Parker v. Credit Cent. S. Inc. (In re Parker)

• Decision Date: 15 May 2014
• Docket Number: Bankruptcy No. 12–11502–WRS.,Adversary No. 12–1066–WRS.
• Citation: 515 B.R. 337
• Court: U.S. Bankruptcy Court — Middle District of Alabama
• Parties: In re Marion PARKER, Debtor. Marion Parker, Plaintiff v. Credit Central South Inc., Defendant.

515 B.R. 337

In re Marion PARKER, Debtor.Marion Parker, Plaintiff

v.Credit Central South Inc., Defendant.

Bankruptcy No. 12–11502–WRS.

Adversary No. 12–1066–WRS.

United States Bankruptcy Court,

M.D. Alabama.

Signed May 15, 2014.

Nicholas H. Wooten, Nick Wooten, LLC, Auburn, AL, for Plaintiff.

Roy C. Dumas, Hill, Hill, Carter, Montgomery, AL, for Defendant.

MEMORANDUM DECISION

WILLIAM R. SAWYER, Bankruptcy Judge.

This Adversary Proceeding is before the Court on the application for attorneys' fees filed by Plaintiff Marion Parker. (Doc. 34). On February 11, 2014, this Court entered judgment in favor of Parker and against Defendant Credit Central South, Inc., awarding damages and attorneys' fees, finding that Credit Central had willfully violated the automatic stay. (Docs. 28, 29). Credit Central objects to Parker's application for fees. (Doc. 50). For the reasons set forth below, Credit Central's objection is overruled and Parker's application for attorneys' fees and expenses is allowed, as requested, in the amount of $30,318.00.

I. FACTS

Parker brought suit against Credit Central seeking money damages and attorneys' fees for violations of the automatic stay. (Doc. 1). The matter was tried on December 18, 2013, and judgment was entered in favor of Parker on February 11, 2014. (Docs. 28, 29). The Court awarded attorneys' fees as part of the judgment and provided a schedule for making application and filing objections. (Doc. 30). Credit Central has appealed this Court's judgment to the District Court. (Docs. 37, 53).

This Court handed down a Memorandum Decision on February 11, 2014, making findings of fact and conclusions of law. (Doc. 28). Nevertheless, a brief review is appropriate here. On August 14, 2012, Credit Central filed a collection suit against Parker in the District Court of Dale County, Alabama. Nine days later, on August 23, 2012, Parker filed a petition in bankruptcy pursuant to Chapter 13 of the Bankruptcy Code. Parker testified at trial that he had a telephone conversation with a representative of Credit Central and made them aware of the bankruptcy filing. Shortly after that telephone conversation, Credit Central filed a proof of claim in this bankruptcy proceeding. (Case No. 12–11502, Claim No. 1, filed August 28, 2012). As Credit Central's civil action was filed on the Small Claims docket, Alabama law does not require a corporation to use a licensed attorney to collect its own debts. Ala.Code § 12–12–31(b). In the small claims suit, Credit Central was not represented by counsel. Moreover, at trial, a representative of Credit Central stated that it was not their practice to use licensed attorneys as it was more cost effective to use non-attorney employees. Kimi Speaks, Credit Central's Office Manager, a non-lawyer, testified at trial that she telephoned the Clerk's office in Dale County and made them aware of Parker's bankruptcy filing, apparently thinking that this was enough to stay proceedings. Needless to say, the telephone call did not accomplish anything. A few days later, the Sheriff served process on Parker at his place of employment, causing him anxiety and embarrassment. A few weeks after that, default judgment was entered in favor of Credit Central, against Parker.¹ While Credit Central was inept when it came time to cease the legal process which it had set in motion, it was quite smart when it came time to file a Proof of Claim with the Bankruptcy Court, as it filed a Proof of Claim within a few days of Ms. Speaks' telephone conversation with Parker.² A few days after Parker filed his complaint initiating this Adversary Proceeding, Credit Central found the resources to file a written motion to dismiss, which promptly stopped the small claims suit. The record does not reflect that Credit Central made any effort to compensate Parker and reach a reasonable settlement.

II. LAW

This Court has jurisdiction to hear this matter pursuant to 28 U.S.C. § 1334. This is a core proceeding within the meaning of 28 U.S.C. § 157(b)(2). This Court entered judgment in favor of Plaintiff Parker and against Defendant Credit Central on February 11, 2014. (Docs. 28, 29). The Court awarded Parker attorneys' fees pursuant to its judgment and set a schedule for Parker to file his application and allowing Credit Central time to object. (Doc. 30).

Credit Central objects to Parker's application for attorneys' fees, contending that Parker is not entitled to any attorneys' fees. (Doc. 50). The Court overrules the objection of Credit Central for two reasons. First, 11 U.S.C. § 362(k), which provides for a mandatory award of attorneys' fees when a willful violation of the automatic stay is proven, does not limit awards of attorneys' fees to those necessary to stop the violation. Second, even if § 362(k) were so limited, under the facts of this case, the Court would award attorneys' fees necessary to prosecute the adversary proceeding necessary to collect damages and attorneys' fees under the Court's inherent authority and under 11 U.S.C. § 105.

The Court will consider Parker's attorney fee application on its merits. Credit Central contends that attorneys' fees should be awarded only up to the point that the stay violation is remedied and a return to the status quo is achieved. Credit Central would have the court deny Parker the attorneys' fees necessary to prosecute his Adversary Proceeding to actually collect his fees and damages. In addition, Parker argues, incorrectly again, that all of Parker's fees should be denied because all they were incurred after Credit Central violated the automatic stay. As a final matter, the Court will review Parker's fee application sua sponte, on its merits.

A. ATTORNEY FEE AWARDS UNDER § 362(k) INCLUDE THOSE FEES NECESSARY TO PROSECUTE AN ADVERSARY PROCEEDING TO COLLECT DAMAGES AND ATTORNEYS' FEES

Section 362(k) permits Parker to recover attorneys' fees necessary to recover damages, and attorneys' fees and costs, including the attorneys' fees necessary to prosecute the adversary proceeding. In those instances where a creditor stops its violationof the automatic stay midstream, the fees continue through judgment, appeal and any necessary collection proceedings. The Court will divide its discussion of this question into five parts. In Part 1, the Court will consider the text of § 362(k). In Part 2, the Court will examine precedent from the Eleventh Circuit, published decisions from United States District Court for the Middle District of Alabama, and decisions of this Court. In part 3, the Court will consider the history of § 362(k). In Part 4, the Court will consider Sternberg v. Johnston, 595 F.3d 937 (9th Cir.2010), and conclude that it is not persuasive and will not be followed. In Part 5, the Court will dispose of a case cited by Credit Central improperly and dispose of Credit Central's argument that attorneys' fees should not be allowed for time spent after it violated the automatic stay.

1. The plain language of § 362(k) provides for a mandatory award for the recovery of attorneys' fees for willful violations of the automatic stay without limitation to a return to the status quo

“The starting point in discerning congressional intent is the existing statutory text.” Lamie v. United States, 540 U.S. 526, 533, 124 S.Ct. 1023, 1030, 157 L.Ed.2d 1024 (2004). Section 362(k)(1) provides as follows:

[A]n individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damages.

11 U.S.C. § 362(k)(1).

When a willful violation of the automatic stay is found, the Bankruptcy Court is required to award “actual damages, including costs and attorneys' fees.” Id. This is underscored by the command “shall” which is contained in that provision. § 362(k) is unusual in this respect as most statutes providing for attorneys' fees leave some discretion in the trial court to deny attorneys' fees to a successful plaintiff. For example, in civil rights actions, the court “may allow the prevailing party ... a reasonable attorney's fees (including expert fees) as part of the costs.” 42 U.S.C. § 2000e–5(k). Another noteworthy aspect of § 362(k) is that in “appropriate circumstances” the court may award punitive damages. That is, the Court is required to award damages, attorneys' fees and costs and then given discretion to award punitive damages in “appropriate circumstances.” The indicates a strong congressional policy in favor of enforcement of the automatic stay.

Had Congress intended to allow fees only to remedy the violation, but not to collect them, it would have provided for attorneys' fees necessary to cause a termination of the violation, and would exclude fees necessary for their recovery. Thus, Congress may have said something like: “a party damaged by a willful violation of the automatic stay shall be awarded attorneys' fees necessary to terminate the violation.” However, § 362(k) contains no language which suggests such a limitation. Rather, the statute speaks in terms of recovery, which contemplates all action necessary to reduce to judgment the award and to collect it from the party violating the automatic stay. It is also important to note that one may recover attorneys' fees even it he is not entitled to an award of punitive damages. Thus, the placement of the term “attorneys' fees” relative to the term “actual damages” is to permit a court to allow attorneys' fees in those cases where it chooses not to award punitive damages. This undercuts Credit Central's argument that § 362(k) is not a fee shifting statute. The most natural reading of the statute supports Parker's contention, that he is entitled to fees for time his attorney spent up to and including the recovery of damages, costs and attorneys' fees. On the contrary, the reading of the statute advanced by Credit Central contemplates a limitation which has no basis in the text of the...