Jacqueline Sterling v. Southlake Nautilus Health & Racquett Club, Incorpo

In the

United States Court of Appeals

For the Seventh Circuit

____________________

No. 24-2021

IN RE: JACQUELINE M. STERLING,

Debtor-Appellant.

____________________

JACQUELINE M. STERLING,

Plaintiff-Appellant,

v.

SOUTHLAKE NAUTILUS HEALTH & RACQUET CLUB, INC.,

Defendant-Appellee.

____________________

Appeal from the United States District Court for the

Northern District of Indiana, Hammond Division.

No. 2:23-cv-349 — Phillip P. Simon, Judge.

____________________

ARGUED JANUARY 22, 2025 — DECIDED JUNE 20, 2025

____________________

Before ROVNER, BRENNAN, and ST. EVE, Circuit Judges.

ST. EVE, Circuit Judge. Five hundred dollars in unpaid gym

membership fees to Southlake Nautilus Health and Racquet

Club—and a series of unfortunate intervening events—

landed Jacqueline Sterling in jail for a weekend. After Sterling

2 No. 24-2021

failed to pay the membership fees, Southlake obtained a de-

fault judgment against her in a collection action in the Supe-

rior Court of Lake County, Indiana. Later, a bankruptcy court

in the Northern District of Indiana discharged Sterling’s debt

to Southlake, but Southlake continued its efforts to enforce the

judgment, in violation of the discharge order. Sterling, for her

part, failed to notify the Lake County court of her bankruptcy,

despite a local bankruptcy rule that requires such notice, or to

appear at a hearing in the collection action. Unaware of the

discharge order, the Lake County court issued a bench war-

rant for Sterling’s arrest based on her failure to appear at the

hearing. A year later, a police officer who stopped to help her

fix a flat tire discovered the bench warrant.

In this civil contempt proceeding, the bankruptcy court

found that Southlake’s violation of the discharge order had

contributed to Sterling’s arrest and weekend in jail—and re-

sulting lost wages and emotional distress. Likewise, the court

found that Sterling had contributed by her fault to her injury.

Based on these findings, and applying principles of compara-

tive fault, the bankruptcy court allocated half the liability for

Sterling’s lost wages and emotional distress—as well as for

the reasonable attorney’s fees Sterling incurred in prosecuting

the contempt proceeding—to each party.

But compensatory damages and attorney’s fees are analyt-

ically distinct. A compensatory damages award in a civil con-

tempt proceeding resembles a tort judgment for compensa-

tory damages. Based on this analogy, we have held that a

court typically must award compensatory damages as a civil

contempt sanction if the complainant proves that the defend-

ant’s actions in violation of a court order caused her injury—

that is, as in a tort action, a court has limited discretion to deny

No. 24-2021 3

relief. Likewise, Sterling concedes that the doctrine of com-

parative fault reduces a defendant’s liability for the injury,

and so the compensatory damages award, if the defendant

proves that the complainant’s blameworthy conduct contrib-

uted to her injury—that is, tort principles also limit a court’s

discretion to grant relief. These limits on a court’s discretion

distinguish an award of compensatory damages in a civil con-

tempt proceeding from traditional equitable relief.

By contrast, a court has broad discretion to shift attorney’s

fees as a contempt sanction. When a court shifts fees pursuant

to civil procedures, the court can shift only those fees incurred

because of the contemptuous conduct. Otherwise, the court

has broad discretion to grant or deny relief—including, we

conclude, the discretion to hold the defendant fully liable for

the attorney’s fees the complainant incurred, regardless of

whether she contributed to her injury. Accordingly, the bank-

ruptcy court had the discretion to hold Southlake fully liable

for the reasonable attorney’s fees Sterling incurred.

The bankruptcy court appeared not to recognize that dif-

ferent principles apply to compensatory damages and attor-

ney’s fee awards, so its finding that Sterling contributed by

her fault to her arrest and weekend in jail did not require it to

apportion liability for the attorney’s fees. We thus vacate the

judgment of the district court in part and remand to the bank-

ruptcy court for it to decide, in light of its broad fee-shifting

discretion, whether to reduce Southlake’s liability for the at-

torney’s fees Sterling incurred based on her failure to notify

the Lake County court of her bankruptcy.

Neither the bankruptcy court’s opinion nor the judgment

order mentioned costs. We interpret this silence as allowing

4 No. 24-2021

costs, and we leave it to the bankruptcy court on remand to

set the deadline for Sterling to file a bill of costs.

I. Background

In March 2011, a flat tire stopped Sterling as she was driv-

ing. A police officer pulled over to assist her, then arrested her

and took her to jail after he discovered a bench warrant for

her arrest. She spent a Friday night to Sunday in jail. As a re-

sult, Sterling missed four shifts at her job as a poker dealer at

Horseshoe Casino in Hammond, Indiana.

Her arrest and weekend in jail related to a proceeding ini-

tiated by Southlake in the Superior Court of Lake County, In-

diana, to collect on $518 in unpaid gym membership fees. In

February 2002, Southlake obtained a default judgment against

Sterling for $957 (the unpaid gym membership fees plus in-

terest), and in December 2009, Southlake filed a motion for

“proceedings supplemental” to enforce the judgment. The

Lake County court held a hearing on the motion in April 2010,

but Sterling failed to appear, so the court issued a bench war-

rant authorizing her arrest—the bench warrant the police of-

ficer discovered when he stopped to help her fix her tire.

The wrinkle central to this case is that a bankruptcy court

discharged Sterling’s debt to Southlake in January 2010, be-

fore the Lake County court issued the bench warrant. Sterling

filed for bankruptcy in the United States Bankruptcy Court

for the Northern District of Indiana in September 2009. She

listed Southlake as a creditor, so the Bankruptcy Noticing

Center sent notice to Southlake of the bankruptcy and the Jan-

uary 2010 discharge order. But Southlake did not forward

these notices to its outside attorneys, who continued to pur-

sue Sterling’s debt to Southlake. And Sterling failed to give

No. 24-2021 5

notice of the bankruptcy to the Lake County court, in contra-

vention of a local bankruptcy rule. See N.D. Ind. L.R. B-4002-

1(a)(2) (requiring a debtor to “give written notice of the bank-

ruptcy to any court or tribunal where an action or other pro-

ceeding is being maintained against the debtor”).

After her release from jail, Sterling filed a complaint in the

bankruptcy court, asking the court to hold Southlake in civil

contempt for violating the discharge order. See 11 U.S.C.

§ 524. After a bench trial, the bankruptcy court ruled in favor

of Southlake, and the district court affirmed. In an appeal

from that decision, however, we concluded that Southlake

had acted in civil contempt when its attorneys pursued Ster-

ling’s debt in violation of the discharge order, and we re-

manded the case to the bankruptcy court for further proceed-

ings. In re Sterling, 933 F.3d 828, 832–36 (7th Cir. 2019).

On remand, the bankruptcy court found $18,000 in emo-

tional distress ($6,000 for each day in jail) and $1,449 in lost

wages from Sterling’s arrest and incarceration. The court dis-

missed Sterling’s evidence of loss of reputation—she has had

to disclose her arrest to an employer and to state gaming com-

missions through the gaming licensure process—as insuffi-

cient, given that she has neither lost a job nor her gaming li-

cense because of these disclosures. In addition, the court de-

nied her request for “false arrest” damages, reasoning that the

bench warrant provided probable cause for her arrest.

The bankruptcy court further found that both Southlake’s

and Sterling’s blameworthy conduct had contributed to cause

Sterling’s arrest and weekend in jail: Southlake’s in prosecut-

ing the collection action in violation of the discharge order,

and Sterling’s in failing to comply with Northern District of

Indiana Local Bankruptcy Rule B-4002-1(a)(2). The court

6 No. 24-2021

reasoned that if Sterling had notified the Lake County court

of her bankruptcy, as required by the rule, “this entire unfor-

tunate occurrence may have been avoided,” and “there is a

chance that much of the litigation could have been avoided.”

On this basis, the court allocated liability for the damage

equally between Southlake and Sterling. In the end, the court

awarded Sterling $9,724.50 in compensatory damages, repre-

senting Southlake’s share of liability for the emotional distress

and lost wages from her arrest and confinement.

Sterling also sought recovery for attorney’s fees. The bank-

ruptcy court found $198,710 in reasonable attorney’s fees. But

the court apportioned liability for fees according to the same

formula it used to apportion liability for damages, so the court

awarded Sterling only $99,355 in attorney’s fees.

Neither the bankruptcy court’s opinion nor the document

setting forth the judgment mentioned costs.

Sterling appealed this sanctions decision, first to the dis-

trict court, which affirmed, and then to this court.

II. Discussion

This appeal concerns the bankruptcy court’s imposition of

civil contempt sanctions. See Ojeda v. Goldberg, 599 F.3d 712,

716 (7th Cir. 2010). We review a sanctions decision for an

abuse of discretion. See Evans v. Griffin, 932 F.3d 1043, 1045

(7th Cir. 2019). Applying this standard, we reverse only if the

court premised its decision on an incorrect legal principle or

a clearly erroneous factual finding, or reached an unreasona-

ble result. See In re KMart Corp., 381 F.3d 709, 713 (7th Cir.

2004); In re Rimsat, Ltd., 212 F.3d 1039, 1046 (7th Cir. 2000).

Under the Bankruptcy Code, a discharge order “operates

as an injunction against the commencement or continuation

No. 24-2021 7

of an action, the employment of process, or an act, to collect,

recover or offset” a discharged debt. 11 U.S.C. § 524(a)(2). An-

other provision permits a court to “issue any order, process,

or judgment that is necessary or appropriate to carry out the

provisions of [the Code].” 11 U.S.C. § 105(a). These statutory

provisions “bring with them the ‘old soil’ that has long gov-

erned how courts enforce injunctions.” Taggart v. Lorenzen,

587 U.S. 554, 560 (2019). “That ‘old soil’ includes the ‘potent

weapon’ of civil contempt,” id. at 560 (quoting Int’l Longshore-

men’s Ass’n, Loc. 1291 v. Phila. Marine Trade Ass'n, 389 U.S. 64,

76 (1967)), and the traditional principles of equity practice that

govern civil contempt, id. at 561.

Based on these traditional principles of equity practice,

“[a] court may hold a creditor in civil contempt for violating

a discharge order where there is not a ‘fair ground of doubt’

as to whether the creditor’s conduct might be lawful under

the discharge order.” Id. at 565. 1 If a court finds this standard

met, the court must then decide what civil contempt sanc-

tions, if any, to impose, which is the decision at issue in this

appeal. Here, we review the following components of the

bankruptcy court’s sanctions decision: compensatory dam-

ages, then attorney’s fees, then costs.

1 In our prior opinion in this case, we applied a different standard: A

standard akin to strict liability, which is the standard we have held applies

to remedy violations of automatic stays. Sterling, 933 F.3d at 832 & n.3 (re-

lying on In re Radcliffe, 563 F.3d 627, 631 (7th Cir. 2009)). In Taggart, how-

ever, the Supreme Court distinguished discharge orders from automatic

stays based on differences in statutory language and purpose. 587 U.S. at

564–65. In the discharge context, courts should rely on principles of equity

practice that govern civil contempt. We do so here.

8 No. 24-2021

A. Compensatory Damages

“[C]ourts have long imposed civil contempt sanctions to

‘coerce the defendant into compliance’ with an injunction or

‘compensate the complainant for losses’ stemming from the

defendant’s noncompliance with an injunction.” Id. at 560

(quoting United States v. United Mine Workers of Am., 330 U.S.

258, 303–04 (1947)). Compensatory sanctions may include a

fine payable to the complainant. See id.; Connolly v. J.T. Ven-

tures, 851 F.2d 930, 932–34 (7th Cir. 1988).

Such a sanction resembles a tort judgment for compensa-

tory damages caused by wrongful conduct, and courts includ-

ing our own have drawn from tort law to define the relevant

principles. “Much like [in] a tort action, the complainant must

prove that the defendant’s actions in violation of the court or-

der caused her injury.” Thompson v. Cleland, 782 F.2d 719, 722

(7th Cir. 1986). If she makes this showing, “compensatory

damages are typically required,” meaning the court typically

must impose a compensatory contempt fine. NLRB v. Neises

Constr. Corp., 62 F.4th 1040, 1057 (7th Cir. 2023); see also In re

Fed. Facilities Realty Tr., 227 F.2d 657, 658 (7th Cir. 1955) (“The

rule to be spelled out from the court decisions is that a party

compelled to resort to a civil contempt proceeding to preserve

and enforce an adjudicated right is entitled to a decree by way

of a fine for injuries actually sustained by him because of the

contemptuous act….”). A court’s lack of discretion in this con-

text distinguishes a compensatory contempt fine from tradi-

tional equitable relief. See Dan B. Dobbs & Caprice L. Roberts,

Law of Remedies § 1.2, at 9 (3d ed. 2018) (distinguishing legal

and equitable relief based on “the tradition that equitable re-

lief is discretionary,” whereas legal relief follows “as a matter

No. 24-2021 9

of course when the right [is] established”). The complainant,

of course, must still prove her damages.

In this case, the bankruptcy court implicitly applied the

doctrine of pure comparative fault when it allocated liability

for the harm from Sterling’s arrest and weekend in jail. In a

tort action, when the plaintiff and the defendant both contrib-

uted by their fault to cause the injury, the doctrine of pure

comparative fault allocates liability for the injury among the

parties according to the comparative degree of their fault. See

Dobbs & Roberts, supra, § 8.5, at 707–08; see, e.g., City of Chicago

v. M/V Morgan, 375 F.3d 563, 578–79 (7th Cir. 2004) (holding

that the district court properly reduced the defendant’s liabil-

ity for damages by half based on the plaintiff’s failure to re-

place a fender protecting electric cables in an admiralty case

involving a tugboat that struck a bridge, severing the cables,

where pure comparative fault applies in admiralty actions).

Likewise, the bankruptcy court found Sterling and Southlake

equally responsible for Sterling’s injury, so the court allocated

half the liability for the injury to Southlake.

Sterling does not dispute that pure comparative fault ap-

plies in a civil contempt proceeding when the complainant

seeks compensation for harm from the defendant’s violation

of a court order. Rather, she argues that the bankruptcy court

misapplied this doctrine by assigning her, not Southlake, the

burden of proving that her failure to notify the Lake County

court of her bankruptcy contributed to her injury. Under the

doctrine of comparative fault, while the plaintiff has the bur-

den of proving her injury, the defendant usually has the bur-

den of proving that the plaintiff contributed by her fault to her

injury. See Dobbs & Roberts, supra, § 3.9, at 274.

10 No. 24-2021

We reject the premise of Sterling’s argument. Based on the

evidence presented, the bankruptcy court found that “if Ster-

ling had complied with the Local Rule B-4002-1(a), the state

court judge likely would have reviewed the court’s file prior

to issuing any bench warrant, acknowledged any bankruptcy

notice, and, as a result, would not have issued a bench war-

rant in the collection case against Sterling.” That is, the bank-

ruptcy court assigned the burden of proof to Southlake—and

found that Southlake had carried its burden.

We next turn to the measure of damages. By analogy to

defamation per se, Sterling argues that she was entitled to pre-

sumed damages for loss of reputation because her arrest rec-

ord imputes criminal conduct. She also defends her analogy

to false arrest, which the bankruptcy court rejected.

Under the common law of defamation, categories of com-

munications deemed virtually certain to cause serious injury

to reputation—including those that impute certain criminal

conduct—qualify as defamatory per se. Restatement (Second)

of Torts §§ 569–71 (Am. L. Inst. 1965); Carey v. Piphus, 435 U.S.

247, 262 (1978). In an action for the publication of a communi-

cation that falls within one of these per se categories, the plain-

tiff can recover “purportedly compensatory damages without

evidence of actual loss,” Gertz v. Robert Welch, Inc., 418 U.S.

323, 349 (1974), as a substitute for ordinary compensatory

damages, see Memphis Cmty. Sch. Dist. v. Stachura, 477 U.S. 299,

311 (1986). See also Dobbs & Roberts, supra, § 7.1(2), at 640–41

(describing the doctrine’s compensatory purpose).

Perhaps the doctrine of presumed damages should apply

in a contempt proceeding when the complainant proves that

the defendant’s contempt caused a communication that im-

putes criminal conduct of the type that can support an action

No. 24-2021 11

for defamation per se. Sterling, however, has failed to show

that Southlake’s conduct caused such a communication. She

offers only the conclusory statement that her arrest record im-

putes criminal conduct. But she was arrested for failure to ap-

pear in the Lake County collection action. Failure to appear in

a civil proceeding is not a criminal offense defined by Indi-

ana’s legislature. See Ind. Code § 35-44.1-2-9 (providing that a

person on release after a charge of a crime who intentionally

fails to appear commits a misdemeanor or felony). Even if this

conduct is criminal under some other definition, Sterling has

not shown that its imputation can support an action for defa-

mation per se. To do so, the criminal conduct imputed must be

“of a character such as to harm the reputation of the person

charged with it in the eyes of a substantial minority of respect-

able persons,” and violations of many traffic and municipal

ordinances do not meet this standard. Restatement (Second)

of Torts § 569 cmt. d. We are doubtful that failure to appear

does either. Thus, Sterling’s analogy to defamation per se falls

apart, and the bankruptcy court properly required her to pro-

vide some evidence of actual loss of reputation.

Sterling’s analogy to false arrest fares better. Like a victim

of false arrest or the related tort of false imprisonment, see Re-

statement (Second) of Torts §§ 35, 41, Sterling experienced a

restraint of her freedom through her arrest and weekend in

jail. In an action for false arrest or false imprisonment, a plain-

tiff can recover compensation for tangible injuries, such as lost

wages, and intangible injuries, such as emotional distress, loss

of time, humiliation, and the like. See Dan B. Dobbs, Paul T.

Hayden, & Ellen M. Bublick, Dobbs’ Law of Torts § 47 (2d ed.

April 2025 update). By analogy, Sterling can recover compen-

sation for the same injuries from Southlake.

12 No. 24-2021

But the bankruptcy court’s rejection of Sterling’s analogy

to false arrest had no discernable effect on its award. The court

awarded Sterling compensatory damages for lost wages and

emotional distress, and she has not identified any other inju-

ries from her arrest and weekend in jail (setting aside loss of

reputation). We thus see no reason for the bankruptcy court

to revisit its compensatory damages award.

B. Attorney’s Fees

Independent of any compensatory damages award, a

court may order the defendant to reimburse the complainant

for the reasonable attorney’s fees she “incurred in bringing

the violation to the court’s attention.” CFTC v. Premex, Inc.,

655 F.2d 779, 785 (7th Cir. 1981); see also Cox v. Zale Delaware,

Inc., 239 F.3d 910, 916 (7th Cir. 2001) (recognizing that the vic-

tim of a discharge order violation can recover reasonable at-

torney’s fees in a civil contempt proceeding “to enable so

small a claim to be litigated”). This exception to the American

rule against fee shifting derives from “the discretion of the

court whose dignity has been offended and whose process

has been obstructed,” Toledo Scale Co. v. Computing Scale Co.,

261 U.S. 399, 428 (1923), to determine a contempt sanction.

Chambers v. NASCO, Inc., 501 U.S. 32, 45 (1991). But the sanc-

tion must be compensatory in nature when imposed pursuant

to civil procedures, as here. Int’l Union, United Mine Workers of

Am. v. Bagwell, 512 U.S. 821, 826–30 (1994).

For the sanction to count as compensatory, the court can

shift only those attorney’s fees incurred because of the con-

temptuous act; it cannot assess an additional amount as pun-

ishment. See Goodyear Tire & Rubber Co. v. Haeger, 581 U.S. 101,

108 (2017). Otherwise, the court has broad discretion to grant

or deny relief. See Neises, 62 F.4th at 1057; Tranzact Techs., Inc.

No. 24-2021 13

v. 1Source Worldsite, 406 F.3d 851 (7th Cir. 2005); Premex, 655

F.2d at 785; Fed. Facilities, 227 F.2d at 658.

This broad discretion distinguishes a fee shifting decision

from a decision to award compensatory damages in a civil

contempt proceeding. See Fed. Facilities, 227 F.2d at 658; see also

Donovan v. Burlington N., Inc., 781 F.2d 680, 682–83 (9th Cir.

1986). As explained above, a compensatory damages award in

a civil contempt proceeding resembles a tort judgment for

compensatory damages, and tort principles may apply. In this

case, Sterling concedes that the doctrine of pure comparative

fault applies in a contempt proceeding, like in a tort action,

when the complainant seeks compensation for an injury

caused partly by her own blameworthy conduct. But even if

the bankruptcy court was required to apportion liability for

Sterling’s lost wages and emotional distress according to the

comparative degree of Southlake’s and Sterling’s fault for her

injury, the same is not true, we conclude, for assessing the at-

torney’s fees Sterling incurred in prosecuting the contempt

proceeding. Instead, the court has broad discretion.

The bankruptcy court, however, appeared not to recog-

nize its broad discretion and instead felt bound by the same

comparative fault principles it applied to the award of com-

pensatory damages. Accordingly, without any apparent inde-

pendent assessment, the bankruptcy court applied the doc-

trine of pure comparative fault to reduce its award of attor-

ney’s fees. Because this decision was apparently based on the

erroneous view that the same principles apply to compensa-

tory damages and attorney’s fee awards, the decision was an

abuse of discretion. We thus vacate the judgment of the dis-

trict court with respect to attorney’s fees and remand for the

bankruptcy court to determine, in light of its broad fee-

14 No. 24-2021

shifting discretion, whether to reduce Southlake’s liability for

the attorney’s fees—and if so, by how much.

C. Costs

Finally, Rule 54(d)(1) of the Federal Rules of Civil Proce-

dure provides that “[u]nless a federal statute, these rules, or a

court order provides otherwise, costs—other than attorney’s

fees—should be allowed to the prevailing party.” This rule

codified the practice of American courts in equity proceedings

prior to the federal rules: As a matter of discretion, courts al-

lowed limited reimbursement for expenses such as court fees

and witness fees (but not attorney’s fees, in a departure from

the English practice, hence the “American rule” mentioned

above). See 10 Charles Alan Wright & Arthur R. Miller, Federal

Practice and Procedure §§ 2665–66 (4th ed. May 2025 update);

28 U.S.C. § 1920 (specifying taxable costs). A court has discre-

tion to disallow costs. Given the presumption in favor of al-

lowing costs, however, “the penalty of denial or apportion-

ment of costs under Rule 54(d) should [generally] be imposed

only for acts or omissions on the part of the prevailing party

in the actual course of the litigation….” Chi. Sugar Co. v. Am.

Sugar Refin. Co., 176 F.2d 1, 11 (7th Cir. 1949).

Neither the bankruptcy court’s opinion nor the judgment

order mentioned costs. Sterling interprets this silence as a de-

cision to disallow costs, and she challenges this aspect of the

bankruptcy court’s sanctions decision.

If the bankruptcy court had disallowed costs, this might

run afoul of Chicago Sugar. Sterling, however, misinterprets

the opinion and judgment order’s silence about costs. We

have held that “a judgment silent about costs is one ‘allowing

No. 24-2021 15

costs.’” Congregation of the Passion, Holy Cross Province v.

Touche, Ross & Co., 854 F.2d 219, 222 (7th Cir. 1988).

Given Sterling’s misinterpretation, she has yet to file a bill

of costs. This context raises a final question: Has the time to

file a bill of costs expired? We have held that “where no local

rule sets a time limit for filing a bill of costs, [Federal Rule of

Civil Procedure] 54(d)—which does not include any specific

time limit—allows a prevailing party to wait until after appeal

to file its bill.” Id. at 221. In this bankruptcy case, Federal Rule

of Bankruptcy Procedure 7054(b)(1) applies. Like Rule 54(d),

Rule 7054(b)(1) does not include any specific time limit for fil-

ing a bill of costs. Nor do the local bankruptcy rules in the

Northern District of Indiana. We therefore conclude that the

time to file of a bill of costs has not expired, and we leave it to

the bankruptcy court to set a deadline for Sterling to file a bill

of costs on remand, then for it to assess costs.

* * *

For the foregoing reasons, we AFFIRM in part and VACATE

in part the judgment of the district court and REMAND to the

bankruptcy court for further proceedings.

16 No. 24-2021

ROVNER, Circuit Judge, concurring. I join the court’s opin-

ion in full. I write separately on the matter of attorney’s fees

to explain why, in my view, there should be no presumption

that the award of fees to Sterling should be reduced to reflect

her degree of fault for the injuries she suffered as a result of

Southlake’s violation of the discharge injunction.

The court has directed the bankruptcy court to engage in

de novo reconsideration of the appropriate fee award, inde-

pendent of the fault allocation as to Sterling’s injuries and the

corresponding reduction of her compensation for those inju-

ries. That will require the bankruptcy court to consider,

among other factors, the distinct purposes of fee-shifting and

compensating Sterling for her injuries, and to consider

whether and why it might be appropriate to deny Sterling full

recompense for the attorney time necessary to obtain the

judgment finding Southlake liable for civil contempt and

awarding her appropriate compensation.

Certainly there may be cases in which a party’s share of

fault for the contempt injury will argue in favor of a reduced

fee award. I can imagine a case, for example, in which a party

has been found partially or primarily responsible for his con-

tempt injury as the result of his own grossly negligent or reck-

less behavior. In such a case, it might make good sense to re-

duce not only the award of compensatory damages but also

the fee award, as a way of acknowledging the equities of the

situation.

But this is a case in which both parties were equally guilty

of ordinary negligence in the failure to give requisite notice

(in Sterling’s case, notice to the state court of the bankruptcy

filing, and in Southlake’s case, notice to its attorneys of the

bankruptcy discharge). Thus the bankruptcy court’s 50-50

No. 24-2021 17

allocation of fault between the parties for Sterling’s underly-

ing injuries.

This is not a case, I should add, in which either Sterling or

her counsel were guilty of some fault or omission in pursuing

the contempt claim that raised ethical concerns, delayed or

hampered the resolution of the claim, or multiplied the pro-

ceedings. It is that sort of misconduct that occurred in the

cases that Southlake has cited to us in its appellate brief.

Southlake Br. 24; see In re Rodriguez, 2020 WL 1672773, at *4

(9th Cir. B.A.P. April 2, 2020) (debtor’s failure, before filing

contempt motion, to reach out to creditor who levied debtor’s

bank accounts for $236.41 in violation of automatic stay, to see

if matter could be resolved without litigation); McMullen v.

Schultz, 443 B.R. 236, 241, 243 (D. Mass. 2011) (attorney’s mul-

tiple failures to comply with disclosure obligations imposed

by Fed. R. Bankr. P. 2016(b)); In re Haimil Realty Corp., 579 B.R.

19, 31–32 (Bankr. S.D.N.Y. 2017) (counsel’s failure to apprise

client of realistic outcomes as between litigating with the

creditor or accepting a settlement offer); In re Lamar, 2013 WL

5726956, at *1 (Bankr. S.D. Ga. Oct. 21, 2013) (special counsel’s

delay in submitting an application to court to approve his em-

ployment).

Nor is this a case where one can parse a prevailing liti-

gant’s multiple claims, distinguish meritorious from un-

founded or otherwise unsuccessful claims, and limit compen-

sation to the former. There was one wrong done to Sterling

and she had one (meritorious) claim for that transgression.

And although the bankruptcy court ultimately found Sterling

50% at fault for her injuries, neither she nor her counsel could

have known in advance what degree of fault the court would

attribute to her, nor could they have feasibly reduced the

18 No. 24-2021

attorney time spent on the case in anticipation of that finding.

Ultimately, the district court found that only a limited num-

ber of the attorney hours claimed should be excluded from

the lodestar calculation because those hours related to a dis-

missed state-court proceeding, and there is no dispute here as

to that excision. The remaining hours claimed were deemed

appropriately claimed and were therefore included in the

lodestar calculation; the resulting total is presumed to be an

accurate calculation of the fees to which Sterling is entitled to

recover. See Murphy v. Smith, 583 U.S. 220, 227 (2018) (the lode-

star figure is presumed to be a reasonable calculation of the

fees that the prevailing party is entitled to recover) (fees

awarded pursuant to 42 U.S.C. § 1988); Emerson v. Dart, 900

F.3d 469, 473 (7th Cir. 2018) (same) (fees imposed as sanction

under court’s inherent disciplinary authority); Teledyne Techs.

Inc. v. Shekar, 739 F. App’x 347, 35–52 (7th Cir. 2018) (non-

precedential decision) (same) (contempt-related fees).

As the bankruptcy court itself recognized, this was a rela-

tively complex case. Although, in the abstract, the claim of

civil contempt was arguably straightforward (apart, perhaps,

from the allocation of fault as between Sterling and Southlake

for her injuries), in practice it has taken over a decade of liti-

gation, commencing with a two-day bench trial, followed by

one round of appeals (first to the district court and then to this

court) in order for Sterling to prevail on the finding of con-

tempt, and now a second round of appeals up the ladder to

this court in order for her to obtain reconsideration as to the

award of attorney’s fees. In no sense was this extended litiga-

tion the result of Sterling’s comparative fault with respect to

her underlying injuries—Sterling’s omission to send notice to

the state court of her pending bankruptcy, and the injuries she

suffered when she was arrested, were complete well before

No. 24-2021 19

the litigation over Southlake’s contempt began; there was

nothing she could do to rectify her omission or mitigate her

injuries after the fact.

Apart from the limited context of Sterling’s fault, an addi-

tional factor that the bankruptcy court must have in mind

when it reconsiders the fee award is the unique function such

an award serves in enabling a plaintiff to vindicate her

rights—here, Sterling’s crucial right as an individual whose

debt has been discharged in bankruptcy to be free from fur-

ther efforts to collect on the debt. See In re Castle Home Builders,

Inc., 520 B.R. 98, 106 (Bankr. N.D. Ill. 2014) (noting that the

bankruptcy discharge injunction is a critical element of the

fresh start afforded to the debtor by the Bankruptcy Code, as

is a creditor’s respect for such an injunction). Such rights

mean little if they can be ignored with impunity. But to en-

force one’s rights in court requires an attorney, and attorneys

are expensive. Sterling suffered real injuries as a result of

Southlake’s violation of the discharge order: she was arrested

and spent three days in jail, she missed her scheduled shifts

at work and lost the wages she would have earned during

those shifts, and going forward, she may have to disclose her

arrest to prospective employers for the rest of her life. The

damages awarded to Sterling to compensate her for those in-

juries were by no measure extravagant (even before being

halved to reflect her comparative fault). But the modest vic-

tory she achieved demanded a significant expenditure of at-

torney time nonetheless. Only if the fee award reflects the re-

ality of what it took to achieve the judgment in Sterling’s favor

can it be said that her rights as a debtor have been fully vin-

dicated. Cf. Civil Rights Attorney’s Fees Awards Act of 1976,

P.L. 94-559, S. Report No. 94-1011, at 2 (1976) (“If private citi-

zens are to be able to assert their civil rights, and if those who

20 No. 24-2021

violate the Nation’s fundamental laws are not to proceed with

impunity, then citizens must have the opportunity to recover

what it costs them to vindicate these rights in court.”); see also

In re Fed. Facilities Realty Tr., 227 F.2d 657, 658 (7th Cir. 1955)

(compensation for a party compelled to resort to civil con-

tempt to preserve and enforce an adjudicated right may in-

clude the party’s attorney’s fees); N.L.R.B. v. Neises Constr.

Corp., 62 F.4th 1040, 1057–58 (7th Cir. 2023) (awarding fees as

a component of sanctions for a party’s civil contempt).

Like my colleagues, I recognize the bankruptcy court’s

broad discretion in arriving at a reasonable award of attor-

ney’s fees. The court’s task is arguably less straightforward

than it otherwise might have been given that Sterling contrib-

uted to her own injuries. But her comparative fault is but one

factor in the fee calculus—the inquiry is broader than the par-

ties’ relative fault and is properly informed by other, inde-

pendent considerations. I am confident that the bankruptcy

court will have all such factors in mind when it reconsiders

the fees to which Sterling, as the prevailing party, is entitled.