Remedying Stay Violation by SSA/Dept. of Treasury
Posted: Tue Aug 06, 2013 2:10 pm
Dear Mark,
There are two statutory provisions under which you can get damages for stay violations: 105(a) and 362(k) (this used to be 362(h) prior to the enactment of BAPCPA). Why do we need more than one?
Section 362(k)'s provision affords relief only to individuals (with emphasis added): "[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." Thus, for example, if a corporate debtor is injured by a stay violation, it cannot appeal to 362(k). Instead, it can use 105(a). Such an action is prosecuted under a contempt theory:
It is clear that, even though a trustee does not qualify as an "individual" for purposes of section 362(h), a trustee can recover damages in the form of costs and attorney's fees under section 105(a) as a sanction for ordinary civil contempt. See United States v. Arkison (In re Cascade Roads, Inc.), 34 F.3d 756, 767 (9th Cir. 1994) (damages not otherwise available to a corporate debtor under section 362(h) for a creditor's willful violation of the automatic stay were nevertheless available under section 105(a) as a sanction for ordinary civil contempt; distinguishing In re Goodman, supra). It is equally clear that, while an award of damages under section 362(h) is mandatory, an award of damages under section 105(a) is discretionary. Id.; In re Pace, 159 B.R. at 904.
In re Pace, 67 F. 3d 187, 193 (9th Cir. 1995).
Therefore, since a nonindividual debtor can seek relief from a stay violation under a contempt theory, it follows that a stay violation is a form of contempt, i.e., contempt of the order for relief. Thus, an OSC motion is an appropriate vehicle to use.
Judge Zurzolo feels that if you are seeking money damages, Fed. R. Bank. Proc. 7001 (1) is implicated: "The following are adversary proceedings: (1) a proceeding to recover money or property . . ." Therefore, he insists on an adversary proceeding.
However, given that adversary proceedings are more expensive than OSC motions, and given the Ninth Circuit's holding in Sternberg v. Johnston, 595 F. 3d 937, 949 (9th Cir. 2010) ("actual damages under 362(k)(1) do not include fees incurred in prosecuting the adversary proceeding to obtain damages"), I use an OSC motion where possible, and resort to an adversary proceeding only when necessary. I have successfully used an OSC motion before Judge Ahart when seeking relief from a stay violation.
I wish you a solid victory.
Nick
Nicholas Gebelt
Nicholas Gebelt, Ph.D., J.D.
Attorney at Law
Certified Bankruptcy Law Specialist
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