Hunsaker et al v. United States

Filing 19

Opinion and Order: Sovereign immunity bars claims against the federal government seeking emotional distress damages under 11 U.S.C. § 362(k). Therefore, the bankruptcy court lacked jurisdiction to award the Hunsakers emotional distress damages. See F.D.I.C. v. Meyer, 510 U.S. 471, 475 (1994) (Sovereign immunity is jurisdictional in nature.). The judgment of the bankruptcy court is REVERSED. Signed on 10/20/2016 by Judge Michael J. McShane. (cp)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
JONATHAN ELDON HUNSAKER and
CHERYL LYNN HUNSAKER,

Plaintiffs-Appellees,
v.

Case No. 6:16-cv-00386-MC
OPINION AND ORDER

UNITED STATES,
Defendant-Appellant.
_____________________________
MCSHANE, Judge:
The Internal Revenue Service (IRS) appeals the bankruptcy court’s judgment awarding
Jonathon and Cheryl Hunsaker emotional distress damages under 11 U.S.C. § 362(k). The court
concluded the IRS’s repeated violations of the automatic stay contained in § 362(a) caused the
Hunsakers significant emotional harm. The IRS argues the Hunsakers’ emotional distress was
insufficient to award emotional distress damages. In the alternative, the IRS argues sovereign
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immunity bars the Hunsakers’ claims altogether. This second argument, whether the United
States waived sovereign immunity for emotional distress damages under § 362(k), is a matter of
first impression in the Ninth Circuit.
Sovereign immunity can only be waived by unequivocal, clear statutory language. F.A.A.
v. Cooper, 132 S. Ct. 1441, 1448 (2012). Section 362(k) contains, at best, an ambiguous waiver
for emotional distress damages. Ambiguities must be resolved in favor of immunity. Id.
Therefore, sovereign immunity bars the Hunsakers’ claims. The judgment of the bankruptcy
court is REVERSED.
BACKGROUND
The Hunsakers filed for Chapter 13 bankruptcy protection on November 5, 2012. Their
filing triggered the automatic stay contained in 11 U.S.C. § 362(a). The automatic stay blocks
creditors from collection attempts outside of court-supervised reorganization proceedings. In this
case, the parties agree the IRS violated the automatic stay four times.
On December 2, 2013, the IRS sent the first of four notices to the Hunsakers demanding
payment for back taxes. The notice bore the headlines “Final Notice” and “Notice Of Intent to
Levy And Notice Of Your Right To A Hearing.” The IRS sent similar notices on February 10,
2014; September 1, 2014; and December 8, 2014. Each notice violated the automatic stay. The
IRS’s violations allegedly caused the Hunsakers significant emotional harm.
The IRS presents compelling arguments regarding the merits of the Hunsakers’ claims for
emotional distress damages. For example, Mr. Hunsaker alleged only brief losses of appetite,
stress, and mounting frustration after receiving the IRS notices. Appellant’s Br. App. 185:14–20,
195:21–23, ECF No. 13-6. Therefore, Mr. Hunsaker likely never suffered an injury sufficient to
support an award of emotional distress damages under § 362(k). See In re Dawson, 390 F.3d

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1139, 1149 (9th Cir. 2004) (“Fleeting or trivial anxiety or distress does not suffice to support an
award; instead, an individual must suffer significant emotional harm.”).
Although Mrs. Hunsaker likely suffered legally sufficient harm in the form of debilitating
migraine headaches, the evidence in the record does not necessarily connect Mrs. Hunsaker’s
migraines to the IRS’s violations. For example, neither Hunsaker could remember if, or when,
any specific IRS notice triggered a debilitating migraine. In fact, after receiving the third notice,
when assurances from their attorney were allegedly wearing thin, Mrs. Hunsaker got up the next
day and went to work as normal. Additionally, although Mrs. Hunsaker testified her prescription
records would be the best indicator of when she experienced debilitating migraines, those records
strongly suggest she experienced fewer migraines during the relevant time period. This Court is
skeptical whether Mrs. Hunsaker established the required causal connection between the notices
and her migraines. In re Dawson, 390 F.3d at 1149. This Court need not reach those issues,
however, because sovereign immunity bars the Hunsakers’ claims.
STANDARD OF REVIEW
This Court reviews the bankruptcy court’s conclusions of law de novo. In re Dawson,
390 F.3d at 1145.
DISCUSSION
Sovereign immunity limits a district court’s subject matter jurisdiction over actions
brought against the United States. Vacek v. United States Postal Service, 447 F.3d 1248, 1250
(9th Cir. 2006). The United States “is immune from suit unless it has expressly waived such
immunity and consented to be sued.” Dunn & Black, P.S. v. United States, 492 F.3d 1084, 108788 (9th Cir. 2007). Legislative history cannot provide a waiver that otherwise appears ambiguous
in the text of the statute. Cooper, 132 S. Ct. at 1448. In other words, the scope of the waiver must

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be “clearly discernable” from the statutory language. Id. If the scope is unclear, this Court must
accept the interpretation most favorable to the federal government. Id. Stated differently, the
scope of any waiver of sovereign immunity is to be strictly construed in favor of the United
States. Dunn & Black, 492 F.3d at 1088 (citation omitted). The party suing the United States
bears the burden of demonstrating the existence of “an unequivocal waiver of immunity.”
Holloman v. Watt, 708 F.2d 1399, 1401 (9th Cir. 1983).
Section 106(a) of the Bankruptcy Code clearly waives sovereign immunity for some
claims under § 362(k). See 11 U.S.C. § 106(a) (“[S]overeign immunity is abrogated as to a
governmental unit to the extent set forth in this section with respect to . . . [§] 362[.]”). Section
362(k) allows individual debtors injured by a creditor’s willful violation of the automatic stay to
recover “actual damages.” In Dawson, the Ninth Circuit resolved the question of whether
Congress intended “actual damages” to include claims for emotional distress. 390 F.3d at 1146.
The court concluded allowing emotional distress damages best fulfills legislative intent to protect
debtors from excessive psychological and emotional harm.1 Id. at 1148. Therefore, “actual
damages” in § 362(k) includes emotional distress damages under some circumstances.2 Id.
Dawson did not address sovereign immunity, however, because the dispute there involved only
private parties. That emotional distress damages are available against private parties does not
automatically authorize them against the federal government. After all, “when it comes to an
award of money damages, sovereign immunity places the Federal Government on an entirely
different footing than private parties.” Lane v. Pena, 518 U.S. 187, 196 (1996).

1

The Dawson court relied on the legislative history of the automatic stay provision generally, not on the legislative
history for § 362(k), which does not exist. See In re Schwartz-Tallard, 803 F.3d 1095, 1100 (9th Cir. 2015) (“We do
not have legislative history that speaks directly to Congress’ purpose in enacting § 362(k).”).
2
When the Ninth Circuit decided Dawson, the damages provision was coded at § 362(h). In 2005, an amendment
moved the provision to § 362(k) but left it otherwise unchanged.

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The Dawson court concluded the phrase “actual damages” was ambiguous even given the
text and context of § 362(k) as a whole. 390 F.3d at 1146. The legislative history discussed in
Dawson cannot waive sovereign immunity where the text of § 362(k) otherwise remains
ambiguous. See Cooper, 132 S. Ct. at 1448 (“Legislative history cannot supply a waiver that is
not clearly evident from the language of the statute.”). Because the phrase “actual damages” is
ambiguous, this Court must construe § 362(k) in favor of immunity. See id. (any ambiguities in
the statutory language must be strictly construed in favor of immunity, including ambiguities
regarding the scope of the waiver). Reinforcing this conclusion is the fact that, before concluding
“actual damages” includes emotional distress damages, the Dawson panel came to the opposite
conclusion in an opinion it later withdrew. Dawson v. Washington Mutual Bank, F.A., 367 F.3d
1174 (9th Cir.), withdrawn, 385 F.3d 1194 (9th Cir. 2004). The two Dawson opinions provide
compelling proof that any waiver of sovereign immunity as to emotional distress damages in §
362(k) is, at best, implicit.
The Supreme Court’s decision in Cooper also supports a limited reading of 362(k).
Although Cooper specifically addressed the Privacy Act, not § 362(k), the Supreme Court
addressed essentially the same question: if a statute waives sovereign immunity for “actual
damages,” does that waiver include emotional distress damages? Id. at 1447–48. The Supreme
Court answered no. Id. at 1453. In doing so, the Supreme Court identified multiple plausible
readings of “actual damages,” even given the particular context of the Privacy Act. Id. In the
context of § 362(k), the phrase “actual damages” displays the same chameleon-like qualities
found in the Privacy Act; there are multiple plausible readings of § 362(k). Therefore, this Court
must accept the reading most favorable to the federal government, which excludes emotional
distress damages. Cooper, 132 S. Ct. at 1448; Dunn & Black, 492 F.3d at 1088.

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Barring emotional distress damages against the federal government will not, as the
bankruptcy court said, “swallow up the waiver of sovereign immunity altogether.” Appellant’s
Br. App. 255:8, ECF No. 13-10. For example, the Bankruptcy Code unequivocally waives
sovereign immunity for economic damages under § 362(k). Sections 106(a)(3) and 362(k), when
read together, waive sovereign immunity for a “money recovery” of “actual damages.” There is
no plausible way to read “money recovery of actual damages” to exclude economic damages.
Thus, the federal government cannot “escape liability for any form of damages” simply because
it is immune from emotional distress damages under § 362(k).
CONCLUSION
Sovereign immunity bars claims against the federal government seeking emotional
distress damages under 11 U.S.C. § 362(k). Therefore, the bankruptcy court lacked jurisdiction
to award the Hunsakers emotional distress damages. See F.D.I.C. v. Meyer, 510 U.S. 471, 475
(1994) (“Sovereign immunity is jurisdictional in nature.”). The judgment of the bankruptcy court
is REVERSED.
IT IS SO ORDERED.
DATED this 20th day of October, 2016.

__________________________
Michael McShane
United States District Judge

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