Veronica L. Russell

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AUTHENTICATED / Tt

U.S. GOVERNMENT
INFORMATION

GPO

UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF OHIO

In Re: )
) JUDGE RICHARD L. SPEER
Veronica Russell )
) Case No. 10-33164
Debtor(s) )
)
DECISION AND ORDER

This cause comes before the Court after a Hearing on the Debtor’s Motion for Contempt of
Court and for Violation of the Automatic Stay. (Doc. No. 10). The Debtor’s Motion is brought
against the Toledo Postal Employees’ Credit Union, Inc., a creditor, and its legal counsel, Thomas
Overly. On the Debtor’s Motion, the Court has now had the opportunity to review the arguments
submitted by the Parties, both oral and written, as well as the entire record in this case. Based upon
this review, the Court finds that the Debtor’s Motion for Contempt of Court and for Violation of the

Automatic Stay should be Granted, subject to the limitations set forth herein.
BACKGROUND

The Toledo Postal Employees’ Credit Union holds a judgment against the Debtor. To enforce
its judgment, the Credit Union (hereinafter the “Creditor”) effectuated a wage garnishment with the
Debtor’s employer, the United States Postal Services. The order of garnishment was entered by the

Lucas County Court of Common Pleas, which continued thereafter to administer the garnishment.

While the garnishment order was in effect, the Debtor filed a petition in this Court for relief
under Chapter 7 of the United States Bankruptcy Code. The Debtor filed her petition for bankruptcy
relief on May 6, 2010. Contemporaneous with the commencement of her bankruptcy case, counsel
for the Debtor provided notice of the bankruptcy filing to Creditor’s counsel, Thomas Overly, and

to the Lucas County Court of Common Pleas.

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In re: Veronica Russell
Case No. 10-33164

After the commencement of her bankruptcy case, the Debtor’s wages were garnished on two
separate occasions. The first postpetition garnishment was for the amount of $451.00 and occurred
on or about May 14, 2010. On May 28, 2010, the Debtor’s wages were again garnished; this time
in the amount of $425.00.

At the time of each of these garnishments, Creditor’s counsel was immediately notified of
the action. Documentation, however, was not filed by Creditor’s counsel to have the state court
release the garnishment until May 28, 2010, after the second postpetition garnishment to the Debtor’s
wages had occurred. The Debtor has since been reimbursed all those funds garnished on a

postpetition basis.

On June 2, 2010, the Debtor brought the action now before the Court. For her action, the
Debtor alleged that, since the commencement of the case, the Creditor and Creditor’s counsel “are
in direct violation of the automatic stay by virtue of their failure to take any action to cease and/or
withdraw the garnishment proceeding” against her. (Doc. No. 10). Based on these allegations, the |
Debtor asks the Court to award her the amount of funds wrongfully garnished, plus statutory interest
and attorney’s fees and punitive damages pursuant to 11 U.S.C. § 362(k). (Doc. No. 10).

DISCUSSION

The matter before the Court concerns the application of the automatic stay as set forth in 11
U.S.C. § 362. Specifically, damages are sought based upon the Debtor’s allegation that the Creditor
and Creditor’s counsel violated the automatic stay. Determinations concerning a violation of the
automatic stay, and an award of damages thereunder, are deemed to be “core proceedings.”
Accordingly, this Court has the jurisdictional authority to enter final orders and judgments in this

matter. 28 U.S.C. § 157; In re Pawlowicz, 337 B.R. 640, 645 (Bankr. N.D.Ohio 2005).

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In re: Veronica Russell
Case No. 10-33164

Upon the commencement ofa bankruptcy case, an automatic stay goes into effect. 11 U.S.C.
§ 362(a) The scope of the stay is broad and operates to enjoin essentially any act, whether the
commencement or continuation thereof, by a creditor to collect ona prepetition claim. Inre Harchar,
393 B.R. 160, 167 (Bankr. N.D.Ohio 2008). The purpose of the automatic stay is to provide the
debtor with some breathing room from creditor’s collection efforts and to “ensure the orderly
liquidation of the debtor’s bankruptcy estate.” In re Perviz, 302 B.R. 357, 365 (Bank. N.D. Ohio
2003).

The scope of the automatic stay is sufficiently broad so as to place an affirmative duty ona
creditor garnishing a debtor’s wages to release the garnishment upon receiving notice of the debtor’s
bankruptcy. In re Scroggin, 364 B.R. 772, 779-80 (10" Cir. B.A.P. 2007); In re Timbs v. Gross,
178 B.R. 989, 991 (Bankr. E.D. Tenn. 1994); Inre Dennis, 17 B.R. 558, 560 (Bankr. M.D.Ga. 1982).
At the same time, it is a familiar maxim that the law does not require vain or useless acts.' Contrary,
therefore, to the Debtor’s position, it cannot be stated with certainty that a duty to release the
garnishment arose on the part of Creditor’s counsel on May 6, 2010, when the Debtor commenced
her bankruptcy case and notice thereof was first provided to Creditor’s counsel. This is because
contemporaneous with this action, Debtor’s counsel also provided notice of the pending bankruptcy
to the court administering the garnishment, an act which one could reasonably construe as sufficient

to effectuate a release of the garnishment.

In any event, it is clear that by May 14, 2010, an affirmative duty arose on the part of
Creditor’s counsel to take action to release the wage garnishment. On that day, Creditor’s counsel
received notice that the Debtor’s wages were still being garnished, notwithstanding that prior notice

had been provided to the court administering the garnishment. No action, however, was undertaken

1

Quod vanum et inutile est, lex non requirit. “The law does not require what is vain and useless.”
BLACK’S LAW DICTIONARY app. B (8" ed. 2004).

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In re: Veronica Russell
Case No. 10-33164

by Creditor’s counsel to prevent any further wage garnishments until May 28, 2010, after the
Debtor’s wages had again been garnished. Based, therefore, upon this sequence of events it can only
be concluded that Creditor’s counsel, by failing to take action after May 14 to release the

garnishment, violated the automatic stay when Debtor’s wages were again garnished on May 28.

Where a violation of the automatic stay has occurred, a debtor’s ability to recover damages
is governed by 11 U.S.C. § 362(k)(1). Under this provision, an award of actual damages is
mandatory upon a finding that the violation of the stay was willful. Inre Mosher, 432 B.R. 472, 476
(Bankr. D.N.H. 2010). Specifically, § 362(k)(1) provides, inter alia, “... 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.”

It is well-established that no specific intent is required to sustain a finding that a creditor
willfully violated the stay. Harris v. Memorial Hosp. (In re Harris), 374 B.R. 611, 615 (Bankr.
N.D.Ohio 2007). Instead, a willful violation of the stay occurs simply “when the creditor knew of
the stay and violated the stay by an intentional act.” TranSouth Fin. Corp. v. Sharon (In re Sharon),
234 B.R. 676, 687 (6" Cir. B.A.P. 1999) (interpreting § 362(h)). For this purpose, Creditor’s counsel
fully acknowledged that he received actual notice of the Debtor’s bankruptcy filing soon after the
Debtor commenced her case. As a result, § 362(k)(1) requires that any damages sustained by the

Debtor after May 14, 2010, when the stay violation first occurred, are compensable.

As a causational requirement of 362(k), any compensatory damages awarded to a debtor
must be the result of an “actual injury.” Archer v. Macomb County Bank, 853 F.2d 497, 500 (6" Cir.
1988). A “damage award must not be based on ‘mere speculation, guess, or conjecture.’” Id. at 499,
citing John E. Green Plumbing & Heating Co. v. Turner Construction Co., 742 F.2d 965, 968 (6
Cir.1984), cert. denied 471 U.S. 1102, 105 S.Ct. 2328, 85 L.Ed.2d 845 (1985). As the individual

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In re: Veronica Russell
Case No. 10-33164

seeking recovery, the Debtor has the burden of proof on the issue of damages. Jn re Sharon, 234 B.R.
at 687.

As taken from her Motion, the Debtor’s actual damages are comprised of two components:
the funds wrongfully garnished, and attorney’s fees. For all practicable purposes, however, the first
component has been rendered moot, with the postpetition funds garnished from the Debtor having
been returned to her. The Debtor’s actual damages are, thus, limited to attorney’s fees. Under a
billing statement provided to the Court, Debtor’s attorney alleged that, in addressing the stay

violation, she rendered $1,575.00 worth of legal services.

Section 362(k) explicitly provides that any attorney fees incurred by a debtor as the result of
a stay violation are compensable as actual damages. While § 362(k)(1) does not specify any standard
acourt is to employ when making an award of attorney fees, a few parameters are generally accepted.
First, and foremost, the attorney fees must be reasonable. Inre Harris, 374 B.R. 611, 617 (Bankr.
N.D.Ohio 2007).

When determining the reasonableness of fees, courts may and do frequently look to other
provisions of the Bankruptcy Code, primarily § 330 which governs awards of professional fees. Id.
Under this provision, it is provided that when determining the amount of reasonable compensation
to be awarded, the court should take into account “whether the compensation is reasonable based on
the customary compensation charged by comparably skilled practitioners in cases other than cases

under this title.” § 330(a)(3)(F).

Additionally, the attorney fees requested should bear a reasonable relationship to the amount
in controversy. Mitchell v. Banklllinois, 316 B.R. 891 (S.D.Tex.2004). In this way, significant
awards of attorney fees are rarely appropriate where the debtor has no other damages besides the

attorney fees. In re Risner, 317 B.R. 830, 840 (Bankr. D.Idaho 2004). A debtor is also under a duty

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In re: Veronica Russell
Case No. 10-33164

to mitigate their damages. For attorney fees, this means that after reasonable offers of settlement are
made, any attorney fees incurred thereafter must be borne by the debtor. Jn re Esposito, 154 B.R.

1011, 1015-16 (Bankr.N.D.Ga.1993).

Within these parameters, the Court, having reviewed the billing statement submitted by
Debtor’s attorney, finds that the sum of $650.00 constitutes a reasonable figure for attorney’s fees.
Judgement, therefore, will be rendered in the Debtor’s favor in this amount. The Debtor’s further

request for punitive damages, however, will be denied.

Section 362(k) authorizes an award of punitive damages “in appropriate circumstances.” The
term “appropriate circumstances” is not defined by the Bankruptcy Code, but has generally been held
to require egregious misconduct on the creditor’s part such as that which is taken in arrogant

defiance of federal law. In re Pawlowicz, 337 B.R. at 648.

In this matter, while the conduct of Creditor’s counsel was hardly laudatory, thus warranting
an award of actual damages, his conduct can hardly be said to be egregious. Specifically, it is noted
that after the Debtor’s wages were garnished a second time, Creditor’s counsel took prompt action
to have the garnishment released. Accordingly, the Debtor’s award of damages will be limited to

attorney fees in the amount of $650.00.

In reaching the conclusions found herein, the Court has considered all of the evidence,
exhibits and arguments of counsel, regardless of whether or not they are specifically referred to in

this Decision.

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In re: Veronica Russell
Case No. 10-33164

Accordingly, it is

ORDERED that, based upon a violation of the automatic stay of 11 U.S.C. § 362(a),
judgment for legal fees is hereby rendered pursuant to 11 U.S.C. § 362(k)(1) in favor of the Debtor,

Veronica Russell, against Creditor’s legal counsel, Thomas Overly, in the amount of Six Hundred

Fifty Dollars ($650.00).

IT IS FURTHER ORDERED that, pursuant to Bankruptcy Rule 9021, the Clerk, United
States Bankruptcy Court, shall issue a judgment entry in accordance with the above order.

Dated: November 18, 2010

[4 Zan

Richard Le

United States
Bankruptcy Judge

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CERTIFICATE OF SERVICE

Copies were mailed this 18 day of November 2010 to:

Douglas A Dymarkowski
5431 Main Street
Sylvania, OH 43560

Recovery Management Systems Corporation
25 S.E. 2nd Avenue, Suite 1120
Miami, FL 33131

Veronica L. Russell
3617 Foxbrook Ct.
Toledo, OH 43611

Judith A Myers
316 N. Michigan, Suite 300
Toledo, OH 43604

Toledo Postal Employees Credit Union
P.O. Box 117
Toledo, OH 43697

Sheila A McKeon
420 Madison Avenue Suite 1250
Toledo, OH 43604

Thomas G Overley
3450 West Central Ave. Suite 332
Toledo, OH 43606

/s/Jennifer S Huff
Deputy Clerk, U.S. Bankruptcy Court

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