Opinion
Case No. 00-30783-T, Chapter 13. Adv. Proc. No. 00-3040-T.
March 20, 2001
MEMORANDUM OPINION
Trial was held January 17, 2001, to determine damages under the motion of debtor Bruno S. Woolridge against Consumer Finance Corporation for willful violation of the automatic stay pursuant to 11 U.S.C. § 362 (a)(6) and § 362(h). In a bench ruling on November 1, 2000, the court granted debtor's motion for summary judgment, holding that defendant Consumer Finance willfully violated the automatic stay of 11 U.S.C. § 362(a).
For reasons stated in this opinion, the court will award debtor actual damages of $179.48 plus the sum of $1,000.00, representing reimbursement of attorney's fees.
Facts.
Debtor filed a chapter 13 bankruptcy petition on February 10, 2000. On the petition date, debtor was the owner of a 1998 Chevrolet which was subject to a secured claim of defendant.
On March 2, 2000, debtor's Chevrolet was repossessed by an agent of defendant. On that same day, a paralegal of Krumbein Associates, debtor's counsel, spoke by telephone to an employee of defendant. The paralegal advised defendant that debtor had filed bankruptcy and requested defendant to return the vehicle to debtor. Also on that date, the paralegal faxed to defendant's office a copy of debtor's bankruptcy notice.
On March 4, 2000, debtor's attorney Charles Krumbein spoke by telephone with defendant's attorney Kevin Fitzpatrick and requested return of the vehicle. As a result of this conversation, the vehicle was returned to debtor on that same day.
The date of March 4, 2000, was established in the record by the summary judgment and original pleadings. However, the court notes that Krumbein Associates' billing statement reflects that this telephone conversation took place on March 3. See Plaintiff's Exhibit 3.
Debtor's Request for Damages.
On March 16, 2000, debtor's counsel filed a motion to hold defendant in contempt pursuant to Bankruptcy Code § 362(a)(6) and § 362(h). Debtor's motion asked the court to award debtor actual damages in the amount of $179.48 plus $2,000.00 for attorney's fees plus $5,000.00 in punitive damages. At trial on damages, debtor's counsel requested a total fee in the amount of $9,171.51 based upon time charges and expenses incurred by his firm since the seizure of debtor's vehicle. Although debtor did not appear at trial, his counsel also requested actual damages for debtor's loss of work in the amount of $635.35 plus punitive damages totaling $8,000.00.
Discussion and Conclusions of Law.
The court previously held on summary judgment that defendant Consumer Finance Corporation willfully violated the automatic stay of § 362(a). The willful violation consisted of Consumer Finance's failure to return debtor's vehicle from the time it received notice of the bankruptcy on March 2, 2000, until March 4, 2000. As a result of defendant's actions, debtor must be awarded his "actual damages." In re Hendry, 214 B.R. 473, 476 (Bankr.E.D.Va. 1997).
The difficulty here is the determination of debtor's actual damages. Debtor's attorney asserted at trial that the actual damages of debtor were $638.35 and that in addition, the court should award a total of $8,000.00 in punitive damages plus attorney's fees and expenses of $9,171.51. Part of the problem with counsel's argument is that debtor failed to appear at trial. Because of this, counsel was unable to introduce specific evidence of debtor's personal damages resulting from the loss of use of his vehicle for two days. Neither did counsel introduce evidence to support a demand for punitive damages of $8,000.00. Debtor's counsel did submit an itemized statement of his firm's fee charges in the case.
Included within counsel's billing statement are the following: (1) time charges of 8.7 hours and a total charge of $945.00 for research and preparation of the motion for contempt; (2) 12.6 hours and charges of $1,265.00 for discovery; and (3) 7.9 hours and charges of $835.00 for the summary judgment motion.
A review of the initial pleadings reveals that defendant admitted in answer to debtor's motion for contempt (1) that it had seized debtor's vehicle on March 2, 2000; (2) that on that same day it received notice from debtor's counsel's office of the bankruptcy and its improper seizure of the vehicle; (3) that on March 4, 2000, debtor's counsel spoke with Consumer Finance's counsel; and (4) that on March 4, the vehicle was returned to debtor. These pleadings thus established the essential facts of the stay violation at the outset of the case. Nevertheless, counsel's fee request includes charges of $1,265.00 for discovery work of doubtful necessity. Moreover, the court also questions the charges for filing a motion for summary judgment. Consumer Finance essentially acknowledged its willful violation, and this simple case could have been substantially stipulated and tried in two hours or less.
Consumer Finance committed a relatively minor violation of the automatic stay that it promptly remedied and which caused debtor little personal damage. It is apparent to the court that this case is really about Krumbein Associates' extraordinary fee request.
This situation presents a dilemma for the court. Obviously, the debtor must be compensated for his damages, and ordinarily these damages include attorney's fees. In fact, in most willful violation cases, these are the only damages. But what is the limit of fees that a debtor's counsel may reasonably accumulate in relation to the wrong committed by the creditor?
The arguments of both counsel at trial were remarkably similar to those in another recent case decided by the court.
Debtor's counsel argues that his full fee charges should be awarded by the court. In a case such as this, he reasoned, the debtor is entitled to vigorous representation in relieving the stay violation and in pursuing a recovery of damages. Otherwise, the culpable creditor will have no motivation to cease its willful conduct in violation of the § 362 automatic stay.
In response, counsel for defendant asserts that debtor's counsel could have resolved the matter at an early stage by limiting his request to reasonable damages. Counsel for defendant offered that a reasonable demand would have resulted in a settlement. Instead, counsel for debtor made exorbitant demands that could not be acceded to by the creditor. Accordingly, debtor's counsel precluded a reasonable settlement and "worked" the case excessively. Debtor now presents a bill out of proportion to defendant's conduct.
As noted above, where there is a willful violation of the stay, an award of actual damages is usually considered mandatory. However, this does not give debtor's counsel carte blanche on fees. The court does not disagree with the argument of debtor's counsel that a debtor is entitled to vigorous representation where there has been a violation of the stay. However, most of these cases are fairly promptly settled and never proceed to trial. The creditor who unreasonably prolongs the proceedings can expect serious consequences. See, e.g., Brown v. Town Country Sales and Service, Inc. (In re Brown), 237 B.R. 316, 321-22 (Bankr.E.D.Va. 1999); In re Hendrey, 214 B.R. at 476.
Unfortunately, at trial, the attorneys' arguments were on a somewhat personal level, and their assertions were not supported by direct evidence. Thus the court is unable to determine who was at fault in prolonging the case.
As to the damage award, while the court has no direct evidence of debtor's actual damages, there is no doubt that debtor lost the use of his vehicle for at least two days. Accordingly, the court will allow debtor actual damages for lost work in the amount originally requested in the motion, $179.48.
Because debtor's counsel fee request is substantially disproportionate to the actual damage suffered by debtor and the circumstances of the case, it will be reduced. The court will award debtor's counsel a fee of $1,000.00, inclusive of expenses.
The court notes that in future cases of this type, I intend to consider the conduct of both parties and their counsel relevant to the issue of damages. Counsel for a debtor should be prepared to demonstrate to the court that the charges are justified; likewise, where a creditor asserts that unreasonable demands were made on behalf of a debtor, the court will consider that evidence relevant to the damage issue.
A separate order will be entered.
The clerk is directed to send copies of this opinion to counsel for debtor and counsel for defendant.