Zokaites v. Lansaw
| Decision Date | 15 March 2016 |
| Docket Number | 2:15cv404 |
| Parties | FRANK ZOKAITES, Appellant, v. GARTH LANSAW and DEBORAH LANSAW, Appellees. |
| Court | U.S. District Court — Western District of Pennsylvania |
Electronic Filing
The central issue in this appeal is whether the bankruptcy court erred by awarding the appellees, Garth and Deborah Lansaw, actual damages of $2,600, compensatory damages of $7,500 and punitive damages of $40,000 as a result of violations of the automatic stay by the appellant, Frank Zokaites. The bankruptcy court determined that Zokaites' conduct was sufficiently egregious to merit this award. After careful consideration of the arguments presented and the authority bearing on the matters raised, the court concludes the damages appropriately were awarded. Accordingly, the bankruptcy court's judgment in favor of the Lansaws and against Zokaites in the amount of $50,100 will be affirmed.
Garth and Deborah Lansaw operated a day care facility, Forever Young Childcare ("daycare"), and leased the space for the daycare from Zokaites. On August 16, 2006, the Lansaws filed a bankruptcy petition. The Lansaws subsequently sought an injunction against Zokaites based on his repeated and ongoing violations of the automatic stay. They initiated an adversarial proceeding against Zokaites on August 28, 2006, in part to obtain an injunction barring him from ongoing disruption of the daycare. The Honorable Judith Fitzgerald held a hearing on October 3-4, 2006 and follow-up argument on October 20, 2006 on the request for injunctive relief and other related matters. At the conclusion of that proceeding Judge Fitzgerald issued a Memorandum Opinion, finding that Zokaites violated the automatic stay and enjoining him. The issue of damages for these violations was not addressed at that time.
The Lansaws thereafter alleged in the main bankruptcy case that they were entitled to damages for the violations. They advanced these allegations in the form of a "counterclaim" against Zokaites' proof of claim. This counterclaim was not resolved during the remaining five years Judge Fitzgerald was assigned to this matter. The case was reassigned to the Honorable Thomas Agresti on December 11, 2012, upon Judge Fitzgerald's retirement.
Judge Agresti held a status conference on January 29, 2013 and determined that two issues needed to be resolved: a false light invasion of privacy claim and damages for the stay violations, both of which had been brought by the Lansaws against Zokaites. Judge Agresti concluded that the best way to resolve these matters was to initiate a new adversary proceeding. A trial in that proceeding was held on February 1, 2013. Judge Agresti found for Zokaites on the Lansaws' false light invasion of privacy claim. Conversely, he entered a judgment of damages in favor of the Lansaws for the violations of the automatic stay, and denied Zokaites' demands for a reduction based on setoff or recoupment. Zokaites appeals this award.
Zokaites alleges res judicata applies due to the two-day trial held by Judge Fitzgerald in 2006. Judge Fitzgerald's Memorandum Opinion enjoining Zokaites did not address damages. Zokaites alleges this omission is tantamount to "refusing" to award monetary damages andtherefore res judicata bars any damages award. Appellant's Brief (Doc. No. 17) at 11. This argument is unfounded.
The affirmative defense of res judicata is applicable when "there has been (1) a final judgment on the merits in a prior suit involving (2) the same parties or their privies and (3) a subsequent suit based on the same causes of action." United States v. Athlone Indus., Inc., 746 F.2d 977, 983 (3d Cir. 1984). Zokaites has the burden of showing that the doctrine bars the current judgment. Id.
Zokaites has failed to sustain his burden. A final judgment regarding damages was not entered at the conclusion of the 2006 trial. Judge Fitzgerald did not mention either the entry of or denying the ability to obtain a judgment concerning damages in her Memorandum Opinion. She did not direct the entry of a final order concerning damages that would be consistent with Federal Rule of Civil Procedure 54(b). See Fed. R. Bankr. P. 7054 (). A final judgment order pursuant to Federal Rule of Civil Procedure 58 was not entered in the adversary proceeding. See Fed. R. Bankr. P. 7058 (). A final order pursuant to 11 U.S.C. § 350(a) indicating the main bankruptcy case was fully administered was never entered. See In re Ginsberg, 164 B.R. 870, 873 (Bankr. S.D. N.Y. 2002) (); In re Swiss Chalet, Inc., 485 B.R. 47, 51 (Bankr. D. P. R. 2012) (). Thus, Zokaites has failed to proffer any order or entry in the record that wouldindicate Judge Fitzgerald had fully adjudicated the matter of Zokaites' violations of the automatic stay.1
Moreover, Judge Agresti clarified in both his Memorandum Opinion and during the 2014 proceeding that damages had not been decided by Judge Fitzgerald and plainly were at issue in the 2014 hearing. As a matter of factfinding, Judge Agresti determined that Judge Fitzgerald's remarks during the 2006 hearing served merely as notice that a damages phase of the proceeding was yet to come. Doc. No. 12 in 2:15cv40 at A 305.2 He also drew on Judge Fitzgerald's extensive trial notes (which had been filed into the record) in making this finding, as both the Lansaws and Zokaites "refused" to provide a transcript of the 2006 trial. See Memorandum Opinion of Judge Fitzgerald of December 12, 2006, at 1 (Doc. No. 10 in 2:15cv40 at A 169).
Notably, Zokaites did not raise the issue of damages at the conclusion of the 2006 trial.3 If Zokaites had reason to believe the issue of damages was resolved, he presumably would have sought an appropriate order of clarification in front of Judge Fitzgerald and a concomitant order entering a final judgment on the matter. Instead, the open issue languished for years.
Finally, Zokaites asserts Judge Agresti relied solely upon an argument advanced on June 18, 2009 before Judge Fitzgerald to decide whether res judicata applied. This is inaccurate. While Judge Agresti did rely on this statement in part, a reading of the 2014 hearing transcriptclearly shows he also relied on Judge Fitzgerald's 2006 Memorandum Order and her trial notes. From these sources of information and the fact that the case had remained open for years after the active proceedings before Judge Fitzgerald, Judge Agresti determined as a matter of fact that a final resolution of damages had not occurred. Doc. No. 12 in 2:15cv40 at A 308 ("although the whole opinion or memorandum order is relevant to what we're doing today, it's clear that based on the audio record, Judge Fitzgerald's words in the --- her order of December 2006, that although the testimony may be relevant for both matters, she was addressing only the issue of the injunction and rejection of the lease and not damages and leaving the matter for damages for another day."). This determination certainly was not clearly erroneous.
Moreover, the determination was not an error of law. Zokaites argues that Judge Fitzgerald's injunctive relief followed by the subsequent ability to reject the lease was a resolution of all appropriate damages. But Judge Fitzgerald subsequently made reference to the fact that the issue of damages had not been resolved, see id., and it has long been settled that a court has the ability to enter an award of damages after equitable relief has been granted. See American Life Ins. Co. v. Stewart, 300 U.S. 203, 214 (1937) () (quoting Davis v. Wakelee, 156 U.S. 680, 688 (1895); Medtronics, Inc. v. Intermedics, Inc., 725 F.2d 440, 442 (7th Cir. 1984) (Posner, J.) () (citing 1 Pomeroy, A TREATISE ON EQUITY JURISPRUDENCE § 236-41 (1881); Wright v. Scotton, 13 Del. Ch. 402, 417-18, 121 Atl. 69, 76 (S. Ct. 1923); Dawson & Palmer, CASES ON RESTITUTION 146-51 (2d ed. 1969)). In addition, the case remained open in 2012, whichsignified that additional judicial action was needed to close the case. For all these reasons, it is clear that res judicata does not bar the adversary proceeding on damages and Judge Agresti's holding must be affirmed.
Judge Agresti awarded compensatory emotional distress damages to the Lansaws in the amount of $7,500. This award will be affirmed.
Zokaites argues that it was error to award emotional distress damages without expert testimony or what Zokaites asserts to be the lack of credible evidence of injury. However, as Judge Agresti aptly noted, "when the willful violator of the automatic stay has engaged in conduct that is patently or obviously egregious, emotional distress injuries may be proven merely by credible debtor testimony alone without resort to other extrinsic and corroborating evidence." In re Wingard, 382 B.R. 892, 904 (Bankr. W.D. Pa. 2008).
Judge Agresti found Zokaites' actions to be "obviously egregious" and therefore no expert testimony was necessary. Indeed, Judge Agresti noted "[t]he post filing conduct of [Zokaites] ranks with the most egregious the Court has ever personally witnessed while on the Bench or even reviewed in...
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