Opinion
Case No.: 1-01-02971
March 29, 2002
For the Movants: Larry Wolf, Esquire
For the Respondent: Paul G. Lutz, Esquire
MEMORANDUM
Procedural and Factual History
On June 8, 2001, Michael R. Livelsberger and Cynthia A. Livelsberger (Debtors) filed a Petition in Chapter 13. Among Debtors' creditors was White Rose Credit Union (WRCU), who held a general unsecured claim in the amount of $2,487.00. WRCU received notice of the filing and sent a representative to attend the first meeting of creditors. On June 22, 2001, July 6, 2001 and October 1, 2001, WRCU mailed Debtors automated notices requesting payment. Two of these notices also included handwritten payment requests from an employee of WRCU.
Because of these notices having been sent, Debtors filed the instant motion to hold WRCU in contempt for violation of the automatic stay. WRCU did not file an answer to the motion. At the hearing of this matter, WRCU did not contest that the notices had been sent, they merely objected to the amount of damages that the Debtors were seeking.
Debtors filed a brief. WRCU did not. This matter is ready for decision. I have jurisdiction pursuant to 28 U.S.C. § 157 and 1334. This matter is core pursuant to 28 U.S.C. § 157(b)(2)(A).
Discussion
11 U.S.C. § 362(a)(1) prohibits "any act to collect, assess, or recover" a claim against the debtor that arose pre-petition. Section 362(h) provides that if a creditor violates this prohibition, a debtor "shall recover actual damages, including costs and attorneys fees. . . ." To be liable for a stay violation, the creditor must have known about the stay and his actions must have been volitional. In re Atlantic Business and Community Corp., 901 F.2d 325, 329 (3d Cir. 1990); In re Lansdale Family Restaurants, Inc., 977 F.2d 826 (3rd. Cir. 1992).
WRCU admits that it intentionally sent the notices in question and that it had notice of the filing of the bankruptcy petition. Thus a violation of the stay must be found to have occurred.
Debtors have the burden of proving the amount of damages from an injury suffered from the violation. In re Micro Marketing Int'l, 150 B.R. 573, 575 (Bankr.M.D.Pa. 1992). That proof must be specific and direct, not speculative or conjectural. John E. Green Plumbing Heating Co. v. Turner Const. Co., 742 F.2d 965, 968 (6th Cir. 1984); In re Express America, Inc., 132 B.R. 535 (Bankr.W.D.Pa., 1991).
The instant Motion seeks attorneys fees ($960.00 total), "lost overtime wages" for both Debtors ($396.00 total) and mileage costs ($10.80 total) for Debtors travel to the hearing of this matter. The total amount of damages is $1,366.80.
In awarding attorneys fees for stay violations, "our goal is not to encourage more activities of lawyers, . . . but to bring litigation to a conclusion." In re Weisberg, 218 B.R. 740, 753 (Bankr.E.D.Pa. 1998). Courts should closely scrutinize the fees requested by attorneys in stay violation cases to determine what amount is "reasonable". In re McLaughlin, 96 B.R. 554 (Bankr.E.D.Pa. 1989); Matter of Liberal Market, Inc., 24 B.R. 653, 658 (Bankr.S.D.Ohio 1982); Matter of Olen, 15 B.R. 750 (Bankr.E.D.Mich. 1981).
Some courts have declined to award any attorney fees whatsoever in cases where the violation was perceived to have been "minor". See, e.g., In re McLaughlin, 96 B.R. 554 (Bankr.E.D.Pa. 1989); In re Ayscue, 1995 WL 908383, *3 (E.D.Va.)).
In determining an appropriate attorney fee award for a violation of the automatic stay, a court must exclude hours that are "excessive, redundant or otherwise unnecessary" in calculating the amount of hours reasonably expended on the case by the debtor's attorney. In re Watkins, 240 B.R. 668 (Bankr.E.D.N.Y. 1999). The policy of section 362(h), to discourage willful violations of the automatic stay, is tempered by a reasonableness standard born of courts' reluctance to foster a "cottage industry" built around satellite fee litigation. In re Putnam, 167 B.R. 737, 741 (Bankr.D.N.H. 1994). Attorneys are not at liberty to incur large legal fees simply because those fees will be shifted to their adversaries pursuant to section 362(h). See Price v. Pediatric Academic Assoc., Inc., 175 B.R. 219, 221 (S.D.Ohio 1994), on remand, In re Price, 179 B.R. 70 (Bankr.S.D.Ohio 1995).
Reasonable and necessary fees do not include unnecessary litigation costs. Several courts have greatly reduced awards of attorneys' fees in situations where unnecessary costs were incurred or under circumstances similar to those presented in the instant motion. See, In re McCrosson, 1997 WL 47625 (Bankr.E.D.Pa. Feb. 3, 1997) (awarding $500 in fees rather than the requested $1,000); Price, 179 B.R. at 73 (limiting fee award to $75 where legal fees and judicial time far exceeded the $13 in actual damages); Putnam, 167 B.R. at 741-42 (reducing attorneys' fees by over 50% where, inter alia, the fees bore no relation to the amount of actual damages suffered and where Debtor failed to attempt to settle the matter before filing the motion); McLaughlin, 96 B.R. at 556 (reducing fees by over 50%); In re Houchens, 85 B.R. 152, 155 (Bankr.N.D.Fla. 1988) (awarding $50 but imposing Rule 9011 sanctions in the amount of $350 against the debtors and their attorney for bringing the contempt motion).
In appropriate circumstances, a court may determine that a section 362(h) motion was wasteful and limit the attorney's compensation award to the amount that he would have earned had he handled the matter efficiently. Such circumstances are those where "the injury caused and damages incurred, other than attorney's fees, only amount to the cost of appearing in court to litigate the contempt motion; the burden of requiring the debtor's attorney to notify the creditor of the violations is insignificant; and no bad faith on the part of the defendant exists." Price, 175 B.R. at 222.
I am in full agreement with the observations made by the courts cited above; it is litigation for the sake of litigation when an attorney files a Motion for damages and takes the matter all the way to trial for a violation of the stay by which the debtor was not actually injured. Under such circumstances, the trial could become tantamount to a filibuster, with the debtor's attorney inclined to prolong the agony simply to ensure himself of a full day's pay for which he does not have to bill his own client. With bankruptcy case filings rising every year and this Court's calendar commensurately clogging, I am not inclined to promote such needless litigation.
In the instant case, the great bulk of the damages requested resulted from the hearing. No answer had been filed to the Motion for Sanctions, so the Debtors could have moved for a default order, obviating the need for any hearing. In this case, the amount of "damages" directly resulting from the sending of the automated notices and not from the hearing are minimal.
None of the pleadings (including the bankruptcy Petition itself) show what Debtors' counsel's normal hourly fee is. In this district $200.00 per hour is a fairly standard rate of compensation for attorneys who are involved in complex Chapter 11 litigation. The instant Chapter 13 matter is hardly complex. Attorney Wolf's statement of his fees would indicate that this case called for nearly five hours of work at a rate of $200.00 per hour. Under these conditions, I cannot grant Attorney Wolf the fees he requests.
Additionally, Debtors request compensation for "lost overtime" wages. While a request for reimbursement of lost wages is appropriate, there is no proof that what the Debtors lost was in fact overtime. Nor is there proof of the Debtors' ordinary rate of pay. Therefore, the requested amount cannot be awarded because it is completely speculative.
The attorneys fees to be awarded in this case will be set at $300.00. In order to recover lost wages, Debtors shall submit affidavits and pay stubs showing their hourly rate of pay and the amount of time lost for attending the hearing of this matter. Unless WRCU objects to the amount of lost wages requested, that amount shall be awarded. Any such objection shall be filed within ten days after WRCU is served with the affidavits. Attorney Wolf's fees for the hearing shall not be billed to the Debtors.
I recognize that it seems inconsistent to award the Debtors lost wages for attending an unnecessary proceeding while denying their attorney his fees for that same proceeding. Nonetheless, I will award the lost wages because the Debtors were simply following their attorney's instructions and cannot be charged with a responsibility to recognize the lack of necessity for the hearing.
CLARIFYING ORDER
AND NOW, this 29th day of March, 2002, the Order which was docketed in the above-captioned matter on March 29, 2002 is hereby clarified to show that it was entered, as well as docketed on March 29, 2002. The date which had been typed onto that Order was in error. The Order remains unchanged in all substantive respects.