Virginia Lawyers Weekly VA Lawyers Weekly
Where debt collectors sent debtors a payoff letter and offered a discounted payment for the judgment debt after the debtors filed for bankruptcy protection, the debt collectors violated the discharge injunction. They must pay $25,000 the debtors incurred in attorney’s fees remedying the violation.
Background
Morton Craig Skaggs and Laurie Lynn Skaggs are the bankruptcy debtors and the plaintiffs in this case. Stephen W. Gooch and Stephen W. Gooch PC are debt collectors and the defendants in this case. The defendants violated the bankruptcy discharge injunction. The question for the court is to what extent the defendants should pay damages.
Analysis
When the defendants issued the payoff letter and offered a discounted payment for the judgment debt, they violated the discharge injunction. Because the defendants had no objectively reasonable basis on which to believe the judgment survived the bankruptcy discharge order or that their collection activity was otherwise lawful, the defendants shall be held in contempt of the discharge order.
Based on the evidence, the court concludes that the defendants did not act in good faith. Even if the defendants’ actions did not rise to the level compelling this court to award punitive damages, all the same the actions were unjustified, unreasonable and harmful.
After a review of the entire evidentiary record and a consideration of both parties’ arguments, the court finds that the plaintiffs’ request for $25,000 for attorney’s fees is reasonable and necessary to recompense the debtors for the harm caused by the defendants. The attorney’s time records show that the plaintiffs incurred attorney’s fees in the amount of $25,675.00 from March 16, 2020, through June 1, 2022, in connection with the closing of the sale of the property and pursuing the motion for contempt to remedy the violation.
These amounts are supported by testimony of the debtor and the court docket in this case. The court finds the hourly rate is within (and indeed lower than) rates ordinarily charged by other experienced bankruptcy attorneys in this district. The time records are detailed and reflect no duplication of services nor unnecessary or unrelated services. The amount of time spent for each task is reasonable and not excessive. It is clear from the statements made at the evidentiary hearing, as well as a review of the time records and the court’s own docket, that the attorney’s fees the plaintiffs incurred after the closing date were solely to remedy the violation.
Mr. Skaggs additionally incurred time away from his work plus transportation expenses to attend hearings and depositions. He was obviously emotionally disturbed by the events. Yet, the court will not grant his request for $2,000 as additional damages.
To begin with, the court finds emotional damages should not be awarded in the absence of objective corroborating evidence quantifying the damage amount. On top of that, even if there is corroborating documentary evidence, the Fourth Circuit has disallowed emotional distress as an appropriate form of damages for civil contempt. As such, this court is not willing to hold otherwise.
Likewise, the court will not award damages for Mr. Skaggs’s lost opportunity cost. Although Mr. Skaggs testified about his loss of time, and loss of potential earnings from his self-employment, he did not provide corroborating evidence. He asserted he had documentation corroborating his testimony but failed to introduce timely into evidence any documentation. Accordingly, the court denies Mr. Skaggs’s request for loss of time, potential earnings and out-of-pocket expenses as speculative.
This court previously ruled in this case that punitive damages are not necessary to coerce the defendants to cease collection activity. Consistent with that decision, the court will not impose non-compensatory damages for this violation.
Debtors’ motion for sanctions granted in part, denied in part.
Skaggs v. Gooch, Case No. 17-50941, Jan. 19, 2023. WDVA Bankr. at Harrisonburg (Connelly). VLW No. 023-4-003. 15 pp.
