TWO LESSONS. DO NOT FIRST EXPECT A WARNING BEFORE SUIT IS FILED. KEEP PROPER TIME RECORDS AND PROVE UP YOUR FEES.

In a case that is yet to be published, Bankruptcy Judge Stephen Gerling attempts to teach us two important lessons in recovering damages for an automatic stay violation.  Both were learned the hard way.  The first is a lesson for the creditor or violator of the stay, and the second is reserved for the debtor's attorney.

In re Turner, Case No. 04-66972.(Bankr N.D.N.Y. 7/21/2006) renews our faith that provided you prove up your damages appropriately that creditors will not be allowed to escape damages by use of frivolous excuses that blames the debtor or debtor's attorneys for their bad acts.

The case involved Today's Rentals, a rent-to-own company, who repossessed a TV set, which constituted property of the bankruptcy estate, through the use of "deception and trickery".  One day after the repossession the bankruptcy attorney sent Today's Rentals a copy of the motion it intended to file, and did file approximately a month later.  The counsel for Today's Rentals made the argument, as defined by the Court, that damages should not be awarded because the bankruptcy attorney immediately drafted the motion instead of giving the creditor a warning.

The Creditor's Lesson.  The Court ruled that a creditor does not have a right to have "a warning shot fired across it bow" before litigation is instituted for a willful violation of the automatic stay.  The Court stated that "[s]uch a requirement would place an unreasonable burden on a debtor to forewarn the offending creditor to cease and desist before debtor's counsel could reasonably file a Code § 362(h) motion".  In more particular terms it can be said that there exists no precondition to a private cause of action in § 362(h) under the pre-reform law or § 362(k) under the post-reform law, and therefore such an argument is precluded as a defense.  In other words, the burden is not on the debtor to see that a creditor with notice complies with the automatic stay.  The burden is on the creditor to comply with the automatic stay.

The Debtor's Lesson.  Proving up attorneys' fees as damages is the proper responsibility of the debtor's attorney.  There is a defined way to do so.  Failing to do so will be detrimental to getting fully paid for your services.  In this case the debtor's attorney requested $9,200.00.  The time records submitted, in the Court's words, "suffered from the infirmity of 'lumping,'" or generally showing a number of discrete tasks attributable to a single time increment.  Further, the  billing records contained mainly "boilerplate language".  As a result the Court was unable to conduct a "reasonableness" analysis given the lack of detail.  Further, the attorney failed to properly prove up the prevailing rates for attorneys' fees as required by Lodestar, leaving the Court to make that interpretation based on evidence provided by opposing counsel.  As a result, the fees of the debtor's attorney were reduced to $4,100.00, substantially discounting the hard won victory.