.UNITED STATES of America, Defendant-Appellee.

No. 16-35991

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 15, 2018, Portland, Oregon

Filed August 30, 2018

Douglas D. Geyser (argued) and Daniel L. Geyser, Stris & Maher LLP, Los Angeles, California; Keith D. Karnes, Karnes Law Offices P.C., Salem, Oregon; for Plaintiffs-Appellants.

Paul Andrew Allulis (argued) and Thomas J. Clark, Attorneys; David A. Hubbert, Acting Assistant Attorney General; Tax Division, United States Department of Justice, Washington, D.C.; for Defendant-Appellee.

Tara Twomey, National Consumer Bankruptcy Rights Center, San Jose, California, for Amici Curiae National Association of Consumer Bankruptcy Attorneys and National Consumer Bankruptcy Rights Center.

Before: M. Margaret McKeown and Richard A. Paez, Circuit Judges, and Cynthia A. Bashant,^* District Judge.

BASHANT, District Judge:

We must determine whether sovereign immunity precludes an award of emotional distress damages against the United States for willful violation of the Bankruptcy Code’s automatic stay. The answer turns on the interplay between two Bankruptcy Code statutes: 11 U.S.C. §§ 106(a) (" Section 106(a)") and 362(k) (" Section 362(k)"). In Section 106(a), Congress waived sovereign immunity for a "money recovery" under certain bankruptcy provisions, including Section 362(k). Section 362(k) in turn allows an individual to recover "actual damages" for a willful violation of the Bankruptcy Code’s automatic stay.

After Jonathan and Cheryl Hunsaker filed for bankruptcy, the Internal Revenue Service ("IRS") violated the automatic stay by sending the couple collection notices. The bankruptcy court awarded the Hunsakers damages under Section 362(k) for their emotional distress, but the district court reversed on sovereign immunity grounds. Because Section 106(a) unambiguously waives sovereign immunity for an award of emotional distress damages under Section 362(k), we reverse and remand.

I.

The Hunsakers filed for relief under Chapter 13 of the Bankruptcy Code. Despite being notified of the couple’s bankruptcy, the IRS sent four notices to the Hunsakers demanding payment and threatening imminent enforcement action, including a levy on Social Security benefits. The Hunsakers responded by bringing an adversary proceeding against the United States in bankruptcy court seeking damages for violation of the automatic stay under Section 362(k). The government conceded the IRS’s conduct violated the stay.

At trial, the Hunsakers sought only damages for emotional distress. The government argued sovereign immunity bars this relief, but the bankruptcy court was unconvinced. In reaching the merits, the court determined that the IRS’s conduct exacerbated the stress of the Hunsakers’ bankruptcy, causing them to suffer significant emotional distress. As compensation, the court awarded the Hunsakers $4,000 in damages.

In an appeal to the district court, the government again invoked sovereign immunity. The government also challenged the merits of the Hunsakers’ claims, arguing they suffered insufficient emotional distress to warrant damages. The district court concluded Congress has not waived sovereign immunity for emotional distress damages under Section 362(k). The court therefore reversed the bankruptcy court’s judgment and ordered the Hunsakers’ complaint to be dismissed, without reaching the merits of their claims. The Hunsakers appealed.

II.

We have jurisdiction under 28 U.S.C. § 158(d). We review de novo questions of statutory interpretation and sovereign immunity. See Zazzali v. United States (In re DBSI, Inc.) , 869 F.3d 1004, 1007 n.2 (9th Cir. 2017) ; Montana v. Goldin (In re Pegasus Gold Corp.) , 394 F.3d 1189, 1193 (9th Cir. 2005).

III.

"Sovereign immunity shields the United States from suit absent a consent to be sued that is ‘unequivocally expressed.’ " United States v. Bormes , 568 U.S. 6, 9–10, 133 S.Ct. 12, 184 L.Ed.2d 317 (2012) (quoting United States v. Nordic Vill., Inc. , 503 U.S. 30, 33–34, 112 S.Ct. 1011, 117 L.Ed.2d 181 (1992) ). "Congress has enacted several broad waivers of the United States’ sovereign immunity." Navajo Nation v. Dep’t of the Interior , 876 F.3d 1144, 1168 (9th Cir. 2017).

The waiver at issue here, Section 106(a), applies to fifty-nine provisions of the Bankruptcy Code. For these enumerated provisions, Section 106(a) provides that "sovereign immunity is abrogated as to a governmental unit to the extent set forth in this section." The extent of the waiver relevant to this appeal is set forth in Section 106(a)(3), which authorizes a court to "issue against a governmental unit an order, process, or judgment under such sections ... , including an order or judgment awarding a money recovery, but not including an award of punitive damages."

One of the waiver’s enumerated provisions, Section 362, is the Bankruptcy Code’s automatic stay statute. When debtors file for bankruptcy, Section 362 imposes an automatic stay "to protect debtors from all collection efforts while they attempt to regain their financial footing." Schwartz v. United States (In re Schwartz) , 954 F.2d 569, 571 (9th Cir. 1992). Section 362(k) establishes consequences for violating the stay: "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." In Dawson v. Washington Mutual Bank, F.A. (In re Dawson) , 390 F.3d 1139, 1148 (9th Cir. 2004), we held "actual damages" under Section 362(k)"include[s] damages for emotional distress."¹

Relying on Section 362(k) and Dawson , the bankruptcy court awarded the Hunsakers emotional distress damages against the government. Because Section 106(a) ’s waiver of sovereign immunity applies to Section 362(k), this appeal turns on whether the bankruptcy court’s award falls within the scope of the waiver. That is, we must resolve whether an award of emotional distress damages is an "order or judgment awarding a money recovery, but not including an award of punitive damages." See 11 U.S.C. § 106(a)(3).

We conclude that it is. We first explain why the scope of Section 106(a) ’s waiver of sovereign immunity is unambiguous and encompasses damages for emotional distress under Section 362(k). We then address the government’s alternative, implausible interpretation of the waiver based on the term "money recovery" in Section 106(a)(3). Finally, we address our departure from the First Circuit’s decision reaching the opposite result in an analogous context.

A.

"To maintain a suit against the government for money damages, ‘the waiver of sovereign immunity must extend unambiguously to such monetary claims,’ thus foreclosing an implied waiver." Daniel v. Nat’l Park Serv. , 891 F.3d 762, 768 (9th Cir. 2018) (quoting Lane v. Pena , 518 U.S. 187, 192, 116 S.Ct. 2092, 135 L.Ed.2d 486 (1996) ). "Ambiguity exists if there is a plausible interpretation of the statute that would not authorize money damages," and we "construe any ambiguities in the scope of a waiver in favor of the sovereign." FAA v. Cooper , 566 U.S. 284, 290–91, 132 S.Ct. 1441, 182 L.Ed.2d 497 (2012).

Although a waiver of sovereign immunity must be unequivocally expressed, "Congress need not state its intent" to waive the government’s immunity "in any particular way" or "use magic words." Cooper , 566 U.S. at 291, 132 S.Ct. 1441. "The sovereign immunity canon is just that—a canon of construction." Richlin Sec. Serv. Co. v. Chertoff , 553 U.S. 571, 589, 128 S.Ct. 2007, 170 L.Ed.2d 960 (2008). It is an interpretive tool that "does not ‘displac[e] the other traditional tools of statutory construction.’ " Cooper , 566 U.S. at 291, 132 S.Ct. 1441 (alteration in original) (quoting Chertoff , 553 U.S. at 589, 128 S.Ct. 2007 ).

Our inquiry, then, is whether the scope of the waiver is "clearly discernable from the statutory text in light of traditional interpretive tools." Cooper , 566 U.S. at 291, 132 S.Ct. 1441. If it is not, we will adopt the interpretation of the waiver that is most favorable to the government. Id. ; see also In re DBSI , 869 F.3d at 1013 ("[W]here a plausible interpretation of a provision that would preserve immunity is available, we should adopt that interpretation and preserve the government’s sovereign immunity.").

Turning to our interpretive tools, "we start with the plain meaning of the statute’s text." Father M v. Various Tort Claimants (In re Roman Catholic Archbishop of Portland in Or.) , 661 F.3d 417, 432 (9th Cir. 2011) (quoting United States v. Wright , 625 F.3d 583, 591 (9th Cir. 2010) ). "The plainness or ambiguity of statutory language is determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole." Robinson v. Shell Oil Co. , 519 U.S. 337, 341, 117 S.Ct. 843, 136 L.Ed.2d 808 (1997).

Section 106(a) ’s text plainly waives sovereign immunity for court-ordered monetary damages under the waiver’s enumerated provisions, although the damages may not be punitive. Under Section 106(a)(3), a court is authorized to issue against the government an "order, process, or judgment under" the provisions identified in Section 106(a)(1), "including an order or judgment awarding a money recovery, but not including an award of punitive damages." The clause "including ... a money recovery" expressly broadens the waiver’s scope to encompass monetary damages. The text then provides for one limitation: the money recovery cannot "includ[e] an award of punitive damages." Thus, the statute’s text unambiguously waives sovereign immunity for nonpunitive monetary damages under the waiver’s listed provisions.² And because Section 106(a)(3) ’s language is unambiguous, the scope of the waiver is "clearly discernable from the statutory text in light of traditional interpretive...