FILED
APR 2 2020
NOT FOR PUBLICATION SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. NC-19-1191-FBTa
ERIKA RODRIGUEZ, Bk. No. 18-10674
Debtor.
ERIKA RODRIGUEZ,
Appellant,
v. MEMORANDUM*
NATIONAL FUNDING, INC.,
Appellee.
Argued and Submitted on March 26, 2020
Filed – April 2, 2020
Appeal from the United States Bankruptcy Court
for the Northern District of California
Honorable Charles Novak, Chief Bankruptcy Judge, Presiding
*
This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
Appearances: Thomas Philip Kelly, III argued on behalf of appellant;
Jennifer E. Duty on the brief for appellee.
Before: FARIS, BRAND, and TAYLOR, Bankruptcy Judges.
INTRODUCTION
The bankruptcy court held that creditor National Funding, Inc.
willfully violated the automatic stay when it levied chapter 71 debtor Erika
Rodriguez’s bank accounts. Ms. Rodriguez sought to recover $29,000 in
attorneys’ fees and $2,500 in costs, but the court awarded $7,875 and $81,
respectively, because she had failed to mitigate her damages before filing a
motion for contempt.
Ms. Rodriguez appeals, arguing that the bankruptcy court should
have awarded her the full amount of her claimed fees and costs and did not
provide adequate reasons for discounting her award.
The bankruptcy court acted within its discretion. We AFFIRM.
FACTUAL BACKGROUND
A. Prepetition events
In 2018, Ms. Rodriguez defaulted on a business loan from National
Funding. National Funding obtained a $130,060 default judgment against
1
Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101-1532, and all “Rule” references are to the Federal
Rules of Bankruptcy Procedure.
2
her in state court, and the state court promptly issued a writ of execution.
On August 1, National Funding sent instructions to the Sonoma
County Sheriff’s Department to levy Ms. Rodriguez’s bank accounts.
B. Ms. Rodriguez’s bankruptcy case
Ms. Rodriguez filed a chapter 7 petition on October 1, 2018. Her
creditor matrix included National Funding, care of its attorney, Jennifer E.
Duty. She also filed a notice of stay of proceedings in the state court action.
National Funding conceded that it knew of Ms. Rodriguez’s petition
by October 2. Nevertheless, on that date, it sent the sheriff’s office new
instructions to enforce the writ of execution. On October 10, a staff attorney
for National Funding, Tara Muren, personally learned of Ms. Rodriguez’s
bankruptcy case. She claimed that she directed her legal assistant to contact
the sheriff’s office to terminate the levy that day.
For whatever reason, the sheriff’s office did not receive notice of the
levy termination. On or around October 22, it levied Ms. Rodriguez’s
checking and savings accounts, recovering a total of $236.41.
Ms. Rodriguez attempted to withdraw funds after the levy, which
resulted in a $35 overdraft fee. Neither the sheriff’s office nor National
Funding has ever returned the funds to Ms. Rodriguez.
C. Ms. Rodriguez’s motion for contempt
Ms. Rodriguez notified her attorney, Thomas P. Kelly III, that the
sheriff’s office had levied her accounts. Mr. Kelly did not contact National
3
Funding or otherwise informally attempt to resolve the stay violation.
Rather, Mr. Kelly (on behalf of Ms. Rodriguez) filed a motion for
contempt (“Contempt Motion”) against National Funding in the
bankruptcy court. Ms. Rodriguez argued that she had given National
Funding notice of her bankruptcy filing, but it nevertheless violated the
automatic stay by levying her bank accounts.
National Funding opposed the Contempt Motion and blamed the
levy entirely on the sheriff’s office. It claimed that it had cancelled the levy
by phone, mail, and e-fax and provided copies of the undated levy
termination request. It argued that it did not willfully violate the automatic
stay and that damages were not warranted because Ms. Rodriguez did not
contact National Funding to try to resolve the stay violation amicably.
At the hearing on the Contempt Motion, the bankruptcy court
questioned whether National Funding had documentation proving when it
sent the notice of levy termination to the sheriff’s office; counsel replied
that there was an e-mail but no other fax confirmation. Ms. Rodriguez’s
counsel represented that the sheriff’s office informed him that it had not
received any cancellation notice from National Funding. Due to the factual
disputes, the court set a continued hearing and allowed the parties to
conduct discovery. Ms. Rodriguez’s counsel did not object.
The parties deposed Ms. Rodriguez and the sheriff’s office’s
representative, Ruth Cooper, and filed supplemental briefs.
4
At the continued hearing on the Contempt Motion, the bankruptcy
court noted that there was still a question of fact about whether and when
National Funding attempted to terminate the levy. Mr. Kelly initially
insisted that there was no factual dispute. Eventually, when it became clear
that the court would not decide the issue absent an evidentiary hearing, he
agreed to a hearing: “Yes, as to the Sonoma County Sheriff’s state of
knowledge and at what point did they receive notice, if any, from National
Funding?”
Ms. Cooper, Ms. Rodriguez, and Ms. Muren (the National Funding
staff attorney) testified at the evidentiary hearing. Ms. Cooper reiterated
that the sheriff’s office did not have any record of National Funding
contacting it to terminate the levy prior to October 28, 2018.
Conversely, Ms. Muren testified that she personally became aware of
Ms. Rodriguez’s bankruptcy case on October 10 and instructed her
assistant to terminate the levy that day. She explained that she created a
document directing the sheriff’s office to halt the levy, which her assistant
sent via e-fax. She said that she did not realize that the sheriff’s office had
levied the bank accounts until she reviewed the Contempt Motion.
In its written order, the bankruptcy court found that National
Funding “clearly violated the automatic stay” and that its failure to stop
the levy was a willful violation because it knew of the automatic stay and
its efforts to terminate the collection efforts were inadequate. It awarded
5
Ms. Rodriguez $236.41 plus the $35 overdraft fee. However, it declined to
award her emotional distress damages because her discomfort and
embarrassment were “momentary and slight.”
The bankruptcy court instructed Mr. Kelly to file documents in
support of the request for fees and costs. It also directed both parties to
address whether Ms. Rodriguez satisfied her duty to mitigate her damages.
D. The fees and costs award
Ms. Rodriguez filed a motion for attorneys’ fees and costs (“Fees
Motion”) claiming $29,610 in attorneys’ fees and $2,564.34 in costs. She
argued that National Funding’s strategy of “maximum confrontation”
prolonged the dispute and required significant work. She further argued
that she did not need to mitigate her damages, because National Funding
caused the injury and failed to provide any evidence that it would have
done anything differently even if she had contacted it.
National Funding opposed the Fees Motion and argued that
Ms. Rodriguez failed to mitigate her damages by filing the Contempt
Motion without contacting National Funding and refusing to engage in
settlement discussions.
The bankruptcy court held a hearing on the Fees Motion and ruled
that Ms. Rodriguez was entitled to reasonable attorneys’ fees but not the
full amount claimed. It found that, had Ms. Rodriguez reached out to
National Funding prior to filing the Contempt Motion, “there’s little doubt
6
that National Funding would have promptly returned the funds that the
sheriff removed from her bank accounts.” The court stated that it was “not
adopting a per se rule that requires debtors to send a cease and desist letter
before filing a Section 362(k) motion, but in this instance, that would have
been a far more appropriate method to take. You don’t need a house to
squash a mosquito, and that’s exactly what I have here . . . .”
The bankruptcy court awarded Ms. Rodriguez $7,875 in attorneys’
fees and $81.64 in costs. It explained that it was awarding fees and costs
only through the first hearing on the Contempt Motion, or roughly twenty
hours, which represented “more than enough [time] to understand the
scope of the problem, to contact National Funding, and to resolve this. And
that’s what should have been done.”
Ms. Rodriguez timely appealed.
JURISDICTION
The bankruptcy court had jurisdiction pursuant to 28 U.S.C. §§ 1334
and 157(b)(2)(A). We have jurisdiction under 28 U.S.C. § 158.
ISSUE
Whether the bankruptcy court erred in awarding Ms. Rodriguez less
than the full amount of attorneys’ fees and costs that she incurred while
prosecuting the Contempt Motion.
STANDARD OF REVIEW
We review the amount of sanctions imposed for a willful violation of
7
the stay, including an award of attorneys’ fees and costs, for an abuse of
discretion. Eskanos & Adler, P.C. v. Leetien,
309 F.3d 1210, 1213 (9th Cir.
2002) (citing Franchise Tax Bd. v. Roberts (In re Roberts),
175 B.R. 339, 343 (9th
Cir. BAP 1994)); see Am.’s Servicing Co. v. Schwartz-Tallard (In re
Schwartz-Tallard),
803 F.3d 1095, 1101 (9th Cir. 2015) (en banc) (“[C]ourts
awarding fees under § 362(k) thus retain the discretion to eliminate
unnecessary or plainly excessive fees.” (citation omitted)).
To determine whether the bankruptcy court abused its discretion, we
conduct a two-step inquiry: (1) we review de novo whether the bankruptcy
court “identified the correct legal rule to apply to the relief requested” and
(2) if it did, we consider whether the bankruptcy court’s application of the
legal standard was illogical, implausible, or without support in inferences
that may be drawn from the facts in the record. United States v. Hinkson,
585
F.3d 1247, 1262-63 & n.21 (9th Cir. 2009) (en banc).
DISCUSSION
A. The bankruptcy court did not abuse its discretion in awarding
Ms. Rodriguez less than the full amount of her fees and costs.
Ms. Rodriguez argues that the bankruptcy court erred in discounting
her award of attorneys’ fees and costs because she failed to mitigate her
damages. We discern no abuse of discretion.
Section 362(k) provides that “an individual injured by any willful
violation of a stay provided by this section shall recover actual damages,
8
including costs and attorneys’ fees, and, in appropriate circumstances, may
recover punitive damages.” § 362(k)(1). The Ninth Circuit has held that,
while the award of attorneys’ fees is mandatory, courts have discretion to
determine the reasonableness of the award:
Although § 362(k) makes such fee awards mandatory rather
than discretionary, we do not think that feature of the statute
will result in unnecessary litigation brought solely to drive up
the award. Only an award of fees reasonably incurred is
mandated by the statute; courts awarding fees under § 362(k)
thus retain the discretion to eliminate unnecessary or plainly
excessive fees.
In re
Schwartz-Tallard, 803 F.3d at 1101 (citation omitted) (emphasis added).
When considering attorneys’ fees for a stay violation, “[c]ourts in
other circuits have applied the standard of § 330 for compensating
professionals in bankruptcy, which provides for ‘reasonable compensation
for actual, necessary services.’” Eskanos & Adler, P.C. v. Roman (In re Roman),
283 B.R. 1, 11 (9th Cir. BAP 2002) (citations omitted). The reasonableness of
fees is determined by using the “lodestar” approach2 and by considering
the particular circumstances of each case.
Id. Courts may also consider the
proportionality of the attorneys’ fee award in relation to the damages
sought. See In re Beebe,
435 B.R. 95, 102 (Bankr. N.D.N.Y. 2010) (declining to
2
The lodestar approach requires the bankruptcy court to determine the
reasonable amount of fees by multiplying the number of hours reasonably spent by the
attorney’s reasonable hourly rate. See Law Offices of David A. Boone v. Derham-Burk (In re
Eliapo),
468 F.3d 592, 598 (9th Cir. 2006).
9
award attorneys’ fees because “[p]rosecution of the willful stay violation
simply was not reasonable in this case to determine and enforce
appropriate sanctions”).
Additionally, we have noted that the reasonableness inquiry requires
a court to determine whether the debtor could have mitigated her
damages:
[I]n determining reasonable damages under § 362(h) [now
§ 362(k)], the bankruptcy court must examine whether the
debtor could have mitigated the damages. Generally, in
determining the appropriate amount of attorneys’ fees to award
as a sanction, the court looks to two factors: “(1) what expenses
or costs resulted from the violation and (2) what portion of
those costs was reasonable, as opposed to costs that could have
been mitigated.”
In re
Roman, 283 B.R. at 12 (quoting In re GeneSys, Inc.,
273 B.R. 290, 296
(Bankr. D.C. 2001)).
In the present case, Mr. Kelly represented that he had billed over
$30,000 in fees and costs prosecuting the Contempt Motion against
National Funding. The bankruptcy court, however, found that this amount
was unreasonable and awarded $7,875 in fees and $81 in costs,
representing work through the first hearing on the Contempt Motion.
Ms. Rodriguez argues that the bankruptcy court imposed a “meet
and confer requirement for stay violation motions.” She contends that the
bankruptcy court “stated a rule that would have required a third notice of
10
the [automatic stay] by mandating a further meet and confer letter from
Appellant’s counsel.” (National Funding received notice once from the
bankruptcy court when Ms. Rodriguez filed her petition and again when
she filed a notice of automatic stay in the state court case.)
Ms. Rodriguez misconstrues the bankruptcy court’s ruling. It never
imposed a “meet and confer” requirement and did not dispute that
National Funding had notice of the automatic stay. Indeed, it stated that it
was “not adopting a per se rule that requires debtors to send a cease and
desist letter before filing a Section 362(k) motion . . . .”
Rather, the bankruptcy court evaluated the reasonableness and
proportionality of Ms. Rodriguez’s actions in light of National Funding’s
stay violation. The court found that this case involved a relatively minor
violation that National Funding would have quickly remedied, had
Ms. Rodriguez contacted it directly, rather than taking the more
confrontational route of filing the Contempt Motion. It found that her
actions resulted in needless litigation and, by implication, unreasonably
large fees. These findings were not clearly erroneous.
Ms. Rodriguez acknowledges that she had a duty to mitigate her
damages but contends that all of the billed attorneys’ fees were
appropriate. She argues that National Funding increased litigation costs by
11
pursuing a highly confrontational and meritless strategy.3
We are sympathetic to Ms. Rodriguez’s arguments. Based on our
review of the record, we are less optimistic than the bankruptcy court
about National Funding’s response to an informal request. National
Funding’s responses were consistently energetic and never conciliatory: it
sent an amended levy request to the sheriff on the very day it first received
notice of the bankruptcy filing; it made only ineffectual (if any) efforts to
correct its violation until Ms. Rodriguez filed her Contempt Motion; and it
mounted a full-throated, aggressive litigation strategy in response to that
motion. We also note that most of Ms. Rodriguez’s fees and costs were
incurred during the discovery, supplemental briefing, and evidentiary
hearing that National Funding and the court insisted were necessary (and
that Mr. Kelly initially argued were unnecessary). But we can only review
the cold paper record, and we do not have the benefit that the bankruptcy
court enjoyed of first-hand observation of the proceedings. We cannot say
that the court’s findings were illogical, implausible, or without support in
the record.
B. The bankruptcy court adequately explained the reduced award.
Ms. Rodriguez argues that the bankruptcy court erred by failing to
3
In her reply brief, Ms. Rodriguez argues that National Funding waived the
issue of who was at fault in driving the litigation. But National Funding addressed its
position in its answering brief by asserting that it promptly took actions to cancel the
levy and providing appropriate citations to the record.
12
explain the rationale behind the fees and costs award. We disagree.
The Ninth Circuit has repeatedly recognized the trial court’s
discretion in awarding attorneys’ fees but has cautioned that “[i]t remains
important, however, for the district court to provide a concise but clear
explanation of its reasons for the fee award.” Gates v. Deukmejian,
987 F.2d
1392, 1398 (9th Cir. 1992) (quoting Hensley v. Eckerhart,
461 U.S. 424, 437
(1983)) (civil rights claims). This requires the court “to give at least some
indication of how it arrived at the amount of compensable hours for which
fees were awarded to allow for meaningful appellate review. Although we
do not require ‘an elaborately reasoned, calculated, or worded order . . .
[and] a brief explanation of how the court arrived at its figures will do,’
‘something more than a bald, unsupported amount is necessary.’”
Id.
(citations omitted). Nevertheless, when considering an award of attorneys’
fees, the court is not required to go line-by-line through the billing records:
[T]rial courts need not, and indeed should not, become
green-eyeshade accountants. The essential goal in shifting fees
(to either party) is to do rough justice, not to achieve auditing
perfection. So trial courts may take into account their overall
sense of a suit, and may use estimates in calculating and
allocating an attorney’s time. And appellate courts must give
substantial deference to these determinations, in light of “the
district court’s superior understanding of the litigation.”
Fox v. Vice,
563 U.S. 826, 838 (2011) (quoting
Hensley, 461 U.S. at 437) (civil
rights claims).
13
Ms. Rodriguez contends that the bankruptcy court failed to
“articulate any basis why the fees and costs sought were unreasonable and
excessive.” This is not correct. As discussed above, the bankruptcy court
found that a phone call to National Funding’s counsel might have resolved
the situation, so most of the services Ms. Rodriguez’s counsel rendered
were unnecessary.
Ms. Rodriguez further argues that the court did not explain why it
allowed fees and costs only up to the first hearing, particularly when the
court ordered discovery and additional hearings. She is incorrect. The court
explained that it was awarding fees through the first hearing and that
twenty hours represented more than enough time for Mr. Kelly to proceed
reasonably by consulting with Ms. Rodriguez, contacting National
Funding, and resolving the stay violation. The court found that $7,875, or
roughly twenty hours, was “generous” in light of the amount of work it
should have taken to resolve this issue. It was not required to undertake a
line-by-line analysis of Mr. Kelly’s bills, and we defer to the bankruptcy
court’s judgment as to what constituted a reasonable amount of time.
As to the work required beyond the first hearing, Ms. Rodriguez
claims that she did not want discovery and additional hearings. As we
have stated, we are sympathetic to her position. But we do not believe that
the bankruptcy court abused its discretion by requiring these proceedings
to resolve the factual disputes or by denying Ms. Rodriguez’s request for
14
fees for those proceedings based on its not-clearly-erroneous finding that
Ms. Rodriguez could have avoided those proceedings altogether.
In sum, the court did not abuse its discretion when it decided that
Ms. Rodriguez could have remedied the stay violation with twenty hours
of attorney time worth $7,875.
CONCLUSION
The bankruptcy court did not err. We AFFIRM.
15
