ORDER ON MOTION FOR SANCTIONS1
MIKE K. NAKAGAWA, Bankruptcy Judge.
On October 17, 2018, the court heard the Motion for Sanctions for Intentional Violation of the Automatic Stay and Discharge Injunction ("Sanctions Motion") brought by Dean Tyler Bush ("Debtor"). The appearances of counsel were noted on the record. After arguments were presented, the matter was taken under submission.
BACKGROUND
On July 25, 2017, Debtor filed a voluntary Chapter 7 bankruptcy petition along with his schedules of assets and liabilities ("Schedules"), Statement of Financial Affairs, and other required information. (ECF No. 1).2 On the same date, the Clerk of the Court issued a notice to all creditors ("Bankruptcy Notice") that the case was assigned to Shelley D. Krohn, as Chapter 7 bankruptcy trustee ("Trustee"). (ECF No. 7). The Bankruptcy Notice also informed creditors of the date of a meeting of creditors, the deadline to object to discharge or to determine dischargeability of debt, and the deadline to object to the Debtor's exemptions. Additionally, the Bankruptcy Notice informed all creditors that no property appeared to be available to pay claims, and that creditors therefore need not file proofs of claim unless otherwise notified by the court.
On September 19, 2017, Debtor filed amended Schedules "A/B" and an amended Statement of Financial Affairs. (ECF Nos. 15 and 16).
On October 24, 2017, an order was entered granting Debtor his Chapter 7 discharge ("Order of Discharge"). (ECF No. 19).
On October 27, 2017, a Final Decree was entered discharging the Trustee of any further duties and closing the case. (ECF No. 21).
On June 29, 2018, Debtor filed a motion to reopen his Chapter 7 case. (ECF No. 22).
On July 2, 2018, an order was entered reopening the case. (ECF No. 24).
On August 24, 2018, the instant Sanctions Motion was filed by Debtor, and noticed to be heard on October 3, 2018. (ECF Nos. 25 and 26).
On October 1, 2018, an opposition to the Sanctions Motion ("Opposition") was filed by Las Vegas Hospitalists ("LVH"). (ECF No. 30). At the October 3 hearing, the matter was continued to October 17, 2018, to permit a response to be filed by the Debtor.
On October 9, 2018, Debtor filed a reply to the Opposition ("Reply"). (ECF No. 32).
DISCUSSION
The court having considered the written and oral arguments presented, along with the entire record in this proceeding, concludes that the Sanctions Motion must be denied in part and granted in part.
1. The Automatic Stay.
Debtor seeks damages for violation of the automatic stay pursuant to Section 362(k)(1). Debtor attests that after he received his Chapter 7 discharge, he "began received (sic) debt collection letters from LVH regarding the discharged debt." Bush Declaration at ¶¶ 7 to 23.3 The record reflects that the Order of Discharge was entered on October 24, 2017. (ECF No. 19). Under Section 362(c)(1)(C), the automatic stay terminated with respect to the Debtor when he received his Chapter 7 discharge. Because the only actions taken by LVH occurred after the Debtor received his discharge, the automatic stay did not apply to those activities. Accordingly, there was no automatic stay violation and no sanctions are available under Section 362(k).
2. The Discharge Injunction.
Debtor also seeks damages under Section 105(a) for violation of the discharge injunction that arose under Section 524(a)(2). Under the latter provision, a bankruptcy discharge "operates as an injunction against . . . an act, to collect, recover or offset any such debt as a personal liability of the debtor . . ." 11 U.S.C. §524(a)(2). Under the former provision, a bankruptcy court may "issue any order, process, or judgment that is necessary or appropriate to carry out the provisions . . ." of the Bankruptcy Code. 11 U.S.C. §105(a). Enforcement of the discharge injunction pursuant to Section 105(a) may include the imposition of civil contempt sanctions. See In re Zilog, Inc., 450 F.3d 996, 1007 (9th Cir. 2006). Civil contempt sanctions may include an award of compensatory damages, attorney's fees and costs, and relatively mild, non-compensatory fines. See In re Dyer, 322 F.3d 1178, 1193-95 (9th Cir. 2003). The party seeking contempt sanctions must prove by clear and convincing evidence the violation committed by the respondent. Id. at 1191.
The Ninth Circuit recently clarified the applicable standard for imposition of contempt sanctions for violation of the discharge injunction. In Lorenzen, et al. v. Taggart (In re Taggart), 888 F.3d 438 (9th Cir. 2018), the circuit observed:
[A] bankruptcy court may hold a party in contempt for knowingly violating the discharge injunction . . . We have adopted a two-part test for determining the propriety of a contempt sanction in the context of a discharge injunction: "[T]o justify sanctions, the movant must prove that the creditor (1) knew the discharge injunction was applicable and (2) intended the actions which violated the injunction." . . . To satisfy the first prong, knowledge of the applicability of the injunction must be proved as a matter of fact and may not be inferred simply because the creditor knew of the bankruptcy proceeding . . . Additionally, the creditor's good faith belief that the discharge injunction does not apply to the creditor's claim precludes a finding of contempt, even if the creditor's belief is unreasonable. 888 F.3d at 443-44.4
In response to the instant Sanctions Motion, LVH maintains that it never had notice of the Debtor's bankruptcy case because it was never listed as a creditor in the Schedules. See Opposition at 4:18-24. Moreover, it maintains that it was never included in the Creditor Matrix submitted by the Debtor nor in any certificate of service for any notices issued during the Debtor's bankruptcy case. Id. at 4:25 to 7:2. Because it was not scheduled and did not receive notice, LVH also asserts that the Debtor's obligation was not discharged in this Chapter 7 case. Id. at 5:17-19 ("This debt of $180 was not discharged as this was not listed anywhere (SOFA) of Debtor's Voluntary Petition. It may not be collectible but definitely was not discharged through Debtor's listing and schedules."). The latter assertion, of course, is clearly incorrect because unscheduled debts otherwise excepted from discharge under Section 523(a)(3) are discharged in "no asset" cases under Chapter 7.5
But the failure to schedule a creditor or to provide notice of the bankruptcy is not immaterial to whether a creditor has violated the discharge injunction. In this instance, however, Debtor attests that after he received a collection letter from LVH in January 2018, he called LVH on January 25, 2018, and spoke to an individual named "Kym." See Bush Affidavit at ¶¶ 9-10. He attests that Kym agreed to note the Debtor's bankruptcy filing and discharge in the LVH records. Id. Debtor attests that he received another collection letter in February 2018 and again spoke to Kym on February 22, 2018, who requested a copy of his discharge order. Id. at ¶¶ 11-12. He testifies that on the same date he faxed a copy of the discharge order to Kym who confirmed receipt the following day. Id. at ¶¶ 13-14. Debtor attests that he received another collection letter in March 2018 and again spoke to Kym on March 20, 2018, who requested another copy of his discharge order. Id. at ¶¶ 15-16. He testifies that he faxed another copy of the discharge order to Kym the same day, who again confirmed receipt. Id. at ¶¶ 17, 18 and 19. In addition to confirming receipt, Debtor attests that Kym advised him that he would receive a final billing showing a zero balance. Id. Despite Kym's assurance, Debtor testifies that he received additional collection letters from LVH in April 2018, May 2018, June 2018, and July 2018. Id. at ¶¶ 20, 21, 22, and 23. A copy of each billing statement from February through July is attached as Exhibits 1 through 6 of the Bush Affidavit.6 Each billing statement is in the amount of $180.00 and each of them states that it is for services rendered on December 10, 2016, i.e., before the Debtor's bankruptcy was filed. Debtor attests that through August 6, 2018, he incurred attorney's fees and costs in the amount of $19,500 to stop LVH's efforts to collect a $180.00 debt. Id. at ¶ 28.7
In response, LVH has offered the declaration of its principal, Amit Valera ("Valera Declaration"), as well as the declaration of Hussain Hassanally ("Hassanally Declaration"), who is the owner of Expert Medical Services LLC ("EMS"). Except for paragraph 4 of each declaration describing the addresses for each entity, the remaining paragraphs of the two declarations are identical. Apparently, EMS is a billing service and LVH is a client of EMS, and Kym is an employee of EMS but not LVH. Both declarants attest that LVH was never listed as a creditor in the Debtor's bankruptcy case and that neither entity received notice of the Debtor's bankruptcy. See Valera Declaration at ¶¶ 7-8; Hassanally Declaration at ¶¶ 7-8. Neither declarant, however, denies that EMS was acting on LVH's behalf, that the Debtor informed Kym of both the bankruptcy filing and the discharge, and that Kym acknowledged that the Debtor's resulting balance was zero. Rather, both simply attest that any collection letters "were sent through billing software." Valera Declaration at ¶ 10; Hassanally Declaration at ¶ 10.8
Based on this record, the court concludes that LVH had actual knowledge that the discharge applied to its claim no later than January 25, 2018. Thereafter, LVH could not assert that it was unaware of the bankruptcy and that the discharge applied to its claim, because that information was repeatedly provided to its agent, EMS, through EMS's employee, Kym. Under these circumstances, the first prong of the two-part test has been met.9
The second prong of the two-part test also has been met. The second prong focuses on whether the creditor intended the action that violated the discharge injunction. It is undisputed that the billing statements sent to the Debtor were generated through software used by EMS. Debtor's unrebutted testimony is that he informed EMS's employee that LVH's claim had been discharged, but EMS apparently took no effective steps thereafter to prevent the software from sending further billing statements to the Debtor. The failure of LVH's agent to act on the information does not excuse the issuance of the subsequent billing statements. Compare Eskanos & Adler, P.C. v. Leetien (In re Eskanos & Adler, P.C.), 309 F.3d 1210, 1215 (9th Cir. 2002) (creditor offered no evidence that it moved expeditiously to correct violation of the automatic stay). Nor would the ordinary functions of EMS's software negate the intentional nature of the issuance of the billing statements. Compare Sundquist v. Bank of Am., N.A., 566 B.R. 563, 591 (Bankr. E.D. Cal. 2017) ("A business organization that elects to use computers to control acts that are in the line of fire of the automatic stay is no less exposed to damages for `willful' stay violations than entities that rely on real people to direct action. In other words, Bank of America is responsible for (1) the structure of its software and procedures, (2) the accuracy and timeliness of data entry and implementation, and (3) the efficiency and accuracy of its personnel."). See also Associated Credit Services, Inc. v. Campion (In re Campion), 294 B.R. 313, 316 (B.A.P. 9th Cir. 2003) (willful postpetition wage garnishment occurred because debt collector's computer system failed to recognize that the individual debtor had filed for bankruptcy relief). EMS relied on its software to generate the LVH billing statements that were sent to the Debtor rather than having an employee prepare them manually. Reliance on the anticipated functions of the software was intentional and the resulting actions also were intentional.
Based on the foregoing, the court concludes that the Debtor has met his burden by clear and convincing evidence that contempt sanctions for violation of the discharge injunction are appropriate. The evidentiary record establishes that the violation occurred from January 2018 through July 2018, i.e., a seven-month period.10 Compensatory damages, if any, proximately caused during that period will be considered as well as any reasonable attorney's fees incurred.11 A determination of any request for attorney's fees under a "lodestar" standard will require the submission of contemporaneously maintained hourly fee statements.12 Absent a settlement of this matter, an evidentiary hearing will be scheduled, limited to the determination of damages and legal fees.
IT IS THEREFORE ORDERED that the Motion for Sanctions for Intentional Violation of the Automatic Stay and Discharge Injunction, brought by Dean Tyler Bush, Docket No. 25, be, and the same hereby is, DENIED IN PART and GRANTED IN PART.
IT IS FURTHER ORDERED that the instant motion is DENIED with respect to any sanctions for violation of the automatic stay.
IT IS FURTHER ORDERED that the instant motion is GRANTED with respect to sanctions for violation of the discharge injunction, with the amount of damages, if any, to be determined at a limited evidentiary hearing. Additionally, the award of attorney's fees and costs, if any, in connection with the violation of the discharge injunction, will require the submission of an hourly billing statement by counsel for the Debtor.
IT IS FURTHER ORDERED that a status conference to schedule a limited evidentiary hearing will be held on November 14, 2018, at 2:30 p.m. in the Foley Federal Building, 300 Las Vegas Blvd. South, Las Vegas, Nevada, in Courtroom 2.
