11th Cir: §362(k)(1) Authorizes Debtors’ Attorneys’ Fees in Ending a Willful Violation of Stay, Prosecuting a Damages Violation, and Defending Appeal of those Issues

11th Cir: §362(k)(1) Authorizes Debtors’ Attorneys’ Fees in Ending a Willful Violation of Stay, Prosecuting a Damages Violation, and Defending Appeal of those Issues

Plaintiff/Appellant appeals the district court’s order awarding Debtor’s the attorneys’ fees and costs that they incurred because of her unsuccessful appeal of the damages award to the Debtors for her violation of the Bankruptcy Code’s automatic stay provision. This case involves an issue of first impression in this Circuit: whether the Bankruptcy Code authorizes payment of attorneys’ fees and costs incurred by debtors in successfully pursuing an action for damages resulting from the violation of the automatic stay and in defending the damages award on appeal.

The Debtors filed for Chapter 7 bankruptcy on January 10, 2011. They were discharged from bankruptcy on May 10, 2011. The  bankruptcy filing triggered an automatic stay of any litigation against them under 11 U.S.C. § 362(a)(1). Despite the stay, however, Plaintiff—an attorney—filed a civil action on behalf of her clients against one of the Debtors in state court. And even after being informed of the stay, Plaintiff repeatedly refused to voluntarily dismiss the action she had filed.  Eventually it was dismissed in November 2011.

The Debtors filed a motion in the bankruptcy court seeking damages for Plaintiff’s violation of the automatic stay under Section 362(k)(1).  The bankruptcy court awarded the Debtors $81,714.31 in damages, including $41,714.31 in attorneys’ fees. Plaintiff appealed that decision to the district court, which affirmed and also awarded the Debtors an additional $34,551.28 in attorneys’ fees incurred in the appeal of the damages award.

Plaintiff then filed two identical motions in the bankruptcy court and the district court seeking the bankruptcy judge’s recusal. The bankruptcy court denied Appellant’s recusal motion. Appellant appealed that decision to the district court, which affirmed but denied the Debtors’ motion for attorneys’ fees incurred in defending the appeal of the recusal order.

Appellant appealed the district court’s affirmance of her denied recusal motion, and the Debtors cross-appealed the district court’s denial of their motion for attorneys’ fees incurred defending the recusal order on appeal to the district court.  This Court affirmed in part and remanded.  First, we affirmed the district court’s conclusion that the bankruptcy judge’s recusal was not required in this case. Second, we remanded for the district court to either award the Debtors attorneys’ fees under the mandatory fees provision of Section 362(k), or explain why the recusal motion did not involve litigation over the stay violation and thus did not entitle the Debtors to attorneys’ fees. Id. at 912-13. On remand, the district court found that the Debtors’ requested attorneys’ fees were indeed mandatory and awarded an additional $14,918.60 to the Debtors.

The district court also found that the skill and experience required of counsel in defending the appeals, the favorable results obtained, and the undesirability of the case—which required undertaking legal action against a fellow lawyer—supported finding the requested attorneys’ fees to be reasonable as well. Based on these findings, the district court awarded the Debtors appellate fees and costs of $92,495.86. This appeal followed.

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