Snowden v. Check Into Cash of Washington Inc. (In Re Snowden)

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

IN THE MATTER OF: RUPANJALI No. 13-35291

SNOWDEN,

Debtor, D.C. No.

2:12-cv-01095-

RSL

RUPANJALI SNOWDEN, Debtor,

Appellant,

v.

CHECK INTO CASH OF WASHINGTON

INC.,

Appellee.

IN THE MATTER OF: RUPANJALI No. 13-35322

SNOWDEN,

Debtor, D.C. No.

2:12-cv-01095-

RSL

CHECK INTO CASH OF WASHINGTON

INC.,

Appellant, OPINION

v.

RUPANJALI SNOWDEN, Debtor,

Appellee.

2 IN RE: SNOWDEN

Appeal from the United States District Court

for the Western District of Washington

Robert S. Lasnik, District Judge, Presiding

Argued and Submitted

June 5, 2014—Seattle, Washington

Filed September 12, 2014

Before: Alfred T. Goodwin, M. Margaret McKeown,

and Paul J. Watford, Circuit Judges.

Opinion by Judge McKeown;

Concurrence by Judge Watford

SUMMARY*

Bankruptcy

The panel affirmed in part and reversed in part the district

court’s affirmance of the bankruptcy court’s judgment

awarding a chapter 7 debtor damages and attorneys’ fees for

a creditor’s willful violation of the automatic stay under

11 U.S.C. § 362(k)(1).

The panel affirmed the district court’s affirmance of the

decisions of the bankruptcy court on emotional distress and

punitive damages. The panel held that the emotional distress

damages award was proper because the debtor suffered

*

This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

IN RE: SNOWDEN 3

significant emotional harm, clearly established the significant

harm, and demonstrated a causal connection between that

significant harm and the violation of the automatic stay. The

panel concluded that the bankruptcy court applied the correct

legal standard for awarding punitive damages by considering

whether the creditor recklessly or callously disregarded the

law or rights of others. In addition, the award of punitive

damages was not an abuse of discretion.

The panel reversed the district court’s order affirming the

bankruptcy court’s award of attorneys’ fees. The panel stated

that under Sternberg v. Johnston, 595 F.3d 937 (9th Cir.

2010), attorneys’ fees under § 362(k) are limited to fees

relating to enforcing the automatic stay and remedying the

stay violation, not the fees incurred by the debtor in

prosecuting the bankruptcy adversary proceeding seeking

damages for the stay violation. The panel concluded that

here, the stay violation did not end when the creditor sent an

e-mail conditionally offering partial reimbursement;

accordingly, the debtor was entitled to fees incurred in

remedying the stay violation after receiving the e-mail, and

the stay violation ended when the bankruptcy court found a

violation of the automatic stay. The panel remanded for a

recalculation of attorneys’ fees.

The panel affirmed the district court’s affirmance of the

bankruptcy court’s denial of sanctions.

Concurring, Judge Watford agreed that the attorneys’ fees

award must be vacated. He wrote that Sternberg construed

§ 362(k)(1)’s authorization of fee awards more narrowly than

Congress likely intended. Judge Watford agreed with the

Fifth Circuit that § 362(k)(1) allows a plaintiff to recover

attorneys’ fees incurring both in remedying a violation of the

4 IN RE: SNOWDEN

automatic stay and in bringing an action to recover the “actual

damages” caused by that violation.

COUNSEL

Christina L. Henry (argued) and Jacob DeGraaff, Henry,

DeGraaff, & McCormick, P.S., Seattle, Washington, for

Appellant.

Amit D. Ranade (argued) and Alexander M. Wu, Hillis Clark

Martin & Peterson P.S., Seattle, Washington, for Appellee.

OPINION

McKEOWN, Circuit Judge:

This is the story of how a bankruptcy filing listing a $575

payday loan snowballed into a violation of the automatic stay,

and protracted litigation, which left a stressed borrower with

attorneys’ fees and emotional distress. When the automatic

stay that accompanies a bankruptcy filing is violated, the

bankruptcy petitioner is entitled to recover damages and

attorneys’ fees. 11 U.S.C. § 362(k)(1). The issue we

consider is whether a bankruptcy petitioner can collect

attorneys’ fees incurred litigating the violation of the

automatic stay after the violator sends an e-mail conditionally

offering partial reimbursement. We conclude that such fees

are recoverable under § 362(k)(1). The bankruptcy laws do

not permit a stay violator to undermine the remedies available

under § 362(k) by forcing a bankruptcy petitioner to accept a

conditional offer in lieu of pursuing fair compensation and

attorneys’ fees.

IN RE: SNOWDEN 5

BACKGROUND AND PROCEDURAL HISTORY

Rupanjali Snowden took out a $575 payday loan1 from

Check Into Cash of Washington (“CIC”) to make ends meet

for herself and her daughter. Before payment was due,

Snowden put a stop payment on the check. On the same day,

Snowden advised CIC’s Sequim, Washington office that she

was “thinking about filing for bankruptcy,” and provided her

bankruptcy attorney’s phone number. She was advised that

she should let CIC know if she decided to file. When

Snowden told CIC that she could not repay the loan, CIC said

that she must call CIC every day, otherwise the company

would call her “references.” Snowden complied, calling CIC

every day until the day she filed for bankruptcy because she

“didn’t want to be embarrassed.”

Snowden was employed as a hospital nurse. CIC

employees called her at work numerous times asking why she

had not yet repaid the loan. Snowden referred them to her

attorney and asked that they stop calling her at work, but the

calls persisted. These calls affected her work performance

and were “very frustrating” because every time Snowden

heard her name over the loudspeaker she would, “run to the

phone thinking . . . [her daughter had] an emergency.” CIC

advised Snowden that it would not cash the check securing

the loan.

1

“‘Payday’ loans are short-term consumer loans (usually [fewer] than

31 days) secured by a consumer’s post-dated check. The payday industry

targets low to medium income consumers as well as individuals who have

no savings, and live paycheck to paycheck.” Bridge Fund Capital Corp.

v. Fastbucks Franchise Corp., 622 F.3d 996, 999 n.1 (9th Cir. 2010).

6 IN RE: SNOWDEN

In an effort to get her financial house in order, Snowden

filed her Chapter 7 bankruptcy petition without directly

advising CIC. She listed CIC as an unsecured creditor with

a $575 claim. When Snowden checked her bank account a

little over a month after the bankruptcy filing, she saw that it

was overdrawn. The bank advised her that CIC had cashed

the check securing the payday loan. Instead of honoring the

automatic stay, and after a number of harassing phone calls

to Snowden at the hospital, CIC used an electronic funds

transfer to debit Snowden’s bank account for the amount due,

overdrawing her account by $816.88, including bank charges.

When Snowden found out about the overdraft, she went

into a tailspin because her finances had careened out of

control at the moment when she thought she was finally

getting them together. “[T]he number just panicked [her],”

and she was “out of [her] mind.” She worried that every

other creditor would “do the same thing [CIC] did,” which

“was very overwhelming.” Snowden “had to borrow to pay

those [overdraft] fees, and had to tell her daughter she could

not afford to buy tennis shoes for her as promised or pay for

a haircut.” Snowden testified that she “was going nuts,”

“could not concentrate,” was “agitated,” and felt “miserable.”

Snowden went to CIC’s Sequim office to sort out the

situation and was told someone would contact her, but no one

did. She left there “feeling really sick to [her] stomach . . .

[because she] just didn’t want to deal with this anymore.”

Snowden testified that, on the way to CIC, she ran into her

daughter’s babysitter, Christy Smith, and “broke down . . .

crying.” Smith, however, testified that the run-in never

occurred and that Snowden falsified an e-mail in Smith’s

name mirroring Snowden’s account of their run-in. Smith

testified that Snowden offered her $600 in exchange for

IN RE: SNOWDEN 7

favorable testimony. Snowden, on the other hand, testified

that Smith wrote the e-mail and denied that she offered her

any money.

In April 2009, Snowden filed a motion for sanctions in

the United States Bankruptcy Court for the Western District

of Washington, alleging that CIC willfully violated the

automatic stay provision of the bankruptcy code, 11 U.S.C.

§ 362, and seeking a return of the funds and overdraft fees,

emotional distress and punitive damages, and attorneys’ fees.

Throughout the proceedings, CIC disputed that it violated the

automatic stay.

CIC rejected Snowden’s request to settle the case for

$25,000. Instead, in an e-mail affirmatively claiming it was

without fault, CIC proposed repaying Snowden the loan

amount, bank fees, and three hours of attorneys’ fees, a total

of $1,445. Understandably, Snowden did not jump at this

suggestion because the $1,445 did not compensate her for the

emotional distress CIC had caused.

The case proceeded to trial. Ultimately, the bankruptcy

court rejected CIC’s defenses, found a willful violation of the

automatic stay, and awarded emotional distress damages of

$12,000 as well as the $575 loan amount, $370 in bank fees,

$12,000 in punitive damages, and $2,538.55 in attorneys’

fees, totaling $27,483.55.2 It denied Snowden’s request for

a fee award in the court’s inherent authority or under

11 U.S.C. § 105(a). The court found Snowden’s testimony on

emotional distress credible though it could not “resolve the

contradiction between Ms. Smith and Ms. Snowden” and

2

The bankruptcy court noted the stipulation that CIC previously paid the

loan amount, bank fees, and punitive damages awards.

8 IN RE: SNOWDEN

concluded that “[c]ashing of the check upended both

[Snowden’s] finances and her efforts to manage her affairs

. . . as did [CIC’s] ongoing refusal to rectify the situation that

it created.” The court also awarded punitive damages,

determining that “CIC point[ed] to no policy directing its

local offices to forward bankruptcy notices to headquarters or

corporate collection or instructing how to check for

bankruptcy,” which “qualifies under the authorities . . . as

reckless disregard for the rights of customers who file for

bankruptcy relief.” The court determined that Snowden was

entitled only to attorneys’ fees incurred up to May 20, 2009,

the date on which CIC sent its e-mail.

CIC appealed the bankruptcy court’s emotional distress

and punitive damages, and fees awards. The district court

determined that although the bankruptcy court cited the

controlling case, In re Dawson, 390 F.3d 1139 (9th Cir.

2004), it did not apply the proper standard for emotional

distress damages. The district court found, however, that the

bankruptcy court applied the appropriate punitive damages

standard and indicated that it would be inclined to affirm the

judgment were it not for the error regarding emotional

distress damages. The district court remanded for a

determination of emotional distress damages under the

appropriate standard and for a reevaluation of punitive

damages in light of any change in the emotional distress

damages award.

The district court also affirmed on Snowden’s cross-

appeal of the attorneys’ fees award and the failure to impose

sanctions under the bankruptcy court’s inherent authority or

under § 105(a). The district court classified the May 20, 2009

e-mail as a “tender” that would have remedied the stay

violation. It therefore concluded that Sternberg v. Johnston,

IN RE: SNOWDEN 9

595 F.3d 937 (9th Cir. 2010), “le[ft] little to discuss” because

it limited attorneys’ fees solely to those fees “associated with

remedying the stay violation.” Id. at 945. Like the

bankruptcy court, the district court reasoned that any damages

accrued after May 20, 2009 were not associated with

remedying the stay violation because if Snowden had

accepted the amount mentioned in CIC’s e-mail, the violation

would have ended.

On remand, the bankruptcy court did not alter its

judgment, even though it reconsidered the trial record in light

of the district court’s decision. The bankruptcy court noted

that it found Snowden’s testimony more credible than

Smith’s, and that Snowden had clearly established significant

emotional distress because “a reasonable person in precarious

financial circumstances who[] had to endure what Ms.

Snowden did, after filing bankruptcy, going through the stress

that normally attends that process and beginning to build a

structure on which she could go forward with her life, had the

repeated calls at work, then had the beginnings of the

financial structure she was rebuilding kicked out from

underneath . . . would [suffer] substantial emotional distress.”

Following round two in the bankruptcy court, CIC again

appealed the emotional distress and punitive damages awards

to the district court. Snowden cross-appealed the sanctions

decision and the attorneys’ fees determination under

Sternberg, and she sought to recover fees incurred on appeal.

In this second appeal to the district court, the court

determined that its prior rulings on attorneys’ fees and

sanctions remained the law of the case. It also denied

Snowden attorneys’ fees incurred as a result of the appeal

because those fees were not incurred in an effort to enforce

the stay, but in pursuit of a damages award for a stay

10 IN RE: SNOWDEN

violation. In effect, the second appeal left in place the

bankruptcy court’s original order.

CIC now appeals the emotional distress and punitive

damages awards, and Snowden cross-appeals the attorneys’

fees and sanctions rulings.

ANALYSIS

I. Emotional Distress Damages

Section 362(k) permits an award of emotional distress

damages if the bankruptcy petitioner “(1) suffer[s] significant

harm, (2) clearly establish[es] the significant harm, and (3)

demonstrate[s] a causal connection between that significant

harm and the violation of the automatic stay (as distinct, for

instance, from the anxiety and pressures inherent in the

bankruptcy process).” Dawson, 390 F.3d at 1149. CIC takes

issue only with the bankruptcy court’s findings on the second

prong, arguing that Snowden did not clearly establish

significant emotional harm but only “[f]leeting or trivial

anxiety or distress.” See id. at 1149. Reviewing the decision

of the district court de novo, we review for clear error the

bankruptcy court’s findings of fact and for an abuse of

discretion the bankruptcy court’s decision whether to award

damages and how much to award. Id. at 1145, 1150. We

affirm.

On remand, the bankruptcy court evaluated the evidence

supporting Snowden’s claim for emotional distress damages

under the correct standard of proof, namely whether she

“clearly establish[ed]” that she suffered significant emotional

harm. See id. at 1149. Although “the circumstances

surrounding the violation make it obvious that a reasonable

IN RE: SNOWDEN 11

person would suffer significant emotional harm,” id. at 1151,

CIC contests whether Snowden “in fact suffered significant

emotional harm.” Discrediting Smith’s testimony, the

bankruptcy court found Snowden credible and determined

that “Snowden did suffer significant and substantial

emotional distress as a result of CIC’s actions in cashing the

check and in continuing to call her post-petition. Cashing of

the check upended both her finances and her efforts to

manage her affairs . . . as did [CIC’s] ongoing refusal to

rectify the situation that it created.”

When asked why her declaration in support of the motion

for sanctions did not include any information about the

harassing telephone calls, Snowden replied “I did not know

I was supposed to tell them. I didn’t know it was such a big

thing . . . . It is a big thing, because when you come out of

the room, it’s a burden to leave everything behind . . . and to

walk to the phone to answer the phone every time. I don’t

know if you’ve ever seen a nurse work. . . . Not only are you

leaving that room to come answer the phone, you’re putting

a patient on hold. . . . That’s a big thing.” CIC seizes on the

statement, “I didn’t know it was such a big thing,” to claim

that Snowden did not subjectively suffer emotional distress.

In view of the context explaining why the phone calls indeed

were “a big thing” and the testimony about her emotional

distress, the district court did not err in confirming the

emotional distress damages award.

II. Punitive Damages

Section 362(k) provides for punitive damages “in

appropriate circumstances.” 11 U.S.C. § 362(k)(1). An

award of punitive damages requires “some showing of

reckless or callous disregard for the law or rights of others.”

12 IN RE: SNOWDEN

In re Bloom, 875 F.2d 224, 228 (9th Cir. 1989). CIC is

incorrect that the bankruptcy court erroneously applied the

“willful violation” standard rather than the “reckless

disregard” standard. The bankruptcy court explained that

punitive damages were “appropriate in the context of a stay

violation when there’s a reckless and callous disregard for the

law or the rights of others or where the conduct is malicious,

wanton, or oppressive.” The bankruptcy court therefore

applied the correct legal standard.

The court’s award of punitive damages was not an abuse

of discretion. See Pavon v. Swift Transp. Co., Inc., 192 F.3d

902, 909 (9th Cir. 1999). The bankruptcy court supported the

award with findings that CIC failed to provide a policy or

employee training about how to address debt collection

following a bankruptcy filing. The bankruptcy court

reasonably concluded that CIC demonstrated reckless and

callous disregard for the law.

III. Attorneys’ Fees

“The filing of a bankruptcy petition immediately gives

rise to an automatic stay.” Sternberg, 595 F.3d at 940 (citing

11 U.S.C. § 362). Section 362(k)(1) provides that “an

individual injured by any willful violation of a stay . . . shall

recover actual damages, including costs and attorneys’ fees,

and, in appropriate circumstances, may recover punitive

damages.” 11 U.S.C. § 362(k)(1).

In Sternberg, we held that attorneys’ fees under § 362(k)

are limited to “those attorney fees related to enforcing the

automatic stay and remedying the stay violation, not the fees

incurred in prosecuting the bankruptcy adversary proceeding

in which he pursued his claim for those damages.” 595 F.3d

IN RE: SNOWDEN 13

at 940. In that case, an Arizona state court presiding over a

divorce proceeding entered judgment against an individual

who was also involved in bankruptcy proceedings. Id. at

941–42. The Arizona court required immediate payment of

the judgment without determining whether there was any

non-estate property or requesting that the bankruptcy court

determine whether the automatic stay applied to its order. Id.

Simultaneously with filing an appeal, the petitioner

commenced an adversary proceeding in the bankruptcy court

arguing that collection on the judgment was a willful

violation of the automatic stay. Id. The petitioner was

successful in the adversary proceeding and received a

damages award, which included attorneys’ fees. Id. at 942.

We affirmed the finding that the automatic stay was

violated, but concluded that the petitioner was not entitled to

attorneys’ fees from “the subsequent adversary proceeding in

which [the petitioner] sought to collect damages for the stay

violation.” Id. at 945. We interpreted § 362(k)(1) “against

the backdrop of the ‘American Rule,’” under which parties

are presumed to bear their own litigation costs. Id. at 945–47.

We also relied on the plain meaning of “actual damages” as

“[a]n amount awarded . . . to compensate for a proven injury

or loss; damages that repay actual losses.” Id. at 947 (citing

Black’s Law Dictionary 416 (8th ed. 2004) (internal

quotation marks omitted)). We reasoned that “[o]nce 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).”3 Id. “We remand[ed]

3

Sternberg acknowledged that the decision created a circuit split with

the Fifth Circuit, see In re Repine, 536 F.3d 512, 522 (5th Cir. 2008),

which rejected the argument that § 362(k) “does not provide for a

14 IN RE: SNOWDEN

to the district court with instructions to remand to the

bankruptcy court to determine which fees are properly

allocable to efforts to enforce the automatic stay and prevent

enforcement of the state court order that violated the stay.”

Id. at 948.

Sternberg established a brightline rule that attorneys’ fees

incurred in an attempt to collect damages once the stay

violation has ended are not recoverable. Id. However, the

issue remains whether the e-mail CIC sent to Snowden ended

the violation. To answer this question, we look to whether

the petitioner is using “[t]he stay [a]s a shield, not a sword.”

Id. at 948. As we explained in Sternberg, the limitation on

recovery of attorneys’ fees was aimed at reducing incentives

for further litigation while providing a bankruptcy petitioner

a remedy for the stay violation. Id.

Our more recent decision in In re Schwartz-Tallard, No.

12-60052, 2014 WL 4251571 (9th Cir. Aug. 29, 2014), is

instructive. There, we permitted recovery of attorneys’ fees

incurred in defending an appeal from the decision of the

bankruptcy court finding a violation of the automatic stay.

2014 WL 4251571, at *3–4. We held that the debtor was

entitled to fees because she “was forced to defend [the]

appeal to validate the bankruptcy court’s ruling that [the

creditor] had violated the stay, and to preserve her right to

collect the pre-remedy damages awarded by the bankruptcy

court. In other words, unlike in Sternberg, Schwartz–Tallard

was not using the stay as a sword, but as a shield from stay

violation.” Id. at *3 (first alteration in original) (internal

quotation marks omitted).

successful claimant to collect the fees incurred in prosecuting their

action,” id. See Sternberg, 595 F.3d at 948.

IN RE: SNOWDEN 15

Here, the district court affirmed the bankruptcy court’s

rationale that although CIC never admitted a stay violation,

Snowden’s “losses would have been righted and the violation

would have come to an end” had she accepted the $1,445

tender. We review that conclusion for an abuse of discretion.

The bankruptcy court’s determination that the May 20, 2009

e-mail marked the end of the stay violation was an abuse of

discretion because the court failed to identify “the correct

legal standard for decision of the issue before it.” See United

States v. Hinkson, 585 F.3d 1247, 1251 (9th Cir. 2009) (en

banc). Having violated the automatic stay attendant to

Snowden’s bankruptcy filing, CIC had an affirmative

obligation to return any property it had wrongfully seized

from the bankruptcy estate. In re Abrams, 127 B.R. 239,

242–43 (B.A.P. 9th Cir. 1994). Instead of returning that

property with no strings attached, CIC responded to

Snowden’s offer to settle the case with an e-mail containing

implied conditions. Snowden’s attorney delivered her

demand for $25,000 only by voice mail, so we do not know

the exact terms of the offer. But the most logical inference,

given the size and timing of the demand (it came just a week

after Snowden filed a motion for sanctions seeking

comprehensive relief from CIC) is that it represented an offer

to settle all of Snowden’s claims.

By declining the sum presented in CIC’s e-mail, Snowden

was using the stay not as a sword but as a shield. CIC

contested that it violated the automatic stay and made it clear

that giving Snowden the $1,445 was not an admission of a

violation of the automatic stay. CIC unsuccessfully

maintained that position throughout the litigation in the

bankruptcy court. Snowden had to proceed with the litigation

to establish a violation of the automatic stay; put differently,

she had to go to court to end the stay violation. See

16 IN RE: SNOWDEN

Schwartz-Tallard, 2014 WL 4251571, at *4 (“[T]he

additional litigation resulted from [the violator’s] continued

attempts to justify its stay-violating behavior—not from the

debtor’s conduct.”); Sternberg, 595 F.3d at 948. The fees

Snowden incurred in remedying the stay violation after

receiving CIC’s e-mail fall squarely under the admonition

that “[w]ithout a doubt, Congress intended § 362(k)(1) to

permit recovery as damages fees incurred to [end] violation

of the automatic stay.” Sternberg, 595 F.3d at 946.

Permitting the violator to short-circuit the remedies

available under § 362(k)(1) by making a conditional offer to

return the property wrongfully seized in violation of the

automatic stay would undermine the remedial scheme of

§ 362(k). See Sternberg, 595 F.3d at 947–48. The automatic

stay prevents further litigation in order to provide a

“breathing spell” from creditors and preserves the petitioner’s

resources for creditors. Id. at 948. Attorneys’ fees under

§ 362(k)(1) “deter stay violators from continuing to disturb

the breathing spell the stay aims to create.” Schwartz-

Tallard, 2014 WL 4251571, at *4.

Had Snowden accepted the $1,445 and sought damages

for emotional distress in a separate action, her recovery may

have been precluded because CIC never admitted a violation

of the stay—not to mention the reality that any settlement

would have included a standard release of liability. A

bankruptcy appellate panel of this court has declined to find

that an automatic stay violation is remedied by a Rule 68

offer of judgment, noting that “[i]n retrospect, [the creditor]

may regret not having explicitly included attorney’s fees in its

offer of judgment and having offered a sum that would have

been sufficient to make the debtor think very hard about

whether continued litigation is worthwhile.” In re Campion,

IN RE: SNOWDEN 17

294 B.R. 313, 315, 318 (B.A.P. 9th Cir. 2003) (internal

quotation marks omitted). Although the district court

characterized the e-mail as a “tender,” CIC never followed up

with a formal offer or terms of settlement. Since a Rule 68

offer of settlement does not remedy the stay violation, the

single e-mail from CIC hardly serves to stop the train and cut

off fees.

Because CIC did not return the property it had wrongfully

seized from Snowden on May 20, 2009, the bankruptcy court

chose the wrong date to mark the end of the stay violation.

The proper date is December 10, 2009, when the bankruptcy

court found a violation of the automatic stay. The litigation

leading up to that ruling “relate[d] to [Snowden] ‘enforcing

the automatic stay and remedying the stay violation.’” See

Schwartz-Tallard, 2014 WL 4251571, at *3 (quoting

Sternberg, 595 F.3d at 940). Therefore, we reverse the

district court’s determination limiting fees to those incurred

before May 20, 2009, and we remand for a recalculation of

attorneys’ fees.

Snowden cannot automatically recover all the fees she

incurred before the end of the stay violation. Under

Sternberg, she can recover only those fees related to

remedying the stay violation itself. 595 F.3d at 940.

Presumably some fees incurred before December 10, 2009,

are therefore not recoverable, as they would have related to

Snowden’s damages claims rather than her efforts to end the

stay. “All fees related to proving [Snowden’s] damages are

disallowed under the American Rule.” Id. at 948.

18 IN RE: SNOWDEN

IV. Sanctions

Snowden cross-appeals the bankruptcy court’s failure to

issue a sanctions award under its inherent authority, which

“allows a bankruptcy court to deter and provide compensation

for a broad range of improper litigation tactics.” In re Dyer,

322 F.3d 1178, 1196 (9th Cir. 2003). “Because of their very

potency, inherent powers must be exercised with restraint and

discretion,” Chambers v. NASCO, Inc., 501 U.S. 32, 44

(1991); therefore, “[s]anctions are justified when a party acts

for an improper purpose.” Fink v. Gomez, 239 F.3d 989, 992

(9th Cir. 2001) (emphasis omitted).

The bankruptcy court declined to find any bad faith in

CIC’s approach to Snowden’s bankruptcy litigation. Based

on the record documenting the litigation tactics, the

bankruptcy court did not abuse its discretion in denying

sanctions under its inherent authority. See Eskanos & Adler,

P.C. v. Leetien, 309 F.3d 1210, 1213 (9th Cir. 2002).

Snowden also appeals the bankruptcy court’s failure to

issue sanctions under 11 U.S.C. § 105(a), which vests

bankruptcy courts with powers “necessary or appropriate to

carry out the provisions” of the bankruptcy code. Because a

remedy was available to Snowden under § 362(k), no

additional remedy was available under § 105(a). See In re

Roman, 283 B.R. 1, 14–15 (B.A.P. 9th Cir. 2002).

CONCLUSION

We affirm the district court’s order affirming the

decisions of the bankruptcy court on emotional distress and

punitive damages, and sanctions. We reverse the district

court’s order affirming the award of attorneys’ fees and

IN RE: SNOWDEN 19

remand for a calculation of attorneys’ fees related to

remedying the stay violation, including those fees incurred

after May 20, 2009.

The parties shall bear their own costs on appeal.

AFFIRMED in part; REVERSED in part;

REMANDED.

WATFORD, Circuit Judge, concurring:

I join the court’s opinion and write separately to add a

few words on the attorney’s fees issue.

I agree with my colleagues that the fees award must be

vacated, but it’s hard to fault either the bankruptcy court or

the district court for that. Our court has made calculating

attorney’s fees under 11 U.S.C. § 362(k)(1) unnecessarily

complicated. The problem stems from our decision in

Sternberg v. Johnston, 595 F.3d 937 (9th Cir. 2010), where

we construed § 362(k)(1)’s authorization of fee awards more

narrowly than Congress likely intended.1 Read most

naturally, the statute allows a plaintiff to recover attorney’s

fees incurred both in remedying a violation of the automatic

stay and in bringing an action to recover the “actual damages”

caused by that violation. That’s the sensible reading of the

statute the Fifth Circuit adopted. In re Repine, 536 F.3d 512,

1

Section 362(k)(1) provides: “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.”

20 IN RE: SNOWDEN

522 (5th Cir. 2008). In Sternberg, however, we rejected that

reading and held instead that § 362(k)(1) imposes a temporal

limit on the plaintiff’s right to recover attorney’s fees, such

that no fees may be recovered for any work performed after

the stay violation has ended. 595 F.3d at 947. Thus, under

our reading of § 362(k)(1), if the stay violation ends before

the plaintiff ever files an action to recover her “actual

damages,” none of the fees incurred in prosecuting the suit

may be awarded. I don’t think that’s the regime Congress

contemplated.

Nonetheless, as a three-judge panel, we’re bound by the

rule in Sternberg, which requires us to vacate the award at

issue here. Check Into Cash violated the automatic stay by

wrongfully withdrawing $575 from Ms. Snowden’s bank

account. Our task under Sternberg is to determine when the

stay violation ended. As the court notes, when a creditor

violates the stay by wrongfully seizing the debtor’s property,

the stay violation usually doesn’t end until the creditor returns

the property to the debtor. See In re Abrams, 127 B.R. 239,

242–43 (B.A.P. 9th Cir. 1991). That didn’t occur on May 20,

2009, as the bankruptcy court held, because Check Into Cash

didn’t send Snowden a check on that date for $575 plus the

overdraft fees she was charged. It offered to return those

funds, but with strings attached: Check Into Cash styled its

offer as a “counteroffer” to Snowden’s $25,000 settlement

demand, so accepting the offer would have required Snowden

to release her claims for emotional distress and punitive

damages. Check Into Cash’s conditional, strings-attached

offer to return the property it had wrongfully seized—an offer

Snowden understandably rejected—did not end the stay

violation.

IN RE: SNOWDEN 21

I agree with the court that the stay violation ended by

December 10, 2009, when the bankruptcy court ordered the

return of Snowden’s wrongfully seized property. Although

Check Into Cash did not actually pay Snowden the $575 plus

overdraft fees until some months later, by December 10,

2009, it no longer contested its obligation to pay those sums.

Nor did Check Into Cash contest that it had actually violated

the stay. Cf. In re Schwartz-Tallard, __ F.3d __, 2014 WL

4251571 at *4 (9th Cir. Aug. 29, 2014) (stay violation hasn’t

ended if defendant continues to contest whether a stay

violation actually occurred). After the bankruptcy court’s

December 10, 2009, ruling, Check Into Cash contested only

whether Snowden was entitled to recover emotional distress

and punitive damages as a result of the stay violation.

So, under Sternberg, we are left to remand this case to the

bankruptcy court with instructions to (1) calculate the portion

of Snowden’s pre-December 10, 2009, attorney’s fees

attributable to her efforts to recover the $575 plus overdraft

fees, and (2) disallow all remaining fees. This impractical

(and inevitably somewhat arbitrary) exercise is sure to invite

further litigation. That Sternberg requires such an odd,

resource-consuming exercise, not dictated by the plain text of

§ 362(k)(1), is another reason to question the soundness of

Sternberg’s holding.