AMENDED1 MEMORANDUM OF DECISION AND ORDER ASSESSING SANCTION FOR VIOLATION OF DISCHARGE INJUNCTION
Re: ECF Nos. 888, 902
ANN M. NEVINS, Bankruptcy Judge.
Having concluded the discharge injunction set forth in 11 U.S.C. § 524(a) was violated and that the movant incurred attorneys' fees as a result, the court now requires payment of a portion of the movant's attorneys' fees as a sanction.
On July 27, 2018, this Court entered an Order determining Dorothy DeJesus and Candace Scott (collectively, the "Respondents") violated the discharge injunction and the terms of Curtis J. Jackson, III's ("Debtor") confirmed Chapter 11 plan2 by prosecuting appeals of a judgment in the Appeals Court of Massachusetts3 ("Discharge Violation Order"). ECF No. 902. The court assumes parties' familiarity with the procedural history more fully set forth in the Discharge Violation Order and the Debtor's Motion.4 The Discharge Violation Order directed the Debtor to file an itemized statement of attorneys' fees and costs incurred in connection with the prosecution of the Motion for Sanctions for purposes of determining the Debtor's damages. The court notes the request for punitive damages was withdrawn during a hearing held on July 18, 2018, leaving only the issue of actual or compensatory damages to be assessed.5 In support of his request for attorneys' fee damages, the Debtor submitted two declarations, including:
(1) A declaration by John L. Cesaroni, Esq. of Zeisler & Zeisler, P.C. declaring Zeisler & Zeisler spent 26.40 hours totaling $8,705.00 ("Cesaroni Declaration");6
(2) A declaration by Mark Albano, Esq. of the Albano Law Firm, LLC, as counsel primarily involved with the defense of the appeals, indicating he spent 5.7 hours at $350.00 per hour totaling $1,995.00 ("Albano Declaration").
ECF Nos. 904, 905, respectively.
The attorneys' fees requested totaled $10,700.00. After review of the Albano and Cesaroni Declaration and for the reasons that follow, I conclude sanctions of $6,725.88 in attorneys' fees shall be awarded to the Debtor for the violation of the discharge injunction.
A debtor may bring a claim for a violation of the discharge injunction in the form of an action for a sanction of civil contempt.7 Torres v. Chase Bank USA, N.A. (In re Torres), 367 B.R. 478, 490 (Bankr. S.D.N.Y. 2007); see also, In re Kalikow, 602 F.3d 82, 97 (2d Cir. 2010) ("the equitable power conferred on a bankruptcy court by 11 U.S.C. § 105 is the power to exercise equity in carrying out the provisions of the Bankruptcy Code," including the provisions of § 524(a)). In 2019, the United States Supreme Court articulated the appropriate standard for holding a creditor in contempt for violations of the discharge injunction. See, Taggart v. Lorenzen, 139 S.Ct. 1799 (2019). The Supreme Court held that
[A] court may hold a creditor in civil contempt for violating a discharge order if there is no fair ground of doubt as to whether the order barred the creditor's conduct. In other words, civil contempt may be appropriate if there is no objectively reasonable basis for concluding that the creditor's conduct might be lawful.
Taggart, 139 S. Ct. at 1799.
"After Taggart, if the court finds a "fair ground of doubt" about whether the [d]ischarge barred the [conduct], it cannot hold the creditor in contempt, and therefore cannot award damages or attorneys' fees to compensate the [d]ebtor — even for conduct that offends the discharge." In re DiStefano, 18-05001 (Bankr. W.D. Mich. Oct. 30, 2019). While Taggart concluded a party's subjective intent was not a factor to consider for a finding of civil contempt, it could be relevant in determining the appropriate damages. Taggart, 139 S. Ct. at 1802.
A court has discretion to tailor appropriate sanctions and may consider many factors, including "(1) the character and magnitude of the harm threatened by the continued contumacy, (2) the probable effectiveness of the sanction in bringing about compliance, and (3) the contemnor's financial resources and the consequent seriousness of the sanction's burden." In re Covelli, 550 B.R. 256, 270 (Bankr. S.D.N.Y. 2016) (internal citations omitted).8 "Bankruptcy courts may appropriately use their civil contempt power under § 105(a) to order monetary relief in the form of actual damages, including attorneys' fees, and punitive damages for violation of the discharge injunction. In re Eppolito, 583 B.R. 822, 828-29 (Bankr. S.D.N.Y. 2018) (citing Bessette v. Avco Fin. Servs., 230 F.3d 439, 445 (1st Cir. 2000) (collecting cases)); see also, Mayer v. DeCarlo, 16-CV-1225 (JFB), 2017 WL 825429, at *4 (E.D.N.Y. Mar. 2, 2017) ("[B]ecause `a sanctions award serves many objectives, including compensation and deterrence,' it may include `attorneys' fees reasonably incurred because of the sanctionable conduct.'") (citing In re Khan, 488 B.R. 515, 535-36 (Bankr. E.D.N.Y. 2013) (quoting 28 U.S.C. § 1927)).
However, some courts have held that to award attorneys' fees, the movant must establish the respondent acted in bad faith or in a vexatious or oppressive manner. See In re Haemmerle, 529 B.R. 17, 26 (Bankr. E.D.N.Y. 2015) (awarding reasonable attorneys' fees after concluding creditor's 137 phone calls were not technical, unintended, or quickly remedied, but were in fact wanton and oppressive); In re Torres, 367 B.R. 478, 490 (Bankr. S.D.N.Y. 2007) (court explained the continued refusal to correct the information, with the intent to pressure the debtor into paying the discharged debt, "if proven at trial, would be sufficiently vexatious and oppressive to support at least a sanction in the amount of the plaintiffs' costs and expenses); In re Watkins, 240 B.R. 668, 678 (Bankr. E.D.N.Y. 1999) (court found bad faith sufficient to justify the awarding of attorneys' fees, where, after a creditor's debt was discharged, the creditor contacted the debtors and offered to make a new loan on the condition that the debtors repay the creditor's discharged debt). Ultimately, the burden rests on the court to craft an appropriate sanction balancing the importance of punishing willful violations of the discharge injunction, protecting the purposes of § 524(a)(2), and meanwhile preventing motions for contempt from becoming a profit-making endeavor by awarding attorneys fees carte blanche. See, In re Schmelcher, 11-61607, 2015 WL 639076, at *5 (Bankr. N.D.N.Y. Feb. 13, 2015); In re Frambes, No. 08-22398, 2012 Bankr.LEXIS 791, at *21 (Bankr.E.D.Ky. Feb. 7, 2012)).
Here, the Debtor's actual damages are his attorneys' fees. The failure to compensate the Debtor for the attorneys' fees incurred, where the Respondents' conduct is worthy of a contempt sanction, would not only permit the offending party to violate the discharge injunction with impunity, but would leave the Debtor worse off for his efforts to secure compliance with his rights under the Discharge Order.
Also impacting this court's consideration of damages is the fact the Respondents, despite requests from Debtor's counsel, did nothing to dismiss the State Court Appeals until the entry of the Discharge Violation Order. Respondent's counsel9 explained the State Court Appeals were not withdrawn because it was his belief that the claims on appeal had been excepted from discharge. However, I find counsel's belief objectively unreasonable given the record of the case, and Respondents are not insulated from a finding of contempt or from the imposition of damages.10 ECF No. 901 at 00:14:01-00:15:59. At no time prior to the determination of non-dischargeability of the Respondents' judgment in the adversary proceeding case number 15-02049, or prior to confirmation of the Debtor's Chapter 11 plan, or prior to entry of the Debtor's discharge did Respondents seek clarification from this Court regarding the dischargeability or non-dischargeability of the claims on appeal. After confirmation of the Chapter 11 plan and payment of the Respondents' proofs of claim in full, Respondents continued their litigation against the Debtor. Even when Debtor's counsel made clear they believed the continued pendency of the appeals constituted a discharge violation, Respondents did not seek a ruling on the matter.
Hence, Respondents' conduct does not reflect an unintended or technical violation of the Debtor's discharge, but rather a deliberate attempt to further pursue a discharged claim without actively assuring themselves that pursuit of the claims was permitted.11 Under these circumstances, I find it appropriate to award at least some amount of attorneys' fees.
Turning to the attorneys' fees requested in this case, I find the rates charged by counsel — $325.00 for Attorney Cesaroni, $350.00 for Attorney Albano, and $500.00 for Attorney Berman — are reasonable and commensurate with those rates customarily charged in this District by those who possess similar skills, expertise, and reputation. "[A] Bankruptcy Court [is] entitled to exercise discretion in determining the reasonable amount of fees to award." In re Plumeri, 434 B.R. 315, 333 (S.D.N.Y. 2010) (discussing reasonableness of attorneys' fees in the context of an award for a violation of the automatic stay); See also, In re Nicholas, 496 B.R. 69, 73-74 (Bankr. E.D.N.Y. 2011) ("A court's principal concern when awarding attorneys' fees is to insure that the fees awarded are reasonable.").
While I find the hourly rates charged reasonable, I find some of the specific time spent unreasonable. In the Cesaroni Declaration, the amount of $97.50 incurred on January 25, 2018 regarding "the Scott and DeJesus distributions" appears to relate to the distribution paid to Respondents on account of their non-dischargeable claims and not to the State Court Appeals. ECF No. 904, p. 7. Thus, this amount will not be awarded. Additionally, there are entries on April 4 and 5, 2018 charging for what appears to be internal email communications between Attorney Cesaroni and Attorney Berman. ECF, 904, p. 7. I find it excessive to award the time incurred by each of the two attorneys in the same firm communicating, and I will reduce the request by $150.00 to account for such time. Accordingly, the attorneys' fees set forth in the Cesaroni Declaration will be reduced by $247.50, leaving a total of $8,457.50 requested by Zeisler & Zeisler, P.C.
In the Albano Declaration, there are three entries that will not be allowed. The first is one of the two entries on May 14, 2018 for 0.1 hours for review of an email from Attorney Cesaroni attaching a copy of the Motion for Sanctions as filed. ECF No. 905, p. 8-9. As these entries are duplicative, only one of them will be allowed. Secondly, the two entries on May 15, 2018 and on May 16, 2018 for reviewing and emailing a "Law 360 article regarding the Motion for Sanctions" will not be awarded. Review of articles about motions counsel filed or a case counsel is involved in is not appropriate as damages for a discharge violation. Accordingly, the attorneys' fees set forth in the Albano Declaration will be reduced by $105.00, leaving a total of $1,890.00 requested by Albano Law, LLC.
In addition to these minor reductions, I will reduce the attorneys' fees by thirty-five (35%) percent to account for what appears to be an excessive amount of time incurred drafting a routine motion for a discharge violation — 11.7 hours at least on a thirteen-page motion — and the significant amount of time spent on email communications among Debtor's own counsel. See, In re Nicholas, 496 B.R. 69, 76 (Bankr. E.D.N.Y. 2011) ("If a court determines some of the time claimed by a party should be excluded, it may also use a percentage `deduction as a practical means of trimming fat from a fee application.'") (citing Kirsch v. Fleet Street, Ltd., 148 F.3d 149, 173 (2d Cir.1998).12 Additionally, this percentage deduction accounts for the Respondents' alleged limited financial resources and their reliance on what has turned out to be erroneous advice of their counsel and a misunderstanding of the dischargeability of the claims pending in the State Court Appeals.13 ECF No. 901 at 00:21:20-00:21:40. See, In re Covelli, 550 B.R. 256, 270 (Bankr. S.D.N.Y. 2016) (Court may consider the contemnor's financial resources and the consequent seriousness of the sanction's burden.). Applying this thirty-five (35%) percent reduction, I find the attorneys' fees requested shall be reduced by $3,621.63.
As a sanction for the violation of 11 U.S.C. § 524, attorneys' fees of $6,725.88 are awarded to the Debtor as damages for a discharge injunction violation consisting of $5,447.96 payable to Zeisler & Zeisler, P.C. and $1,277.92 payable to Albano Law, LLC.14 The Court expresses no opinion, as none was requested, as to any allocation or apportionment of the $6,725.88 as between the Respondents, their counsel, or another payor source.15
This is a final order subject to traditional rights of appeal, with a fourteen (14) day appeal period. See, Fed.R.Bankr.P. 8001, et seq., Fed.R.Bankr.P. 8002(a)(1); Ritzen Grp., Inc. v. Jackson Masonry, LLC, ___ U.S. ___, 205 L.Ed.2d 419, 2020 U.S. LEXIS 5262020, WL 201023 (U.S. Jan. 14, 2020).
ACCORDINGLY, it is hereby
ORDERED: That, the Debtor is awarded attorneys' fees totaling $6,725.88 for the Respondents violation of the discharge injunction pursuant to 11 U.S.C. §§ 524(a) and 105(a); and it is further
ORDERED: That, Dorothy DeJesus and Candace Scott shall each pay $638.96 (for a total of $1,277.92) to the law firm of Albano Law, LLC on or before July 1, 2020; and it is further
ORDERED: That, Dorothy DeJesus and Candace Scott shall pay each pay $2,723.98 (for a total of $5,447.96) to the law firm of Zeisler & Zeisler, P.C. on or before July 1, 2020.
