Charles Easley, Sr. v. Collection Service of Nevada , 910 F.3d 1286 ( 2018 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
CHARLES B. EASLEY, SR.; PATRICIA No. 17-16506
A. EASLEY,
Plaintiffs-Appellants, D.C. No.
2:15-cv-00395-
v. LDG
COLLECTION SERVICE OF NEVADA,
Defendant-Appellee. OPINION
Appeal from the United States District Court
for the District of Nevada
Lloyd D. George, Senior District Judge, Presiding
Argued and Submitted November 15, 2018
San Francisco, California
Filed December 20, 2018
Before: RAYMOND C. FISHER and MILAN D. SMITH,
JR., Circuit Judges, and LAWRENCE L. PIERSOL, *
District Judge.
Opinion by Judge Milan D. Smith, Jr.
*
The Honorable Lawrence L. Piersol, United States District Judge
for the District of South Dakota, sitting by designation.
2 EASLEY V. COLLECTION SERVICE OF NEVADA
SUMMARY **
Bankruptcy
The panel reversed the district court’s order denying
bankruptcy debtors’ motion under 11 U.S.C. § 362(k) for
attorneys’ fees incurred on appeal in successfully
challenging the bankruptcy court’s award of attorneys’ fees
to debtors for a willful violation of the automatic stay.
The panel held that, in addition to authorizing the court
to award reasonable attorneys’ fees and costs incurred on
appeal in defending a judgment rendered pursuant to
§ 362(k), § 362(k) also authorizes attorneys’ fees and costs
that the debtor incurred on appeal in successfully
challenging an initial award made pursuant to § 362(k).
The panel also held that the district court abused its
discretion in denying the motion for attorneys’ fees on the
alternative ground that the debtors failed to comply with a
local rule requiring the filing of points and authorities. The
panel concluded that the memorandum of points and
authorities filed with the district court sufficiently clarified
the attorneys’ fees and costs sought in debtors’ motion.
The panel reversed the order of the district court and
remanded to the district court with instructions to remand to
the bankruptcy court to calculate appellate attorneys’ fees
and costs.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
EASLEY V. COLLECTION SERVICE OF NEVADA 3
COUNSEL
Christopher P. Burke (argued), Las Vegas, Nevada, for
Plaintiffs-Appellants.
Patricia Halstead (argued), Halstead Law Offices, Reno,
Nevada, for Defendant-Appellee.
OPINION
M. SMITH, Circuit Judge:
The Bankruptcy Code (the Code) provides hard-pressed
debtors with an opportunity to obtain some relief from their
financial burdens. One critical tool in the Code aiding an
orderly bankruptcy process is an automatic stay of creditor
actions to collect preexisting debts from debtors who have
filed for bankruptcy protection. See 11 U.S.C. § 362(a). The
Code provides that injured debtors may sue for “actual
damages, including costs and attorneys’ fees” for willful
violations of the stay. Id. § 362(k)(1). We previously held
in In re Schwartz-Tallard, 803 F.3d 1095, 1101 (9th Cir.
2015) (en banc), that this provision authorizes the court to
award reasonable attorneys’ fees and costs incurred on
appeal in defending a judgment rendered pursuant to
§ 362(k). We now clarify that § 362(k) also authorizes
attorneys’ fees and costs to the debtor incurred on appeal in
successfully challenging an initial award made pursuant to
§ 362(k).
4 EASLEY V. COLLECTION SERVICE OF NEVADA
FACTUAL AND PROCEDURAL BACKGROUND
I. Factual Background
Plaintiffs-Appellants Charles and Patricia Easley
(Appellants) filed for Chapter 13 bankruptcy on October 31,
2012, which resulted in the imposition of an automatic stay
pursuant to § 362. Appellants listed Bennett Medical
Services (Bennett) as a Schedule F creditor holding
unsecured, nonpriority claims for $3,535, even though
Bennett had previously assigned the debt to Defendant-
Appellee Collection Service of Nevada (CSN) in July 2012,
and CSN had contacted Patricia Easley about the debt on
September 20, 2012.
CSN, unaware of Appellants’ bankruptcy proceeding,
filed a collection action against Patricia Easley in July 2013.
The parties set up a payment plan in August 2013, whereby
Appellants paid $75 pursuant to the plan before stopping
further payments. In April 2014, Appellants received a writ
of execution on their earnings from CSN. On April 22, 2014,
Appellants’ attorney sent a fax to CSN’s attorney demanding
that CSN stop the garnishment in light of Appellants’
bankruptcy. Still, CSN garnished wages from Patricia
Easley on April 25, May 9, May 23, and June 9, 2014. CSN
attempted to stop the garnishment on May 12, 2014 by
faxing a release of execution to Patricia Easley’s employer
and the Las Vegas Constable, but the garnishment continued
for several weeks more until CSN faxed another notice to
Patricia Easley’s employer and the Las Vegas Constable.
EASLEY V. COLLECTION SERVICE OF NEVADA 5
II. Procedural Background
A. Initial Proceedings
On June 13, 2014, Appellants filed a motion for
contempt against CSN because of its violation of the
automatic stay. The bankruptcy court granted Appellants’
unopposed motion on August 7, 2014. After an evidentiary
hearing, the bankruptcy court found that CSN had willfully
violated the stay, and it awarded $1,295 in damages to
Appellants, in addition to $1,277 for attorneys’ fees and
costs. Appellants appealed the damages and attorneys’ fees
award.
While Appellants’ appeal to the district court was
pending, we decided Schwartz-Tallard. Appellants did not
make the argument to the district court that § 362(k) is
properly interpreted as awarding attorneys’ fees and costs
incurred in prosecuting damages. Instead, they simply
argued that the bankruptcy court erred in failing to account
for several days of attorneys’ work needed to end the stay
violation.
The district court affirmed the actual damages award, but
remanded to the bankruptcy court the attorneys’ fees
calculation in light of Schwartz-Tallard. The bankruptcy
court then awarded attorneys’ fees and costs of $16,324.40,
in addition to the $1,277 initially awarded. The bankruptcy
court refused to award attorneys’ fees and costs incurred on
appeal, claiming it lacked jurisdiction due to a pending
application for these fees before the district court.
B. The District Court’s Decision
On June 29, 2017, the district court denied Appellants’
motion for attorneys’ fees and costs for appellate work. The
6 EASLEY V. COLLECTION SERVICE OF NEVADA
court concluded that Appellants failed to file points and
authority pursuant to Local Rule 7-2(d). The court noted that
it “cannot determine which fees appellant[s] [are] seeking
because the appellant[s] did not properly segregate their fees
for the relief they have received,” and therefore denied the
motion.
Alternatively, the court concluded that § 362(k) does not
allow for recovery of appellate work when a party is
prosecuting, and not defending, the judgment on appeal. The
court cited Schwartz-Tallard when commenting, “[A] party
is entitled to an award of attorney’s fees if they [sic] succeed
in correcting the stay and then are successful in defending
the judgment on appeal.” The district court reasoned that
because Appellants appealed the bankruptcy court’s award
of fees and costs, not CSN, Appellants could not recover
their fees pursuant to § 362(k).
Appellants timely appealed to our court.
JURISDICTION AND STANDARD OF REVIEW
“The rulings of the district courts regarding local rules
are reviewed for abuse of discretion.” All. of Nonprofits for
Ins., Risk Retention Grp. v. Kipper, 712 F.3d 1316, 1327 (9th
Cir. 2013) (quoting Prof’l Programs Grp. v. Dep’t of
Commerce, 29 F.3d 1349, 1353 (9th Cir. 1994)). The district
court’s decision whether to award attorneys’ fees is also
reviewed for abuse of discretion. Shaw v. City of
Sacramento, 250 F.3d 1289, 1293–94 (9th Cir. 2001).
However, when the principal issue raised on appeal is legal
in nature, we review the district court’s award de novo.
Harris v. Maricopa Cty. Superior Court, 631 F.3d 963, 970
(9th Cir. 2011). We have jurisdiction over this appeal
pursuant to 28 U.S.C. § 1291.
EASLEY V. COLLECTION SERVICE OF NEVADA 7
ANALYSIS
I. Local Rule 7-2(d)
The district court initially denied Appellants’ motion
pursuant to District of Nevada Civil Local Rule 7-2(d),
which reads,
The failure of a moving party to file points
and authorities in support of the motion
constitutes a consent to the denial of the
motion. The failure of an opposing party to
file points and authorities in response to any
motion, except a motion under Fed. R. Civ.
P. 56 or a motion for attorney’s fees,
constitutes a consent to the granting of the
motion.
D. Nev. Civ. R. 7-2(d). “Only in rare cases will we question
the exercise of discretion in connection with the application
of local rules.” United States v. Warren, 601 F.2d 471, 474
(9th Cir. 1979).
This is one of those rare cases. The record shows that
Appellants clearly indicated that the attorneys’ fees and costs
requested pertained solely to the appeal, and did not need to
be further segregated. The itemized attorneys’ fees provided
in appellants’ motion begins with “Prepare Notice of
Appeal,” dated March 4, 2015. The entries continue through
October 14, 2016 with additional, clear references to
appellate work: “Prepare Exhibits for Appeal,” “Meet w/
clients re: status of appeal,” “Prepare a FRAP 28j Letter of
Supplemental Authority re: Schwartz-Tallard,” and “Meet
w/ client re: appeal and order.” The dates and entries clearly
involve appeals work completed by Appellants’ attorney,
Christopher P. Burke. Further, Exhibit A is Burke’s
8 EASLEY V. COLLECTION SERVICE OF NEVADA
declaration, in which he states, “[M]y total fees and cost for
this appeal are $14,208.75.” A quick reference back to the
itemized sheet would show an equal number listed as “Total
Fees.” The memorandum of points and authorities is
unambiguously labeled a “motion for attorney fees and cost
for appellate work,” and it repeatedly makes clear that the
Easleys were seeking fees solely “for work on this appeal,”
“for this appeal” and for “all of the appellate work.”
Accordingly, the points and authorities filed with the
district court sufficiently clarify the attorneys’ fees and costs
sought in Appellants’ motion, and we therefore conclude
that the district court abused its discretion when it denied the
motion pursuant to Local Rule 7-2(d).
II. Appellate Attorneys’ Fees and Costs
The district court also denied the motion because of its
understanding of Schwartz-Tallard. Under the “American
Rule,” we follow “a general practice of not awarding fees to
a prevailing party absent explicit statutory authority.” Key
Tronic Corp. v. United States, 511 U.S. 809, 819 (1994).
The relevant provision in the Code specifically authorizes
attorneys’ fee awards to the debtor to remedy willful
violations of the automatic stay:
Except as provided in paragraph (2), 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 added).
EASLEY V. COLLECTION SERVICE OF NEVADA 9
Previously, we interpreted § 362(k)(1) as limiting
attorneys’ fees and costs awards to those incurred in
stopping a stay violation. “Once the violation has ended, any
fees the debtor incurs after that point in pursuit of a damage
award would not be to compensate for ‘actual damages’
under § 362(k)(1),” and thus fees incurred pursuing damages
for a stay violation were not recoverable under the statute.
Sternberg v. Johnston, 595 F.3d 937, 947 (9th Cir. 2010).
However, Schwartz-Tallard overruled Sternberg in 2015. In
Schwartz-Tallard, a creditor wrongly foreclosed on a
debtor’s home in violation of the automatic stay. 803 F.3d
at 1097. The bankruptcy court awarded punitive damages
and economic and emotional damages, as well as attorneys’
fees and costs. Id. The creditor appealed the damages
award, but the district court affirmed. Id. The debtor
returned to the bankruptcy court and filed a motion for
attorneys’ fees and costs incurred on appeal to the district
court. Id. at 1097–98. The bankruptcy court, relying on
Sternberg, denied the motion, but the Bankruptcy Appellate
Panel (BAP) reversed on appeal. Id. at 1098.
We affirmed the ruling of the BAP and held that
“§ 362(k) is best read as authorizing an award of attorney’s
fees [and costs] incurred in prosecuting an action for
damages under the statute.” Id. at 1101. Our holding
changed what Sternberg concluded were recoverable
attorneys’ fees and costs because we determined that is what
Congress intended. As we explained, “Congress
undoubtedly knew that unless debtors could recover the
attorney’s fees they incurred in prosecuting an action for
damages, many would lack the means or financial incentive
(or both) to pursue such actions.” Id. at 1100. Allowing for
attorneys’ fees and costs while prosecuting an action for
damages is likely the only way debtors in bankruptcy can
afford to pursue damages. As is the case here, damages
10 EASLEY V. COLLECTION SERVICE OF NEVADA
themselves may be too limited to justify an action if
attorneys’ fees and costs in pursuit of those damages are not
recoverable. We then addressed the specific circumstances
at issue in Schwartz-Tallard and held that “[w]hen a party is
entitled to an award of attorney’s fees in the court of first
instance, as [debtor] was here, she is ordinarily entitled to
recover fees incurred in successfully defending the judgment
on appeal.” Id. at 1101.
Here, the district court relied on this language from
Schwartz-Tallard and held that Appellants should not be
awarded attorneys’ fees and costs for their appeal since they
appealed to the district court, not CSN. We disagree.
Schwartz-Tallard reasoned that § 362(k)(1) operates as a
fee-shifting statute, albeit where only one party, the debtor,
can collect attorneys’ fees and costs. See Blixseth v.
Yellowstone Mountain Club, LLC, 854 F.3d 626, 629 n.3
(9th Cir. 2017) (“Schwartz-Tallard . . . read[] § 362(k) as a
fee-shifting provision rather than as a damages provision.”).
Unlike most fee-shifting statutes, the language does not
explicitly refer to a “prevailing party.” Baker Botts L.L.P. v.
ASARCO LLC, 135 S. Ct. 2158, 2164 (2015) (“Although [. . .
‘s]tatutory changes to [the American Rule] take various
forms,’ they . . . usually refer to a ‘prevailing party’ in the
context of an adversarial ‘action.’” (second and third
alterations in original) (citation omitted) (quoting Hardt v.
Reliance Standard Life Ins. Co., 560 U.S. 242, 253 (2010))).
Still, § 362(k)’s “phrasing signals an intent to permit, not
preclude, an award of fees incurred in pursuing a damages
recovery.” 803 F.3d at 1099. The statute clearly provides
for damages and attorneys’ fees and costs for an injured
debtor when a creditor violates the automatic stay.
Section 362(k)(1) also serves a deterrent function much
like many fee-shifting statutes. See City of Burlington v.
EASLEY V. COLLECTION SERVICE OF NEVADA 11
Dague, 505 U.S. 557, 574–75 (1992) (Blackmun, J.,
dissenting) (“Congress intended the fee-shifting statutes to
serve as an integral enforcement mechanism in a variety of
federal statutes.”). Imposition of damages and attorneys’
fees and costs is essential to deter creditors from violating an
automatic stay and protect debtors’ assets for proper
adjudication through the bankruptcy process. Recovery of
attorneys’ fees and costs is especially critical in the
bankruptcy context where debtors lack the means to
otherwise pursue their damages.
Additionally, fee-shifting statutes allow for recovery of
attorneys’ fees incurred in establishing a party’s claim for
fees. In re Nucorp Energy, Inc., 764 F.2d 655, 659–60 (9th
Cir. 1985) (“In statutory fee cases, federal courts, including
our own, have uniformly held that time spent in establishing
the entitlement to and amount of the fee is compensable.”).
This principle ensures that the fee award is not diluted by the
time and effort spent on the claim itself, see In re S.
California Sunbelt Developers, Inc., 608 F.3d 456, 463 (9th
Cir. 2010) (“[I]t would be inconsistent to dilute a fees award
by refusing to compensate attorneys for the time they
reasonably spent in establishing their rightful claim to the
fee.” (quoting Camacho v. Bridgeport Fin., Inc., 523 F.3d
973, 981 (9th Cir. 2008))), and includes appellate attorneys’
fees when a party successfully challenges the district court’s
award or when a party successfully defends a favorable
judgment on appeal. See Nucorp Energy, 764 F.2d at 660;
Se. Legal Def. Grp. v. Adams, 657 F.2d 1118, 1126 (9th Cir.
1981).
Most fee-shifting statute cases that award appellate
attorneys’ fees do so for successfully defending a judgment
on appeal. Indeed, almost every case cited by Appellants
that awarded appellate attorneys’ fees after a favorable
12 EASLEY V. COLLECTION SERVICE OF NEVADA
judgment involved a party defending that judgment on
appeal. See Legal Voice v. Stormans Inc., 757 F.3d 1015,
1016–17 (9th Cir. 2014); Planned Parenthood of Cent. & N.
Ariz. v. Arizona, 789 F.2d 1348, 1354 (9th Cir. 1986).
Significantly, Schwartz-Tallard also reached this outcome
after carefully considering the purpose of § 362(k). If a
creditor unsuccessfully appeals a bankruptcy court’s
judgment in favor of a debtor, it stands to reason that the
party who violated the stay should continue to pay for its
harmful behavior by compensating the debtor for its
appellate attorneys’ fees and costs.
Notably, courts also grant appellate attorneys’ fees in
fee-shifting statute cases when, as here, parties successfully
challenge initial judgments on appeal. See e.g., Christensen
v. Dir., Office of Workers Comp. Programs, 576 F.3d 976,
978 (9th Cir. 2009) (granting appellate attorney’s fees after
successful challenge of trial level attorney fees under
33 U.S.C. § 928(a)); N.A.A.C.P., W. Region v. City of
Richmond, 743 F.2d 1346, 1358–59 (9th Cir. 1984)
(awarding trial and appellate attorneys’ fees under 42 U.S.C.
§ 1988 where plaintiffs succeeded on appeal after losing at
trial); Zinna v. Congrove, 755 F.3d 1177, 1179 (10th Cir.
2014) (concluding plaintiff was entitled to appellate
attorneys’ fees after remanding district court’s improper
calculation of trial level attorneys’ fees). Indeed, we are not
aware of any authority suggesting that, although fees may be
awarded under a fee-shifting statute for defending a
judgment on appeal, they are not available for successfully
challenging a judgment as inadequate. As noted, the firmly
established principle is that “attorneys fees may be awarded
for time devoted in successfully defending appeals of or
challenges to the district court’s award of attorneys fees.”
Se. Legal Def. Grp., 657 F.2d at 1126 (emphasis added).
EASLEY V. COLLECTION SERVICE OF NEVADA 13
Although we are unaware of any previous case that has
analyzed § 362(k)’s application of this principle, the purpose
of § 362(k) strongly favors the outcome we now reach.
Section 362(k) provides relief for debtors in the form of
damages and attorneys’ fees and costs when a creditor
willfully violates an automatic stay. And, as previously
noted, the provision of attorneys’ fees and costs is critically
important for “the very class of plaintiffs authorized to sue—
individual debtors in bankruptcy—[who] by definition will
typically not have the resources to hire private counsel.”
Schwartz-Tallard, 803 F.3d at 1100. Section 362(k) thus
seeks to make debtors whole, as if the violation never
happened, to the degree possible. This reasonably includes
awarding attorney’s fees and costs on appeal to a successful
debtor, even when a debtor must bring the appeal.
CONCLUSION
Section 362(k) seeks to make debtors whole when a
creditor willfully violates an automatic stay. This requires
creditors to pay debtors reasonable damages and attorneys’
fees and costs incurred in remedying the violation. When an
appeal is necessary to secure such damages and attorneys’
fees and costs, appellate attorneys’ fees and costs should also
be granted to a successful debtor, regardless of which party
brings the appeal.
Accordingly, we REVERSE the order of the district
court and REMAND to the district court with instructions to
remand to the bankruptcy court to calculate appellate
attorneys’ fees and costs, as Appellants successfully
challenged the bankruptcy court’s award.