Check Into Cash of Washington Inc. v. Snowden

Filing 26

ORDER AFFIRMING IN PART/REVERSING IN PART DECISION OF BANKRUPTCY COURT by Judge Robert S. Lasnik. (RS)

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE
_______________________________________
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In re RUPANJALI SNOWDEN,
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Debtor.
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_______________________________________)
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CHECK INTO CASH OF WASHINGTON,
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INC., a Washington corporation,
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Appellant,
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v.
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RUPANJALI SNOWDEN, a Washington
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resident,
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Appellee.
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_______________________________________)
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RUPANJALI SNOWDEN,
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Cross-Appellant,
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v.
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CHECK INTO CASH OF WASHINGTON,
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)
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Cross-Appellee.
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_______________________________________)

Chapter No. 11
USDC No. 10-cv-1947 RSL
Bankruptcy Case No. 09-10318
Bankruptcy Internal Appeal No 10-S045
ORDER AFFIRMING IN PART/
REVERSING IN PART DECISION
OF BANKRUPTCY COURT

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This matter comes before the Court on cross appeals by Appellant/Cross-Appellee Check

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Into Cash of Washington, Inc., (“CIC”) and Appellee/Cross-Appellant Rupanjali Snowden. The

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subject of the dispute is relatively straightforward: entitlement to damages and fees as a result of

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CIC’s violation of the automatic stay that resulted from Ms. Snowden’s filing for bankruptcy

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ORDER AFFIRMING IN PART/REVERSING IN
PART DECISION OF BANKRUPTCY COURT – 1

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relief. CIC argues that the bankruptcy court erred in awarding Ms. Snowden damages for her
alleged emotional distress and erred in awarding punitive damages. Ms. Snowden argues that
the court erred in declining to award her attorney’s fees incurred after May 20, 2009—the date
on which CIC tendered to Ms. Snowden an amount that would have resolved the stay violation.
Having reviewed the parties’ papers, the Court concludes that the bankruptcy court erred
in awarding emotional distress damages absent a clear showing that Ms. Snowden suffered
significant harm—a conclusion that affects the punitive damage award as well. Accordingly, the
Court REVERSES and REMANDS both of the damage awards for further consideration by the
bankruptcy court. The Court AFFIRMS in all other respects.
I. DISCUSSION

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The issues raised on appeal are quite narrow: legal entitlement to damages for emotional
distress, punitive damages, and attorney fees under a largely undisputed set of facts. The Court
addresses each in turn.1
A. Damages for Emotional Distress
The Court concludes first that the bankruptcy court erred in awarding Ms. Snowden
$12,000 in damages for her alleged emotional distress.
The controlling standard for awarding emotional distress damages is well settled: “to be
entitled to damages for emotional distress under [11 U.S.C.] § 362(h), an individual must (1)
suffer significant harm, (2) clearly establish the significant harm, and (3) demonstrate 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).” In re Dawson,
390 F.3d 1139, 1149 (9th Cir. 2004) (emphasis added); cf. Pub. L. No. 109-8, § 305(1)(B)
(2005) (redesignating subsection (h) as subsection (k)).

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The Court presumes that the parties are familiar with the facts underlying this dispute and does
not repeat them here except as necessary.
ORDER AFFIRMING IN PART/REVERSING IN
PART DECISION OF BANKRUPTCY COURT – 2

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Nevertheless, in its oral ruling, the court stated that the “standard of proof is a
preponderance of evidence.” Admin. Record (“AR”) (Dkt. # 25) at 465. And, though it later
noted that “the Dawson standard is met,” that conclusion immediately followed its clear
application of the preponderance standard to resolve whether to credit Ms. Snowden’s
representations concerning her alleged distress: “I can’t say that it’s more likely than not that
she is the one who’s either misremembering or misrepresenting what happened on that
occasion.” Id. at 470. As a result, the Court must conclude that the bankruptcy court erred in
applying a preponderance standard in lieu of a heightened clear evidence test. This conclusion is
dispositive. In re Debbie Reynolds Hotel & Casino, Inc., 255 F.3d 1061, 1065 (9th Cir. 2001)
(“The use of an incorrect legal standard is per se an abuse of discretion.”).
Nonetheless, the Court thinks it prudent to briefly discuss its concern with the amount of
damages awarded. As Dawson instructs, “Fleeting or trivial anxiety or distress does not suffice
to support an award; instead, an individual must suffer significant emotional harm.” 390 F.3d at
1149 (citing In re Skeen, 248 B.R. 312, 319 (Bankr. E.D. Tenn. 2000) (holding that “‘[b]ecause
the emotional distress suffered . . . was fleeting, inconsequential, and medically insignificant, . . .
it is not compensable’” (emphasis added))). As a result, Ms. Snowden’s own testimony that she
did not consider the phone calls she received at work “such a big thing” and that they never
distracted or caused her any difficulties in performing her work, AR (Dkt. # 25) at 190, would
appear to rebut her claim that they caused her “significant emotional harm.” Cf. Dawson, 390
F.3d at 1149 (“Although pecuniary loss is not required in order to claim emotional distress
damages, not every willful violation merits compensation for emotional distress.”).
Moreover, while emotional distress damages are admittedly hard to quantify, even the
most generous of the “reasonably obvious” damages cases identified in Dawson awarded
damages far less than those awarded in this case. In In re Wagner, for example, the court
awarded emotional distress damages of only $100 even though the creditor entered the debtor’s

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ORDER AFFIRMING IN PART/REVERSING IN
PART DECISION OF BANKRUPTCY COURT – 3

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home at night, doused the lights, and “held up a finger to the debtor’s head (as if he were holding
a gun) and screamed, ‘I’m not playing, I’m not playing, next time I’m going to blow your brains
out, bring a gun and I’ll blow your brains out.’” 74 B.R. 898, 901–02, 905 (Bankr. E.D. Pa.
1987). And in In re Flynn, only $5,000 in damages were awarded, even though the creditor’s
actions forced the debtor to cancel her son’s birthday party because her checking account had
been frozen. 185 B.R. 89, 91, 93 (Bankr. S.D. Ga. 1995).
B. Punitive Damages
The Court next considers CIC’s contention that the bankruptcy court erred in awarding
punitive damages. This is a two-part inquiry. First, the Court must determine whether the
bankruptcy court abused its discretion in awarding punitive damages. Fair Hous. of Marin v.
Combs, 285 F.3d 899, 906 (9th Cir. 2002). If not, the Court must then consider de novo whether
the amount of the award “falls within the bounds of substantive due process.” White v. Ford
Motor Co., 312 F.3d 998, 1026 (9th Cir. 2002).
In this case, CIC raises two complaints: first, that the bankruptcy court effectively
applied a “willful violation” standard instead of the heightened “reckless disregard” standard
required for punitive damages. CIC Mot. (Dkt. # 18) at 14–18. And, second, that the court
clearly erred in concluding that CIC “points to no policy directing its local offices to forward
bankruptcy notices to headquarters or corporate collections or instructing how to check for
bankruptcy, no policy requiring the noting of any receipt of a bankruptcy notice. . . . nor is there
in evidence any policy setting forth how one is to verify a bankruptcy filing . . . .” Id. at 18–20.
Were it not for the Court’s emotional distress conclusion, the Court would affirm.2 The
bankruptcy court stated the proper standard for an award of punitive damages: reckless or
callous disregard for the law or rights of others or malicious, wanton, or oppressive conduct.
And though this Court would not have held that CIC’s actions met the standard for punitive

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The Court does compliment CIC’s counsel, however, on the excellence of their briefs.

ORDER AFFIRMING IN PART/REVERSING IN
PART DECISION OF BANKRUPTCY COURT – 4

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damages—whether, as stated by the Supreme Court, the “defendant’s conduct is ‘outrageous,’
owing to ‘gross negligence,’ ‘willful, wanton, and reckless indifference for the rights of others,’
or behavior even more deplorable,” Exxon Shipping Co. v. Baker, 554 U.S. 471, 493 (2008)
(internal citations omitted)—the Court cannot conclude that the bankruptcy court’s “findings
were illogical, implausible or without support in the record.” TrafficSchool.com, Inc. v. Edriver
Inc., 653 F.3d 820, 832 (9th Cir. 2011). Failure to adopt appropriate and reasonable procedures
to prevent or correct stay violations can provide a basis for punitive damages. In re Stucka, 77
B.R. 777, 784 (Bankr. C.D. Cal. 1987). And, contrary to CIC’s second point, CIC’s own
associate general counsel testified that CIC’s policies do not provide any mechanism for alerting
CIC’s corporate collections department of a store’s receipt of a bankruptcy notice when that
individual’s account has already been forwarded to corporate—the exact scenario present in this
case. AR (Dkt. # 25) at 291–92.3
Finally, the one-to-one damage ratio4 would appear to satisfy constitutional concerns.
See State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 425 (2003) (noting that “an
award of more than four times the amount of compensatory damages might be close to the line
of constitutional impropriety”); BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 574–75 (1996)
(“Three guideposts, each of which indicates that BMW did not receive adequate notice of the
magnitude of the sanction that Alabama might impose for adhering to the nondisclosure policy
adopted in 1983, lead us to the conclusion that the $2 million award against BMW is grossly
excessive: the degree of reprehensibility of the nondisclosure; the disparity between the harm or
potential harm suffered by Dr. Gore and his punitive damages award; and the difference between

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She also testified that there is no “formal” policy for forwarding store-level debtor complaints
of stay violations. AR (Dkt. # 25) at 318–19. And though CIC presented some evidence of its policies
for verifying bankruptcy filings, the court clearly discounted that evidence. Id. at 472.
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The Court considers only the emotional distress damages given the bankruptcy court’s finding
that CIC’s cashing of the check was not a basis for punitive damages. AR (Dkt. # 25) at 473.
ORDER AFFIRMING IN PART/REVERSING IN
PART DECISION OF BANKRUPTCY COURT – 5

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this remedy and the civil penalties authorized or imposed in comparable cases.”). But see Gore,
517 U.S. at 575–76 (“[N]onviolent crimes are less serious than crimes marked by violence or the
threat of violence.” Similarly, ‘trickery and deceit’ are more reprehensible than negligence.”
(citations omitted)); Wagner, 74 B.R. at 900 (awarding only $500 in punitive damages even
though creditor threatened to kill the debtor).
The problem of course is that the Court’s reversal of the award of emotional distress
damages changes the damage-award calculus. And were the bankruptcy court to conclude that
Ms. Snowden cannot clearly demonstrate that she suffered significant harm, or even that the
measure of her damages under that standard were less than the amount originally awarded, due
process might require the court to alter its punitive damage award as well. See State Farm, 538
U.S. at 418–29; Gore, 517 U.S. at 574–75 (1996). As a result, the Court must REVERSE the
court’s award of punitive damages and REMAND to allow the bankruptcy court to rule on the
issues of emotional distress and punitive damages together.
C. Attorney’s Fees
The final issue before the Court is Ms. Snowden’s contention that the court erred in
limiting her award of attorney’s fees to those incurred prior to CIC’s May 20, 2009—the date
CIC offered to repay Ms. Snowden the full amount of the check cashed in violation of the stay,
the bank fees incurred as a result, and three hours of attorney’s fees. The Court affirms.
1. 11 U.S.C. § 362(k)
In regard to the bankruptcy court’s § 362(k) finding, Sternberg v. Johnston leaves little to
discuss. 595 F.3d 937, 945–48 (9th Cir. 2010). A debtor’s ability to recover attorney’s fees
under § 362(k) is limited solely to those fees “associated with remedying the stay violation.” Id.
at 945. It does not permit the recovery of fees incurred in pursuing a “subsequent adversary
proceeding . . . to collect damages for the stay violation.” Id.
In this case, the court found that CIC tendered Ms. Snowden a full refund of the amount

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ORDER AFFIRMING IN PART/REVERSING IN
PART DECISION OF BANKRUPTCY COURT – 6

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of the cashed check, plus fees and costs, on May 20, 2009. AR (Dkt. # 25) at 464. As a result, it
concluded that CIC had effectively remedied its stay violation as of that date. Id. Both of these
findings are more than supported by the record. Id. at 86.
Nevertheless, Ms. Snowden argues that CIC’s tender did not “remedy[] the stay
violation” because CIC did not concede that it had violated the stay. The Court disagrees. Had
Ms. Snowden accepted CIC’s tender, Ms. Snowden’s losses would have been righted and the
violation would have come to an end. And, as Sternberg makes clear, “[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).” 595 F.3d at 947. Accordingly, the fees
incurred by Ms. Snowden post-tender, including those expended to prove a violation, were not
relevant to “remedying the stay violation” but to “to collect damages for the stay violation.” Cf.
id. at 945–48. They are therefore not recoverable under § 362(k)(1).
2. Inherent Authority to Sanction
Likewise, the court did not abuse its discretion in declining to award additional attorney
fees pursuant to either its civil contempt or inherent authority to sanction.
Notably, Ms. Snowden is correct in one respect. Sternberg explicitly noted that it did
“not consider the civil contempt authority of the court” and did “not limit the availability of
contempt sanctions, including attorney fees, for violation of the automatic stay, where otherwise
appropriate.” 595 F.3d at 946 n.3. Unfortunately, however, even assuming the bankruptcy court
misunderstood Sternberg’s import, it could not award Ms. Snowden additional fees pursuant to
either its civil contempt or inherent sanction authority.
As to the first, Ms. Snowden fails to acknowledge that a bankruptcy court cannot use its
civil contempt power to award fees in excess of those obtainable under § 362(k). In re Roman,
283 B.R. 1, 14–15 (B.A.P. 9th Cir. 2002) (“A court’s inherent power must not be used to create
substantive rights that are not available under applicable law.”) (citing Walls v. Wells Fargo

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ORDER AFFIRMING IN PART/REVERSING IN
PART DECISION OF BANKRUPTCY COURT – 7

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Bank, N.A., 276 F.3d 502, 507 (9th Cir. 2002) (stating that a bankruptcy court cannot read other
remedies into those already fixed by Congress)). In In re Roman, for example, the court rejected
the very argument raised here, stating, “Here, Debtor was appropriately awarded actual damages
for the stay violation under § 362(h), and therefore the statutory remedy was Debtor’s exclusive
remedy.” Id.; cf. Pub. L. No. 109-8, § 305(1)(B) (2005) (redesignating subsection (h) as
subsection (k)).
Neither could the court award her the additional fees she seeks through its inherent
authority to sanction. First, sanction authority extends only “to deter and provide compensation
for a broad range of improper litigation tactics,” not actions like the one at issue. In re Dyer, 322
F.3d 1178, 1196 (9th Cir. 2003) (emphasis added). Second, “[b]efore imposing sanctions under
its inherent sanctioning authority, a court must make an explicit finding of bad faith or willful
misconduct.” Id. And in this case, the court explicitly held, “While CIC’s procedures and
controls were inadequate and its stays violations were significant, I do not find bad faith or
willful misconduct on its part.” AR (Dkt. # 25) at 473.
In sum, the court could not have abused its discretion in declining to award Ms. Snowden
additional fees under any of the theories she urges.
III. CONCLUSION
For all of the foregoing reasons, the decision of the bankruptcy court is REVERSED IN
PART. The issues of emotional distress damages and punitive damages are REMANDED back
to the bankruptcy court for further consideration. In all other respects, this Court AFFIRMS.

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DATED this 21st day of February, 2012.

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A

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Robert S. Lasnik
United States District Judge

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ORDER AFFIRMING IN PART/REVERSING IN
PART DECISION OF BANKRUPTCY COURT – 8