Filed: Feb. 04, 2021
Latest Update: Feb. 06, 2021
NOT FOR PUBLICATION FILED
FEB 4 2021
SUSAN M. SPRAUL, CLERK
U.S. BKCY. APP. PANEL
OF THE NINTH CIRCUIT
UNITED STATES BANKRUPTCY APPELLATE PANEL
OF THE NINTH CIRCUIT
In re: BAP No. NV-20-1195-BFL
WILLIE N. MOON and ADNETTE M.
GUNNELS-MOON, Bk. No. 13-12466-MKN
Debtors.
RUSHMORE LOAN MANAGEMENT
SERVICES, LLC,
Appellant,
v. MEMORANDUM 1
WILLIE N. MOON; ADNETTE M.
GUNNELS-MOON,
Appellees.
Appeal from the United States Bankruptcy Court
for the District of Nevada
Mike K. Nakagawa, Bankruptcy Judge, Presiding
Before: BRAND, FARIS, and LAFFERTY, Bankruptcy Judges.
1 This disposition is not appropriate for publication. Although it may be cited for
whatever persuasive value it may have, see Fed. R. App. P. 32.1, it has no precedential
value, see 9th Cir. BAP Rule 8024-1.
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INTRODUCTION
Appellant Rushmore Loan Management Services, LLC ("Rushmore")
appeals an order granting the debtors' supplemental motion for attorney's
fees under § 362(k)(1). 2 We VACATE and REMAND.
FACTS
After reopening their bankruptcy case, chapter 13 debtors Willie N.
Moon and Adnette M. Gunnels-Moon filed a motion seeking to hold
Rushmore in contempt for violation of the automatic stay and the discharge
injunction.
On February 25, 2020, the bankruptcy court entered an Order and
Memorandum Decision granting the Moons' contempt motion and awarding
them $100,742.10 3 in compensatory damages and $200,000 in punitive
damages for Rushmore's willful violation of the automatic stay under
§ 362(k)(1). 4 In re Moon, 613 B.R. 317, 361 (Bankr. D. Nev. 2020). The court
further awarded the Moons their attorney's fees and costs in an amount to be
determined upon proof. The court declined to award the Moons any damages
for Rushmore's violation of the discharge injunction. Rushmore appealed the
bankruptcy court's decision to the BAP, challenging primarily the Moons'
compensatory and punitive damage award. The Moons cross-appealed,
2 Unless specified otherwise, all chapter and section references are to the
Bankruptcy Code, 11 U.S.C. §§ 101–1532.
3 Out of this amount, $100,000 was awarded to Mr. Moon for his emotional distress.
4 Section 362(k)(1) provides, "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."
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challenging the bankruptcy court's decision to deny damages for Rushmore's
discharge injunction violation.
Soon thereafter, the Moons sought the attorney's fees and costs they
incurred in the contempt proceeding against Rushmore under § 362(k)(1)
("First Fee Motion"). They also requested a fee enhancement multiplier of 1.5.
Rushmore opposed the First Fee Motion, arguing that the Moons had
not "incurred" any attorney's fees as "actual damages" under § 362(k)(1),
because there was no agreement obligating them to pay their attorney, Mr.
Christopher P. Burke. Rushmore also argued that if the court was inclined to
award the Moons their attorney's fees, any award should be limited to time
spent on their stay violation claim.
After a hearing, the bankruptcy court granted the First Fee Motion,
awarding the Moons their requested attorney's fees and costs of $67,007.94
under § 362(k)(1) ("First Fee Order"). The court denied the Moons' request for
a fee enhancement. Rushmore appealed the First Fee Order to the BAP. The
Moons cross-appealed the bankruptcy court's decision denying their request
for a fee enhancement.
On appeal, the Panel reversed the bankruptcy court's decision with
respect to the $100,000 awarded to Mr. Moon for his emotional distress, and
vacated and remanded the $200,000 punitive damages award for further
consideration by the bankruptcy court in light of the significantly reduced
compensatory award. The Panel affirmed the bankruptcy court's decision
denying the Moons damages for Rushmore's discharge injunction violation.
3
See Rushmore Loan Mgmt. Servs., LLC v. Moon (In re Moon), BAP Nos. NV-20-
1057-BGTa & NV-20-1070-BGTa, 2021 WL 62629 (9th Cir. BAP Jan. 7, 2021).
As for the First Fee Order, the Panel agreed that the Moons were
entitled to attorney's fees and costs under § 362(k)(1), despite that Mr. Burke
represented them on a contingent fee basis and they had no personal
obligation to pay him for his services. However, the Panel vacated and
remanded the First Fee Order for two reasons: (1) the bankruptcy court did
not explain why it awarded attorney's fees under § 362(k)(1) for what
appeared to be time spent on the Moons' failed discharge injunction violation
claim under § 524(a)(2); and (2) given the Panel's reversal of Mr. Moon's
damage award and remand of the punitive damages award for further
review, the Panel believed it was appropriate to allow the bankruptcy court
to reconsider the amount of the attorney's fee award and whether a fee
enhancement was appropriate. See Rushmore Loan Mgmt. Servs., LLC v. Moon
(In re Moon), BAP Nos. NV-20-1144-BTaF & NV-20-1155-BTaF, 2021 WL 62630
(9th Cir. BAP Jan. 7, 2021).
While the above appeals were pending, the Moons filed a supplemental
fee motion requesting an additional $3,500 in attorney's fees ("Supplemental
Fee Motion"). That is the subject of the instant appeal. The Moons incurred
these fees for time spent defending against Rushmore's opposition to the First
Fee Motion. Rushmore opposed the Supplemental Fee Motion, raising the
same arguments it raised in opposition to the First Fee Motion.
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The bankruptcy court entered an order granting the Supplemental Fee
Motion in full under § 362(k)(1) ("Supplemental Fee Order"). Rushmore
timely appealed.
JURISDICTION
The bankruptcy court had jurisdiction under 28 U.S.C. §§ 1334 and
157(b)(1) and (2)(A). We have jurisdiction under 28 U.S.C. § 158.
ISSUE
Did the bankruptcy court abuse its discretion in awarding the Moons
their supplemental attorney's fees under § 362(k)(1)?
STANDARD OF REVIEW
We review for abuse of discretion an award of attorney's fees under
§ 362(k). Easley v. Collection Serv. of Nev., 910 F.3d 1286, 1289 (9th Cir. 2018).
The bankruptcy court abuses its discretion if it applies the wrong legal
standard or its findings of fact are clearly erroneous. Olomi v. Tukhi (In re
Tukhi),
568 B.R. 107, 112-13 (9th Cir. BAP 2017) (citing United States v. Hinkson,
585 F.3d 1247, 1261-62 (9th Cir. 2009) (en banc)).
DISCUSSION
An award of costs and attorney's fees is mandatory upon a finding that
the stay was willfully violated. Ramirez v. Fuselier (In re Ramirez), 183 B.R. 583,
589 (9th Cir. BAP 1995) ("The words 'shall recover' indicate that Congress
intended that the award of actual damages, costs and attorney's fees be
mandatory upon a finding of a willful violation of the stay.") (citing Tsafaroff
v. Taylor (In re Taylor), 884 F.2d 478, 483 (9th Cir. 1989); Sansone v. Walsworth
5
(In re Sansone), 99 B.R. 981, 987 (Bankr. C.D. Cal. 1989)). Further, attorney's
fees and costs are recoverable by the debtor for successfully prosecuting an
action for damages under § 362(k)(1). Am.'s Servicing Co. v. Schwartz-Tallard
(In re Schwartz-Tallard),
803 F.3d 1095, 1101 (9th Cir. 2015) (en banc).
Rushmore challenges the bankruptcy court's award of the Moons'
supplemental attorney's fees on the same grounds upon which it challenged
the First Fee Order, namely, that the Moons did not incur any fees because
there was no agreement obligating them to pay their attorney. Another Panel
has rejected that argument, and so do we. Rushmore further argues that not
all of the fees should be recoverable under § 362(k)(1), since at least some of
them were incurred pursuing fees and costs related to discharge violations.
While the Panel agreed that the Moons were entitled to attorney's fees
and costs, it vacated and remanded the First Fee Order for further findings
and consideration by the bankruptcy court given the court's sparse analysis
as to why the entire fee award was appropriate under § 362(k)(1) and the
Panel's decision respecting the Moons' damages award. Consequently,
because the two fee orders are so closely related, we believe it appropriate to
vacate and remand the Supplemental Fee Order for further consideration by
the bankruptcy court.
CONCLUSION
For the reasons stated above, we VACATE and REMAND the
Supplemental Fee Order.
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