Right to Attorneys’ Fees for Stay Violations Extends to Appeals

Posted by NCBRC - January 29, 2018

In a case of first impression, the Eleventh Circuit held that the “explicit, specific, and broad language [in section 362(k)] permits the recovery of attorneys’ fees incurred in stopping the stay violation, prosecuting a damages action, and defending those judgments on appeal.” Mantiply v. Horne (In re Horne), No. 16-16789 (11th Cir. Dec. 5, 2017).

After Patricia and Richard Horne filed for chapter 7 bankruptcy, attorney, Mary Beth Mantiply, filed and pursued state court litigation on behalf of her clients against Mr. Horne. The bankruptcy court found the litigation violated the automatic stay and awarded damages and attorneys’ fees of over $81,000.00 to the Hornes. The district court affirmed and added almost $35,000 to the attorney fee tally. Ms. Mantiply then moved to recuse the bankruptcy judge and, when that motion was denied, she appealed again to the district court. The district court affirmed but declined to award attorneys’ fees incurred in the recusal appeal. Ms. Mantiply appealed the denial of the recusal motion and the Hornes cross-appealed the denial of fees. The Eleventh Circuit affirmed the recusal decision and remanded to the district court to either award the Hornes their attorney fees for the appeal or explain why the recusal litigation did not involve the stay violation. In re Horne, 630 F. App’x 908, 909 (11th Cir. 2015) (per curiam) (unpublished). The district court determined that it erred in declining to award the fees and added approximately $15,000 to the tally. Not one to give up easily, Ms. Mantiply sought certiorari in the Supreme Court. Her petition was denied. The Eleventh Circuit referred the Hornes’ subsequent fee request to the district court and that court determined that the stream of litigation, up to and including the petition for certiorari, had its source in the stay violation and that the Hornes were entitled to additional attorneys’ fees in the amount of $92,495.86. True to form, Ms. Mantiply appealed.

Relying on Baker Botts L.L.P. v. ASARCO LLC, 576 U.S. ___, 135 S. Ct. 2158 (2015), which involved section 330(a)(1) dealing with compensation for professional services, Ms. Mantiply argued that the American Rule applies and that, while section 362(k)(1) supports the award of attorneys’ fees for litigating the stay violation, it did not justify deviation from that Rule to an award of attorneys’ fee for subsequent appeals or the recusal motion and appeals.

The court disagreed finding that the language of section 362(k)(1) providing that “an individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys’ fees,” clearly expanded the scope of fee awards beyond the American Rule. Specifically, the court held that section 362(k)(1) is not limited solely to those fees incurred in ending the stay violation. In so holding, the court agreed with the decision in In re Schwartz-Tallard, 803 F.3d 1095, 1101 (9th Cir. 2015) (en banc) where that court declined to read limiting language into section 362(k). The court reasoned that, where the purpose of the fee-shifting provision was to make it possible for a financially-strapped debtor to act as “private attorney general,” it would defeat that goal if the debtor had to pay the fees incurred on appeals and other litigation stemming from the stay violation.

The court made quick work of Ms. Mantiply’s remaining arguments relating to procedural and documentation issues, ultimately concluding that the district court did not abuse its discretion in finding that the fees sought by the Hornes were adequately documented and reasonable under the facts and circumstances of the case. In the interest of minimizing further litigation, rather than referring the case again to the district court for a determination of the appropriate legal fees owed to the Hornes for the current appeal, the circuit court awarded an additional $30,559.98 in fees.

Horne 11th cir opinion Dec 2017

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