Garth F. Lansaw v. , 853 F.3d 657 ( 2017 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
______
No. 16-1867
______
IN RE: GARTH F. LANSAW,
d/b/a Forever Young Childcare
DEBORAH LANSAW,
Debtors
GARTH F. LANSAW and DEBORAH LANSAW
v.
FRANK ZOKAITES,
Appellant
______
On Appeal from the United States District Court
for the Western District of Pennsylvania
(W.D. Pa. No. 2-15-cv-00404)
District Judge: Honorable David S. Cercone
______
Argued December 5, 2016
Before: FISHER,* KRAUSE and MELLOY,** Circuit
Judges.
(Filed: April 10, 2017)
Jeffrey M. Robinson, Esq. [ARGUED]
Robinson Law Group
145 Lake Drive, Suite 102F
Wexford, PA 15090
Counsel for Appellant
Warner Mariani, Esq. [ARGUED]
Warner Mariani, LLC
428 Forbes Avenue, Suite 555
Pittsburgh, PA 15219
Counsel for Appellees
_________
OPINION OF THE COURT
_________
*
Honorable D. Michael Fisher, United States Circuit
Judge for the Third Circuit, assumed senior status on
February 1, 2017.
**
Honorable Michael J. Melloy, Senior Circuit Judge,
United States Court of Appeals for the Eighth Circuit, sitting
by designation.
2
MELLOY, Circuit Judge.
The filing of a bankruptcy petition operates as an
automatic stay of debt collection activities outside of
bankruptcy proceedings. 11 U.S.C. § 362(a). If “an
individual [is] injured by any willful violation of [the] stay,”
that individual “shall recover actual damages, including costs
and attorneys’ fees, and, in appropriate circumstances, may
recover punitive damages.” Id. § 362(k)(1). In the present
case, Frank Zokaites committed several willful violations of
the automatic stay arising from Garth and Deborah Lansaw’s
bankruptcy petition. Because of these violations, the
Bankruptcy Court awarded the Lansaws emotional-distress
damages as well as punitive damages under § 362(k)(1). The
District Court affirmed the awards, and Zokaites now appeals.
We conclude that § 362(k)(1) authorizes the award of
emotional-distress damages and that the Lansaws presented
sufficient evidence to support such an award. We also
conclude that the Lansaws were properly awarded punitive
damages. Accordingly, we will affirm.
I.
A.
The Lansaws operated a daycare in a space leased
from Zokaites. 1 Over the course of several years, the
relationship between the Lansaws and Zokaites devolved into
1
Zokaites’s appellate brief incorporates the facts stated
in the Bankruptcy Court’s memorandum opinion, Lansaw v.
Zokaites (In re Lansaw) (“Lansaw II”), Ch. 7 Case No. 06-
23936-TPA, Adv. No. 13-2037-TPA, 2015 WL 224093(Bankr. W.D. Pa. Jan. 14, 2015). Our recitation of the facts
borrows liberally from the Bankruptcy Court’s opinion.
3
various disputes. The present dispute arose after the Lansaws
entered into a new lease with a different landlord, but before
they vacated Zokaites’s property. When Zokaites learned of
the new lease, he served the Lansaws with a Notice for
Distraint, claiming a lien against the Lansaws’ personal
property for unpaid rent. The following day, August 16,
2006, the Lansaws filed for bankruptcy, 2 thereby triggering
the automatic stay under 11 U.S.C. § 362(a). Zokaites’s
attorney was notified of the bankruptcy filing by a letter dated
August 17, 2006.
Zokaites, nevertheless, violated the automatic stay in
three separate incidents. First, on August 21, 2006, Zokaites
and his attorney visited the Lansaws’ daycare during business
hours to take photographs of the Lansaws’ personal property.
Although Mrs. Lansaw initially denied Zokaites entry,
Zokaites entered the daycare by following a daycare parent
inside. Zokaites then entered Mrs. Lansaw’s office and
backed her against the wall, getting so close that she could
feel his breath. During the incident, Zokaites asked Mrs.
Lansaw three times in quick succession, “Do you want to hit
me?”
Second, on Sunday, August 27, 2006, Zokaites visited
the daycare after business hours and, this time, used his key to
enter the building. He observed that the Lansaws had
removed some personal property and plumbing fixtures from
the space. Zokaites then padlocked and chained the doors.
Mrs. Lansaw’s mother, who had arrived to clean the daycare,
attempted to stop Zokaites and called the police. A police
2
The Lansaws initially filed for bankruptcy under
Chapter 13, but the bankruptcy was later converted to Chapter
7.
4
officer, as well as the Lansaws, arrived at the daycare shortly
thereafter. Zokaites suggested that Mrs. Lansaw inform the
daycare parents that the daycare would not be open the next
day. At the request of a police officer, he allowed Mrs.
Lansaw to reenter the daycare and obtain the parents’ contact
information. Zokaites, however, insisted that Mrs. Lansaw be
escorted in and out of the property by the officer.
After the Lansaws returned home, they received a call
from their attorney informing them that Zokaites had left a
proposed “interim standstill agreement” in the door of the
daycare. It stated that Zokaites would not unchain the
daycare doors unless (1) Mrs. Lansaw’s mother agreed that
she had not been assaulted by Zokaites, (2) the Lansaws
reaffirmed their lease with Zokaites, and (3) the Lansaws
ceased removing property from the daycare. The Lansaws
informed their attorney that the agreement was not
acceptable. They then returned to the daycare, removed the
chains themselves, and decided to sleep in the building to
prevent Zokaites from chaining the door again. Later that
night, Zokaites also returned to the daycare. Before the
Lansaws could reach the door, Zokaites removed Mrs.
Lansaw’s keys that had been hanging from the inside keyhole
and locked the door from the outside. Zokaites left with the
keys, which included personal keys in addition to the daycare
keys, and returned to his vehicle. The Lansaws called the
police once more.
Finally, on August 28, 2006, Zokaites directed his
attorney to send a letter to the Lansaws’ new landlord. The
letter demanded that the new landlord terminate the Lansaws’
new lease and stated that, if the lease was not terminated,
Zokaites would file a complaint. A draft of that complaint
was included with the letter. Zokaites’s attorney also
5
admitted having multiple phone calls with the new landlord in
an attempt to have the new lease terminated.
B.
For reasons that are unclear, the procedural history of
the present action is somewhat complex and spans two
separate adversary proceedings. The Lansaws first initiated
an adversary proceeding in August 2006 to enjoin Zokaites
from committing further violations of the stay. In the same
proceeding, they also sought punitive damages, attorney fees,
and other relief. After a trial, the Bankruptcy Court entered a
December 2006 order finding that Zokaites had violated the
stay and granting the Lansaws’ request for an injunction.
Although the Bankruptcy Court heard testimony related to
emotional distress, it did not make a ruling on damages or
attorney fees in its memorandum opinion. See Lansaw v.
Zokaites (In re Lansaw) (“Lansaw I”), 358 B.R. 666, 672,
675 (Bankr. W.D. Pa. 2006).
The Lansaws again raised the issue of damages before
the Bankruptcy Court in February 2007. This time, they did
so in a counterclaim to Zokaites’s proof of claim in the main
bankruptcy case. This counterclaim for damages, however,
also went unresolved. Approximately five years later, in
December 2012, the main bankruptcy case was reassigned to
the Honorable Thomas P. Agresti. After a status conference
revealed that the counterclaim for damages was yet to be
6
settled, the Bankruptcy Court determined that the best way to
resolve the issue was to initiate a new adversary proceeding. 3
The new adversary proceeding, now before us in the
present case, was tried in August 2014. At the outset of the
trial, the Bankruptcy Court noted it was “building on” what
the previous judge had already found in 2006, namely, that
Zokaites had willfully violated the automatic stay. Lansaw II,
2015 WL 224093, at *3. The previous judge, however, had
not made “definitive findings with regard to certain details of
those violations,” so the Bankruptcy Court again heard
testimony regarding the violations. Id. at *13.
The Lansaws also presented evidence of emotional
distress, which the Bankruptcy Court summarized as follows:
The only evidence that the [Lansaws]
presented as to emotional stress was their own
testimony, though that was often compelling.
Mrs. Lansaw testified that she continues to have
3
As Judge Agresti noted, it is unclear why the
damages claim went unresolved for so many years. Judge
Agresti nonetheless determined that the damages issue
remained open after reviewing the December 2006 opinion in
conjunction with comments the previous judge made at a
hearing in 2009. When appealing Judge Agresti’s decision to
the District Court, Zokaites argued that the omission of
damages from the December 2006 opinion effectively denied
the Lansaws’ request for damages and that res judicata
therefore applied. The District Court, however, held that the
damages issue was not resolved prior to Judge Agresti’s
involvement and that res judicata did not apply. Zokaites
does not challenge that determination in the present appeal.
7
nightmares about Zokaites entering the building
and taking her business away. After these
experiences she sometimes wakes up screaming
and crying. She stated that when she is out in
public and happens to see someone who looks
like Zokaites she can experience moments of
“sheer fear.” She testified that she has lost trust
in others and this has affected her relationship
with friends. She is taking prescription
medication for depression and an ulcer,
conditions which she attributes to stress from
Zokaites, beginning with [an incident prior to
the stay violations] and continuing thereafter.
She felt physically threatened when Zokaites
entered her office on August 21, 2006, and
backed her up to a wall. Mrs. Lansaw
acknowledged that she has not sought
psychological counseling, but said she is
considering doing so.
Mr. Lansaw testified about the effects on
his wife that he has observed. He said that she
has changed markedly since the incidents
involving Zokaites. She just goes to work and
comes home, rarely going out in public,
avoiding human contact, and not enjoying life.
He testified to similar effects on himself, stating
that he has become very withdrawn and has a
fear of making new friendships. He testified that
he has only one friend who understands what he
has gone through and he has no one else to talk
to about it.
8
Id. at *7–8 (citations omitted). The Bankruptcy Court found
this testimony credible and also noted that it was consistent
with the previous judge’s 2006 decision. The 2006 decision
states that “Mrs. Lansaw was in tears in her various
appearances before the Court and during her testimony.”
Lansaw I, 358 B.R. at 672.
The Bankruptcy Court found that Zokaites’s stay
violations caused the Lansaws at least some emotional
distress. In so finding, the Bankruptcy Court considered the
Lansaws’ credible testimony, the egregious nature of
Zokaites’s violations, and the 2006 trial notes made and
docketed by the previous judge. The Bankruptcy Court,
however, acknowledged that factors other than Zokaites’s
stay violations also contributed to the Lansaws’ emotional
distress. As a result, the Bankruptcy Court “discounted” the
actual damages award, Lansaw II, 2015 WL 224093, at *10,
ultimately awarding the Lansaws $7,500 for their emotional
distress and $2,600 in attorney fees. The Bankruptcy Court
also awarded the Lansaws $40,000 in punitive damages.
Zokaites appealed to the District Court, which
affirmed. Zokaites filed this timely appeal.
II.
The Bankruptcy Court had jurisdiction under 28
U.S.C. §§ 157 and 1334; the District Court had jurisdiction
under 28 U.S.C. § 158(a); and we have jurisdiction under 28
U.S.C. §§ 158(d)(1) and 1291. “Our review of the District
Court’s decision effectively amounts to review of the
[B]ankruptcy [C]ourt’s opinion in the first instance.” In re
Allen, 768 F.3d 274, 278–79 (3d Cir. 2014) (quoting In re
Hechinger Inv. Co. of Del., 298 F.3d 219, 224 (3d Cir.
2002)). We review the Bankruptcy Court’s factual findings
for clear error and its conclusions of law de novo. Payne v.
Lampe (In re Lampe), 665 F.3d 506, 513 (3d Cir. 2011). “A
9
finding of fact is clearly erroneous only if it is ‘completely
devoid of minimum evidentiary support displaying some hue
of credibility or bears no rational relationship to the
supportive evidentiary data.’” Havens v. Mobex Network
Servs., LLC, 820 F.3d 80, 92 (3d Cir. 2016) (quoting Berg
Chilling Sys., Inc. v. Hull Corp., 369 F.3d 745, 754 (3d Cir.
2004)). Finally, “[w]e review the constitutionality of the
punitive damages award de novo, but we must accept any
findings of fact . . . unless they are clearly erroneous.” CGB
Occupational Therapy, Inc. v. RHA Health Servs., Inc., 499
F.3d 184, 189 (3d Cir. 2007).
III.
Zokaites argues that the Lansaws introduced
insufficient evidence to support an award of emotional-
distress damages under 11 U.S.C. § 362(k)(1). That statute
provides, with an exception not applicable here, that “an
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.” 11 U.S.C. § 362(k)(1) (emphasis
10
added).4 Accordingly, as a threshold matter, we must first
determine whether the term “actual damages” under
§ 362(k)(1) authorizes recovery for emotional distress. We
conclude that it does, as discussed below. We then turn to
whether the Lansaws presented sufficient evidence to support
emotional-distress damages.
A.
“Because the term ‘actual damages’ has [a]
chameleon-like quality, we cannot rely on any all-purpose
definition but must consider the particular context in which
the term appears.” FAA v. Cooper, 566 U.S. 284, 294 (2012).
The term has been interpreted in some contexts to include
4
On appeal, Zokaites does not concede, but also does
not seriously contest, that he willfully violated the automatic
stay. Even if we were to assume that this issue, determined in
the 2006 decision, is properly before this Court, we would
conclude the findings were not clearly erroneous. Zokaites’s
rationales for resorting to stay violations, including the advice
of counsel, are immaterial to whether he violated the stay.
See Landsdale Family Rests., Inc. v. Weis Food Serv. (In re
Landsdale Family Rests., Inc.), 977 F.2d 826, 829 (3d Cir.
1992) (“It is a willful violation of the automatic stay when a
creditor violates the stay with knowledge that the bankruptcy
petition has been filed. Willfulness does not require that the
creditor intend to violate the automatic stay provision, rather
it requires that the acts which violate the stay be
intentional. . . . [A] creditor’s ‘good faith’ belief that he is not
violating the automatic stay provision is not determinative of
willfulness . . . .” (citation omitted)). But see 11 U.S.C.
§ 362(k)(2) (providing a “good faith” exception to
§ 362(k)(1) not applicable here).
11
damages for emotional distress and, in others, to only
authorize damages for financial harm. Id. at 292–93
(collecting cases). This Court has not yet had occasion to
address whether, in the context of § 362(k)(1), the term
“actual damages” includes emotional-distress damages.
We do not, however, write upon a blank slate; Zokaites
cites to numerous decisions by other courts considering the
issue. Three circuits have expressly concluded that, under
§ 362(k)(1),5 emotional-distress damages are available for
willful violations of the automatic stay. See Lodge v.
Kondaur Capital Corp., 750 F.3d 1263, 1271 (11th Cir.
2014); Dawson v. Washington Mut. Bank, F.A. (In re
Dawson), 390 F.3d 1139, 1148 (9th Cir. 2004), abrogation on
other grounds recognized in Gugliuzza v. FTC (In re
Gugliuzza), –– F.3d ––, 2017 WL 1101094, at *8–9 (9th Cir.
Mar. 24, 2017); Fleet Mortg. Grp., Inc. v. Kaneb, 196 F.3d
5Section 362(k)(1) was previously codified at
§ 362(h). Most court decisions discussed in this opinion
therefore cite to § 362(h). For our purposes, however, the
statute’s language remains the same, and we discuss and
quote the prior court decisions as if they were decided under
§ 362(k)(1).
12
265, 269 (1st Cir. 1999). 6 Two circuits have left open the
possibility that emotional-distress damages may be available
in some circumstances. See Young v. Repine (In re Repine),
536 F.3d 512, 522 (5th Cir. 2008); Aiello v. Providian Fin.
Corp., 239 F.3d 876, 880 (7th Cir. 2001). And one district
court has rejected the notion that emotional-distress damages
are available as “actual damages” under the statute. See
United States v. Harchar, 331 B.R. 720, 732 (N.D. Ohio
2005). We consider three representative decisions in turn.
1.
In Harchar, the Northern District of Ohio noted that
§ 362(k)(1) “is indisputably an ambiguous statute with a
dearth of legislative history.” Id. The court further noted that
§ 362(k)(1) was not enacted with the automatic stay in 1978;
rather, “[t]he 1978 Act provided no mechanism for
enforcement of the automatic stay—perhaps due to
[Congress’s] expectation that enforcement would continue via
procedures for contempt of court.” Id. at 729. Indeed, prior
to the automatic stay’s codification in 1978, contempt was
“the accepted procedure for enforcement of stay violations.”
Id.
The Harchar court noted, however, that questions
surrounded the propriety of bankruptcy judges enforcing the
6
In Fleet Mortgage, the First Circuit upheld an award
of emotional-distress damages and explicitly stated that such
damages are available under the statute. 196 F.3d at 269–70
(“[W]e note that emotional damages qualify as ‘actual
damages’ under [§ 362(k)(1)].”). A later First Circuit decision
nevertheless characterized Fleet Mortgage’s statement as
dicta. See United States v. Rivera Torres (In re Rivera
Torres), 432 F.3d 20, 29 & n.10 (1st Cir. 2005).
13
automatic stay—now a creature of statute and not court
order—through contempt procedures. Id. at 730 (“[R]eliance
on contempt power to remedy violations of § 362 had been
widely criticized.” (quoting Pertuso v. Ford Motor Credit
Co., 233 F.3d 417, 422 (6th Cir. 2000))). Further, the court
noted that the constitutional authority of bankruptcy judges to
use contempt procedures was cast into doubt after the
Supreme Court’s 1982 decision in Northern Pipeline
Construction Co. v. Marathon Pipe Line Co., 458 U.S. 50(1982). Harchar, 331 B.R. at 730. The court inferred that
these circumstances informed Congress’s decision to enact
§ 362(k)(1) because the provision was enacted as part of the
Bankruptcy Amendments and Federal Judgeship Act of
1984.7 Id. The court therefore concluded, “[T]here can be
little doubt that when [§ 362(k)(1)] was enacted in 1984,
Congress was concerned not with providing debtors
compensation for emotional harms, but with providing
explicit statutory authorization for the ‘only previously
available remedy for a stay violation: Contempt.’” Id.
(quoting In re Bivens, 324 B.R. 39, 42 (Bankr. N.D. Ohio.
2004)). Additionally, the court stated, “There is little
indication that awarding damages for emotional harm was
7
In Northern Pipeline, the Supreme Court held that
the Bankruptcy Act of 1978 unconstitutionally vested Article
III judicial powers in “adjunct” bankruptcy courts. 458 U.S.
at 86–87. The Bankruptcy Amendments and Federal
Judgeship Act of 1984 was, at least in part, Congress’s
attempt to resolve these constitutional problems. See Pub. L.
No. 98-353, 98 Stat. 333 (1984) (codified as amended in
scattered sections of 11 U.S.C. and 28 U.S.C.).
14
commonplace under the bankruptcy court’s traditional
contempt procedures.” Id.Given this history of the contempt remedy, Congress’s
demonstrated ability to clearly authorize emotional-distress
damages, and Congress’s waiver of sovereign immunity
under the statute, the Harchar court held that emotional-
distress damages were not available under § 362(k)(1). Id. at
732. In so doing, the court acknowledged Congress intended,
at least in part, that the automatic stay protect against
psychological harm. Id. at 731. But, the court reasoned,
§ 362(k)(1)’s provisions authorizing punitive damages and
attorneys’ fees would “effectively address[ ]” Congress’s
concerns about emotional harm and that “it was incumbent
upon Congress” to “explicit[ly] reference . . . ‘emotional
pain’ or ‘mental anguish’” if it intended to authorize
emotional-distress damages as compensatory damages. Id. at
732.
2.
In Aiello, the Seventh Circuit was skeptical of a
bankruptcy court’s ability to award emotional-distress
damages, but it left open the possibility that such damages
might be available under § 362(k)(1). The court noted that
the automatic stay is a recent codification of the more-than-a-
century-old power of courts to stay collection efforts—a
power that originated long before “the courts [grew] more
confident of their ability to sift and value claims of emotional
distress.” Aiello, 239 F.3d at 880. According to that court,
the automatic stay’s protection “is financial in character; it is
not protection of peace of mind.” Id. at 879. The court further
reasoned, “There is no indication that Congress meant to
change the fundamental character of bankruptcy remedies by
enacting [§ 362(k)(1)].” Id. at 881. And, the court noted,
nothing prohibits a debtor from bringing a suit under state tort
15
law for emotional injury. See id. at 880. The court therefore
concluded that “[t]he office of [§ 362(k)(1)] is not to redress
tort violations but to protect the rights conferred by the
automatic stay.” Id.
Nevertheless, the Seventh Circuit theorized that
considerations of judicial economy “might” permit an award
for emotional distress under § 362(k)(1) where the plaintiff is
already seeking damages for financial injury. Id. Noting that
no such financial injury was alleged in the case before it, the
court held that the plaintiff in Aiello was not entitled to
emotional-distress damages for the defendant’s willful
violation of the automatic stay. Id.
16
3.
The Ninth Circuit came to yet a different conclusion in
Dawson. There, the court concluded that “pecuniary loss is
not required in order to claim emotional distress damages”
under the statute. Dawson, 390 F.3d at 1149 (emphasis
added). In coming to this conclusion, the court found it
necessary to turn to the legislative history behind the
automatic-stay provision. See id. at 1146–48. Quoting
extensively from the House Report for the Bankruptcy
Reform Act of 1978, the court emphasized that Congress
enacted the automatic stay not only to provide creditors
financial protection, but also to provide “the debtor a
breathing spell from his creditors. It stops all collection
efforts, all harassment, and all foreclosure actions. It permits
the debtor to attempt a repayment or reorganization plan, or
simply to be relieved of the financial pressures that drove him
into bankruptcy.” Id. at 1147 (emphasis added) (quoting H.R.
Rep. No. 95-595, at 340 (1977), as reprinted in 1978
U.S.C.C.A.N. 5963, 6296–97); see also Univ. Med. Ctr. v.
Sullivan (In re Univ. Med. Ctr.), 973 F.2d 1065, 1074 (3d Cir.
1992) (quoting the same language).
The Ninth Circuit further noted Congress’s concern
with creditor collection tactics, which can “take[ ] the form of
abusive phone calls at all hours, including at work, threats of
court action, attacks on the debtor’s reputation, and so on.
The automatic stay at the commencement of the case takes
the pressure off the debtor.” Dawson, 390 F.3d at 1147–48
(quoting H.R. Rep. No. 95-595, at 125–26). Accordingly, the
court reasoned:
17
Reading the legislative history as a whole, we
are convinced that Congress was concerned not
only with financial loss, but also—at least in
part—with the emotional and psychological toll
that a violation of a stay can exact from
an . . . individual. Because Congress meant for
the automatic stay to protect more than financial
interests, it makes sense to conclude that harm
done to those non-financial interests by a
violation are cognizable as “actual damages.”
We conclude, then, that the “actual damages”
that may be recovered by an individual who is
injured by a willful violation of the automatic
stay include damages for emotional distress.
Id. at 1148 (citation and footnote omitted).
4.
We find Dawson to be the better approach. As the
Harchar court noted, § 362(k)(1) “is indisputably an
ambiguous statute with a dearth of legislative history.” 331
B.R. at 732. The best way to resolve this dilemma is not to
make inferences from the doubts surrounding the general
authority of bankruptcy courts in 1984, see id. at 730, but
rather to look to the specific interests that Congress intended
to protect when it enacted the automatic-stay provision just a
few years earlier, see Dawson, 390 F.3d at 1146–48. We
conclude, like the Dawson and Harchar courts, that Congress
intended the automatic stay to protect both financial and non-
financial interests. And, with those interests in mind, we join
a growing number of circuits by expressly concluding that
“actual damages” under § 362(k)(1) include damages for
emotional distress resulting from a willful violation of the
18
automatic stay. 8 See Dawson, 390 F.3d at 1148; Lodge, 750
F.3d at 1271; Fleet Mortg., 196 F.3d at 269.
8
The Supreme Court’s decision in FAA v. Cooper, 566
U.S. 284 (2012), does not compel a different result. In
Cooper, a divided Court concluded that the term “actual
damages” in the Privacy Act (“the Act”) did not authorize
recovery for emotional distress from the federal government.
Id. at 287. Although the Court recognized that the Act
protected non-financial interests, id. at 294–95, the Court
noted indications that Congress refused to authorize
emotional-distress damages, see id. at 295–99. The Court
first noted that the Act’s remedial scheme “parallels” specific
common law remedial schemes. Id. at 295–96 (citation
omitted). Under those common law schemes, the term
“general damages” would have clearly authorized recovery
for emotional distress. Id. The Court then noted that a
commission created by Congress specifically recommended
that the Act allow for general damages, but that Congress
never acted on this recommendation. Id. at 297. Thus,
because Congress could have more clearly authorized
recovery for emotional-distress damages and because the Act
provided for damages against federal agencies, the Court
invoked the sovereign immunity canon of statutory
construction to limit damages to economic loss. Id. at 299.
The sovereign immunity canon requires that ambiguous
statutory language be construed in favor of immunity. Id.Unlike Cooper, we are unaware of any legislative
history indicating that Congress refused to authorize
emotional-distress damages for stay violations. If anything,
the legislative history is to the contrary. See supra Parts
19
Of course, we acknowledge that the legislative history
for the automatic stay, enacted in 1978, does not directly
address § 362(k)(1), which was enacted in 1984.
Nonetheless, the automatic stay’s legislative history remains
instructive: If the automatic stay was meant to protect against
non-pecuniary emotional harm, it is only logical that
Congress would intend to include damages resulting from that
harm when it introduced the award of “actual damages” as the
enforcement mechanism six years later. For the same reason,
we disagree with the Harchar and Aiello courts that there is
no indication Congress intended to break from past
bankruptcy practice. By seeking to protect against non-
pecuniary emotional harm with the automatic stay and by
enacting the “actual damages” enforcement provision soon
thereafter, Congress sufficiently indicated a departure from
any prior practice that may have neglected emotional harms
resulting from stay violations. See Hamilton v. Lanning, 560
U.S. 505, 516 (2010) (“[W]e ‘will not read the Bankruptcy
Code to erode past bankruptcy practice absent a clear
indication that Congress intended such a departure.’” (quoting
Travelers Cas. & Surety Co. of Am. v. Pac. Gas & Elec. Co.,
549 U.S. 443, 454 (2007))). Further, while the Harchar court
concluded that Congress’s concerns about non-pecuniary
harms would be “effectively addressed” through the provision
for punitive damages and attorneys’ fees, see 331 B.R. at 732,
III.A.3 and 4; see also Dawson, 390 F.3d at 1147–48.
Further, the defendant in the present case is neither the federal
government nor a state government. We therefore leave for
another case the question of whether emotional-distress
damages may be recovered under § 362(k)(1) against federal
or state governments.
20
we see no reason to infer that Congress intended to
distinguish between the pecuniary and non-pecuniary injuries
when it adopted a system of compensatory damages as a
means of enforcing stay violations.
Finally, we need not and do not decide whether
financial injury is a necessary predicate to recovery for
emotional distress under the statute. Unlike the plaintiff in
Aiello, the Lansaws incurred financial injury in the form of
attorneys’ fees when they sought to enjoin further violations
of the stay by Zokaites. See Aiello, 239 F.3d at 880; see also
11 U.S.C. § 362(k)(1) (“[A]n individual injured by any
willful violation of a stay . . . shall recover actual damages,
including costs and attorneys’ fees . . . .” (emphasis added)). 9
B.
9Although we do not decide whether financial injury
is a necessary predicate, we note that § 362(k)(1) might be the
only avenue available for a debtor to recover for emotional
harm resulting from a stay violation. The Aiello court implied
that those who suffer emotional-distress damages are free to
bring state tort claims, see 239 F.3d at 880, but multiple
circuits have held that state law claims derived from a stay
violation are preempted by federal bankruptcy law, see, e.g.,
E. Equip. & Serv. Corp. v. Factory Point Nat’l Bank, 236
F.3d 117, 121 (2d Cir. 2001) (per curiam); Pertuso v. Ford
Motor Credit Co., 233 F.3d 417, 425–26 (6th Cir. 2000).
Thus, if financial injury is later determined to be a
prerequisite to emotional-distress damages under § 362(k)(1),
those who suffer only emotional injuries might be, contrary to
the suggestion in Aiello, “orphans of the law.” See 239 F.3d
at 880.
21
Having determined that § 362(k)(1) authorizes the
award of emotional-distress damages, we consider what
evidence is required to support such an award. Zokaites
argues that the Lansaws should have been required to provide
medical documentation or expert medical testimony to
support their claims of emotional distress. According to
Zokaites, this medical evidence was necessary to corroborate
the Lansaws’ testimony that they experienced emotional
distress and that this distress was in fact caused by Zokaites’s
stay violations. Zokaites further argues that, given the lack of
this evidence, the Bankruptcy Court’s award was too
speculative.
Depending on the circumstances of each individual
case, corroborating medical evidence may be required to
prove emotional harm and causation. But we decline to adopt
a bright-line rule requiring such evidence to prove emotional-
distress damages under § 362(k)(1). As we have concluded in
the context of other federal statutes, “we see no reason to
require that a specific type of evidence be introduced to
demonstrate injury in the form of emotional distress.” Bolden
v. Se. Pa. Transp. Auth., 21 F.3d 29, 36 (3d Cir. 1994)
(considering the evidence required to prove emotional distress
in § 1983 cases); see also Cortez v. Trans Union, LLC, 617
F.3d 688, 720 (3d Cir. 2010) (declining, in the context of the
Fair Credit Reporting Act, to adopt a “standard requiring ‘a
degree of specificity which may include corroborating
testimony or medical or psychological evidence in support of
the damage award [for emotional distress]’” (quoting Cousin
v. Trans Union Corp., 246 F.3d 359, 371 (5th Cir. 2001))).
And we agree with the Bankruptcy Court that, at least where
a stay violation is patently egregious, a claimant’s credible
testimony alone can be sufficient to support an award of
emotional-distress damages. See Dawson, 390 F.3d at 1150.
22
“We are confident that courts . . . can ensure that plaintiffs
recover only for actual injury even in the absence of expert
medical testimony in such cases.” Bolden, 21 F.3d at 36.
We conclude, moreover, that the Lansaws presented
sufficient evidence of emotional distress to support the
Bankruptcy Court’s award. Testimony at trial demonstrated
that Zokaites willfully and egregiously violated the automatic
stay. On one occasion, Zokaites arrived at the Lansaws’
business—a daycare—during business hours and, after he
was initially denied entry, entered the daycare, backed Mrs.
Lansaw against the wall, and asked her three times whether
she wanted to hit him. On another occasion, Zokaites chained
the doors to the daycare (albeit on a weekend) and refused to
unchain the doors unless the Lansaws reaffirmed their lease
with Zokaites. And, on yet another occasion, Zokaites
attempted to have the Lansaws’ lease with their new landlord
terminated.
In short, Zokaites did not violate the stay with a mere
collections call; rather, he repeatedly—at times, physically
and in the presence of children entrusted to the Lansaws’
care—attempted to intimidate the Lansaws. The Bankruptcy
Court found the Lansaws’ testimony on these incidents
credible and dismissed Zokaites’s testimony as “attempting to
downplay or mitigate the seriousness of his misconduct.”
Lansaw II, 2015 WL 224093, at *15. We cannot, as a result,
say that the Bankruptcy Court clearly erred in finding that
Zokaites’s violations were so egregious “that a reasonable
person in the position of the [Lansaws] would be expected to
suffer some psychological harm as a result of what
happened.” Id. at *9.
Neither can we say that the Bankruptcy Court clearly
erred in finding Zokaites’s stay violations did in fact cause
emotional harm. Zokaites lists numerous stressors—e.g., a
23
carbon monoxide poisoning incident, legal problems with a
child, Zokaites’s pre-automatic-stay conduct, and the inherent
stress of bankruptcy—that may have caused the Lansaws’
emotional distress. He argues that, absent extrinsic evidence
linking the stay violations to the Lansaws’ emotional distress,
the Bankruptcy Court could not make a determination that his
stay violations, rather than the non-actionable stressors,
caused the distress. Emotional distress, however, need not be
so thinly sliced. Mrs. Lansaw was not required, as a matter of
causation, to establish with absolute precision what degree
her depression was caused by the stay violations. As the
Bankruptcy Court acknowledged, numerous stressors
contributed to the Lansaws’ emotional distress and linking the
stay violations to specific manifestations of that distress was
likely impossible. It is sufficient that Zokaites’s stay
violations were so egregious that a reasonable person could
be expected to suffer some emotional harm and that the
Lansaws credibly testified that the violations did cause such
harm.
Of course, as a matter of damages, plaintiffs like the
Lansaws will be more successful when they can link the stay
violations to the entirety of their distress. In the present case,
for example, the Bankruptcy Court found it necessary to
“discount” the emotional damages award so that the Lansaws
were not compensated for non-actionable distress. Lansaw II,
2015 WL 224093, at *15. The Bankruptcy Court looked to
emotional-distress awards in analogous cases, see, e.g.,
Snowden v. Check Into Cash of Wash. Inc. (In re Snowden),
769 F.3d 651, 655 (9th Cir. 2014), and awarded the Lansaws
a comparably modest $7,500. Zokaites argues that this
approach was unduly speculative. But, considering the
circumstances of this case and the variety of stressors
contributing to the Lansaws’ distress, we cannot say the
24
approach was clearly erroneous. Cf. Spence v. Bd. of Educ. of
Christina Sch. Dist., 806 F.2d 1198, 1203 (3d Cir. 1986)
(Higginbotham, J., concurring in result) (“[T]here is ‘no legal
yardstick by which to measure accurately reasonable
compensation’ for injuries such as emotional distress.”
(citation omitted)).
In sum, plaintiffs claiming emotional-distress damages
under § 362(k)(1) must demonstrate, as required by the
statute, that they suffered “actual” emotional harm caused by
the willful stay violation. The evidence necessary to
demonstrate such harm will likely vary from case to case.
But, at least where the evidence also shows that the stay
violations were patently egregious, a plaintiff’s credible
testimony that the violations did in fact cause emotional
distress is sufficient to support an award of damages. Here,
we conclude that the Lansaws presented such evidence and
that the Bankruptcy Court did not clearly err in crediting the
Lansaws’ testimony. Under the circumstances of this case, an
award of $7,500 for emotional distress was neither
unreasonable nor unduly speculative.
IV.
Zokaites next argues that the Bankruptcy Court erred
in awarding the Lansaws punitive damages. As previously
noted, § 362(k)(1) allows for punitive damages “in
appropriate circumstances.” Although such an award must
“comport[ ] with due process,” CGB Occupational Therapy,
499 F.3d at 188, punitive damages are largely left to the
discretion of the bankruptcy court, see Solfanelli v. Corestates
Bank N.A., 203 F.3d 197, 203 (3d Cir. 2000).
We conclude, first, that punitive damages were
appropriate in the present case. Zokaites correctly states that
one of the purposes behind punitive damages is to deter future
misconduct. See State Farm Mut. Auto. Ins. Co. v. Campbell,
25
538 U.S. 408, 416 (2003). He further asserts that, because he
has not improperly contacted the Lansaws in the years since
the stay violations, “there [is] simply no evidence of future
bad conduct to deter.” Appellant’s Br. 49. But, given the
nature of Zokaites’s stay violations and his attempts to
downplay the violations at trial, we cannot say the
Bankruptcy Court erred in determining punitive damages
were appropriate under the circumstances. We reach this
result even though the Bankruptcy Court considered evidence
from the 2006 trial concerning Zokaites’s ability to pay
punitive damages. As the Bankruptcy Court noted, other
evidence from the 2014 trial (e.g., Zokaites’s multiple
residences) indicated he was still financially capable of
paying punitive damages.
Turning to the punitive damages award itself, we
conclude $40,000 comports with due process. In so doing,
we “consider three guideposts: (1) the degree of
reprehensibility of the defendant’s misconduct; (2) the
disparity between the actual or potential harm suffered by the
plaintiff and the punitive damages award; and (3) the
difference between the punitive damages awarded . . . and the
civil penalties authorized or imposed in comparable cases.”
CGB Occupational Therapy, 499 F.3d at 189 (quoting State
Farm, 538 U.S. at 418). Zokaites’s repeated stay violations,
already discussed at length, were sufficiently reprehensible to
support the award. See id. at 190 (discussing the factors
considered in determining degree of reprehensibility).
Indeed, Judge Agresti carefully reviewed Zokaites’s conduct
and concluded that the behavior was the “most egregious” he
had ever encountered in his time on the bench. Lansaw II,
2015 WL 224093, at *20. The 4-to-1 ratio between the
punitive damages award and the actual damages award
($10,100, including $7,500 for emotional distress and $2,600
26
in attorneys’ fees) is in line with awards previously deemed
acceptable by the Supreme Court. See State Farm, 538 U.S.
at 425. And, although $40,000 is higher than other awards
examined by the Bankruptcy Court, see, e.g., In re B. Cohen
& Sons Caterers, Inc., 108 B.R. 482, 487–88 (E.D. Pa. 1989),
we conclude that, under the circumstances of this case, the
award is not sufficiently excessive to be unconstitutional.
V.
Because we conclude § 362(k)(1) authorizes recovery
for emotional distress, the Lansaws presented sufficient
evidence to support such an award, and punitive damages
were properly assessed, we will affirm. 10
10
Zokaites also argues that the damages awards are
property of the bankruptcy estate. After reviewing the record,
however, we conclude that this argument has been waived. In
his post-trial brief before the Bankruptcy Court, Zokaites
argued the awards should be offset against his claims in the
main bankruptcy case, but he did not argue that the awards
are property of the estate.
27