Opinion
Bk. No. 97-12062-JMD, Adv. No. 99-1011-JMD, Chapter 13
June 18, 1999
Raymond J. DiLucci, Esq. RAYMOND J. DILUCCI, P.A. Attorney for Debtors/Plaintiffs.
Kathleen Walls, Esq. PRATT VREELAND KENNELLY ZONAY, LTD Attorney for Defendants.
MEMORANDUM OPINION
I. INTRODUCTION
The Court has before it the defendants' request for sanctions contained in their motion to compel discovery, which was filed with the Court on May 20, 1999 and argued by the parties on June 2, 1999. The defendants request that the plaintiffs and their attorney, Raymond DiLucci, be ordered to pay the attorney's fees and costs of Kathleen Walls, the defendants' attorney, in the amount of $1,668.61. These fees and expenses were incurred as a result of the plaintiffs' failure to respond to the defendants' discovery request.
This Court has jurisdiction of the subject matter and the parties pursuant to 28 U.S.C. § 1334 and 157(a) and the "Standing Order of Referral of Title 11 Proceedings to the United States Bankruptcy Court for the District of New Hampshire," dated January 18, 1994 (DiClerico, C.J.). This is a core proceeding in accordance with 28 U.S.C. § 157(b).
II. FACTS
On April 2, 1999, the defendants served interrogatories on the plaintiffs. Pursuant to Federal Rule of Bankruptcy Procedure 7033 and Federal Rule of Civil Procedure 33(b)(2), the answers to these interrogatories were due on May 2, 1999. Ms. Walls requested responses to the interrogatories in a letter to Mr. DiLucci dated May 6, 1999. Receiving no responses, Ms. Walls attempted to speak to Mr. DiLucci by telephone on May 11, 1999 to verbally request the same. Again, Ms. Walls received no responses.
"The party upon whom the interrogatories have been served shall serve a copy of the answers, and objections if any, within 30 days after the service of the interrogatories." Fed.R.Civ.P. 33(b)(2).
On May 20, 1999, Ms. Walls filed with the Court a motion to compel interrogatory answers. She certified her attempts to contact Mr. DiLucci and his failure to respond. On May 25, 1999, Mr. DiLucci forwarded the requested interrogatory answers to Ms. Walls by certified mail. On May 27, 1999, Mr. DiLucci filed an objection to Ms. Walls' motion to compel discovery indicating that the interrogatory answers had been served on the defendants and that their motion was moot.
On June 2, 1999, the Court held a hearing on the defendants' motion to compel at which time Ms. Walls expressed dissatisfaction with several of the plaintiffs' interrogatory answers. After argument, the Court ordered the plaintiffs to provide further answers to several interrogatories. At the hearing, Ms. Walls argued that the plaintiffs and their attorney should be ordered to pay the defendants' attorney's fees and costs associated with the motion to compel as a sanction under Federal Rule of Bankruptcy Procedure 7037. Ms. Walls submitted an itemized bill seeking $1,875.50 in attorney's fees and $123.11 in costs for a total of $1,998.61. At the conclusion of the hearing, the Court gave the parties the opportunity to further brief the sanction issue and took the matter under advisement. Since the hearing, both parties have provided the Court with further written submissions regarding sanctions.
III. DISCUSSION
Federal Rule of Civil Procedure 37(a)(4)(A), made applicable to this adversary proceeding by Federal Rule of Bankruptcy Procedure 7037, provides:
If the motion [to compel] is granted or if the disclosure or requested discovery is provided after the motion was filed, the court shall, after affording an opportunity to be heard, require the party . . . whose conduct necessitated the motion or the party or attorney advising such conduct or both of them to pay to the moving party the reasonable expenses incurred in making the motion, including attorney's fees, unless the court finds that the motion was filed without the movant's first making a good faith effort to obtain the disclosure or discovery without court action, or that the opposing party's nondisclosure, response, or objection was substantially justified, or that other circumstances make an award of expenses unjust.
Fed.R.Civ.P. 37(a)(4)(A) (emphasis added). Accordingly, the award of sanctions under this rule is mandatory unless (1) the movant has failed to make the required certification that he has made a good faith effort to obtain disclosure without court intervention; (2) the opposing party's nondisclosure was substantially justified; or (3) other circumstances make the award unjust. See Global Petroleum Corp. v. Torco Oil Co., 1987 WL 4785, at * 1, No. 85-0988-Mc (D.Mass. Apr. 30, 1987); M D Builders, Inc. v. Peck, 109 F.R.D. 410, 411-12 (D.Mass. 1986); American Hangar, Inc. v. Basic Line, Inc., 105 F.R.D. 173, 176 (D.Mass. 1985); Parlow v. Bank of New York (In re Hunter Outdoor Prods., Inc.), 21 B.R. 188, 193 (Bankr.D.Mass. 1982); see also Cunningham v. Hamilton County, 1999 WL 380803, at * 7 n. 5, No. 98-727 (U.S. June 14, 1999); Veale v. Town of Marlborough, 1994 WL 369545, at * 1, No. Civ. 92-355-S.D. (D.N.H. July 11, 1994). The rule is specifically designed to prevent a party seeking discovery from having to bear the costs of obtaining an order compelling discovery. See M D Builders, 109 F.R.D. at 412. The party engaging in discovery abuses is directed to bear the costs. See id. The requirement of sanctions furthers the policy of discouraging litigation concerning the propriety of discovery. See Hunter Outdoor Prods., 21 B.R. at 193.
In this case, Ms. Walls has certified that she attempted twice to contact Mr. DiLucci regarding the missing interrogatory answers and twice Mr. DiLucci failed to respond or to forward his clients' answers. At the hearing, Mr. DiLucci did not deny that he failed to respond to Ms. Walls' requests and that his clients did not answer the interrogatories timely. Mr. DiLucci indicated that the "press of other business" prevented him and his clients from providing answers to the interrogatories prior to the defendants' filing their motion to compel. However, the difficulty experienced by the plaintiffs and their counsel in answering the interrogatories was not communicated to counsel for the defendants and no request was made of Ms. Walls for a reasonable extension of time to respond. The plaintiffs did not take the position at the hearing that their failure to timely or to adequately respond to the interrogatories was substantially justified. Further, no circumstances are present in this case that make the award of expenses unjust. For these reasons, the Court will award sanctions pursuant to Federal Rule of Civil Procedure 37(a)(4)(A).
The award of sanctions for discovery abuse is limited, however, to an award for reasonable expenses incurred by the movant in making the motion. See Fed.R.Civ.P. 37(a)(4)(A); Global Petroleum, 1987 WL 4785 at *2; M D Builders, 109 F.R.D. at 412; American Hangar, 105 F.R.D. at 178; Hunter Outdoor Prods., 21 B.R. at 193. At the hearing, Ms. Walls submitted an itemized bill of fees and expenses totaling $1,998.61. The bill contained the following fees which total $1,875.50:
$44.00 for drafting a letter to Mr. DiLucci regarding the late interrogatories (.4 hours);
$66.00 for reviewing letter and telephoning Mr. DiLucci regarding discovery/motion (.6 hours);
$440.00 for researching and drafting the motion to compel (4.0 hours);
$22.00 for filing an office copy of the motion to compel (.2 hours);
$27.50 for reviewing the interrogatory responses (.25 hours);
$297.00 for preparing for the hearing (2.7 hours);
$209.00 for reviewing local fee approval requirements and rules of discovery (1.9 hours);
$660.00 for travel to and from office in Vermont and court in New Hampshire (6.0 hours); and
$110.00 for attendance at the hearing on the motion to compel (1.0 hour).
The bill also contained the following expenses which total $122.11:
In the itemization submitted to the Court, Ms. Walls mistakenly indicated that the expenses total $123.11.
$1.05 for telephone toll calls for May 1999;
$4.73 for postage expenses for May 1999;
$4.73 for postage expenses for May 1999; and
$111.60 for mileage for travel to and from office in Vermont and court in New Hampshire. In the supplemental memorandum filed by the defendants in support of their application for sanctions, Ms. Walls agreed to reduce her travel time charge by half, resulting in a reduction of $330.00 in requested fees.
The Court finds that only a portion of the fees and expenses claimed by the defendants are reasonable. First, the $22.00 charge for filing an office copy of the motion to compel is secretarial in nature and should not be paid by the plaintiffs or their attorney. Second, the amount of time spent researching and drafting the motion to compel is excessive. The motion to compel was two and a half pages long. It cited the applicable bankruptcy rule but no case law. Attached to the motion were a one page discovery certification and the May 6, 1999 letter to Mr. DiLucci. The defendants did not file a separate memorandum of law. The Court finds that $220.00 (or two hours at $110 per hour) is a reasonable request for attorney's fees for researching and drafting the motion to compel.
Third, the 2.7 hours spent preparing for the hearing and the 1.9 hours spent reviewing local fee approval requirements and rules of discovery is also excessive. The facts relating to the discovery dispute are straightforward, and Ms. Walls previously researched the discovery issues. Because this is not a formal fee application, the time spent reviewing the local rules regarding fee applications should have been minimal. For these reasons, the Court finds that $165.00 (or one and one-half hours at $110 per hour) is a reasonable request for preparing for the hearing and reviewing local fee approval requirements.
Fourth, the Court denies any request for travel time between Ms. Walls' office in Vermont and the Bankruptcy Court in New Hampshire. The defendants chose their attorney and must bear the cost of her travel time to the court, particularly where local counsel might otherwise have been used. See Hunter Outdoor Prods., 21 B.R. at 193. For this same reason, the Court finds that the defendants' request for mileage is also unreasonable.
Lastly, the $4.73 cost for postage appears twice on the expense itemization. Because this is duplicative, the Court will award costs for only $4.73 in postage.
IV. CONCLUSION
Pursuant to Federal Rule of Bankruptcy Procedure 7037 and Federal Rule of Civil Procedure 37(a)(4)(A), the defendants' request for sanctions for plaintiffs' failure to timely and to adequately respond to their interrogatories is allowed. The plaintiffs and their attorney are ordered to pay attorney's fees in the amount of $632.50 and costs in the amount of $5.78 to the defendants by August 18, 1999.
These fees include $44.00 for drafting a letter to Mr. DiLucci, $66.00 for reviewing a letter and telephoning Mr. DiLucci's office, $220.00 for researching and drafting the motion to compel, $27.50 for reviewing interrogatory answers, $165.00 for preparing for the hearing and reviewing local fee requirements, and $110.00 for attendance at the hearing on the motion to compel.
These costs include $1.05 for telephone toll charges for May 1999 and $4.73 for postage for May 1999.
This opinion constitutes the Court's findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052. The Court will issue a separate order consistent with this opinion.
MEMORANDUM OPINION
I. INTRODUCTION
The Court has before it the plaintiffs' motion for summary judgment on a complaint brought pursuant to 11 U.S.C. § 362(h) seeking damages for violation of the automatic stay. This Court has jurisdiction of the subject matter and the parties pursuant to 28 U.S.C. § 1334 and 157(a) and the "Standing Order of Referral of Title 11 Proceedings to the United States Bankruptcy Court for the District of New Hampshire," dated January 18, 1994 (DiClerico, C.J.). This is a core proceeding in accordance with 28 U.S.C. § 157(b). For the reasons set forth below, the Court grants plaintiffs' motion for summary judgment and awards damages pursuant to 11 U.S.C. § 362(h) in the amount of $1,075.
Although oral argument on the motion was scheduled for August 16, 1999, after reviewing the pleadings, the Court finds that oral argument will not provide any additional assistance to the Court. The hearing is hereby canceled.
II. SUMMARY JUDGMENT STANDARD
Under Rule 56(c) of the Federal Rules of Civil Procedure, made applicable to this proceeding by Federal Rule of Bankruptcy Procedure 7056, a summary judgment motion should be granted only when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." "Genuine," in the context of Rule 56(c), "means that the evidence is such that a reasonable jury could resolve the point in favor of the nonmoving party." Rodriguez-Pinto v. Tirado-Delgado, 982 F.2d 34, 38 (1st Cir. 1993) (quoting United States v. One Parcel of Real Property, 960 F.2d 200, 204 (1st Cir. 1992)). "Material," in the context of Rule 56(c), means that the fact has "the potential to affect the outcome of the suit under applicable law." Nereida-Gonzalez v. Tirado-Delgado, 990 F.2d 701, 703 (1st Cir. 1993). Courts faced with a motion for summary judgment should read the record "in the light most flattering to the nonmovant and indulg[e] all reasonable inferences in that party's favor." Maldonado-Denis v. Castillo-Rodriguez, 23 F.3d 576, 581 (1st Cir. 1994).
III. FACTS
The undisputed facts are as follows. On or about May 16, 1997, the defendant, Harry Lomas IV ("Lomas") obtained a pre-judgment ex parte attachment in the amount of $195,000 against Matthew Judge ("Judge") in the Hillsborough Country Superior Court ("Superior Court"). On June 2, 1997, the plaintiffs filed a voluntary Chapter 13 bankruptcy petition in the United States Bankruptcy Court. The defendants were not listed as creditors on the plaintiffs' schedules. On July 8, 1997, the Chapter 13 trustee conducted the first meeting of creditors, which Lomas's attorney, David Young, attended.
On or about October 31, 1997, a Superior Court writ of attachment issued. At some point, the attachment was recorded in the Hillsborough County Registry of Deeds. On or about November 25, 1997, Lomas filed a complaint against Judge in Hillsborough County Probate Court ("Probate Court") asserting counts for breach of trust and breach of fiduciary duty and requesting that the Court order Judge to probate Lomas's mother's estate and provide an accounting. On or about January 15, 1998, the Probate Court scheduled a hearing for February 11, 1998. On or about February 11, 1998, the Probate Court entered a default judgment against Judge as he failed to file an appearance in the Probate Court action. On April 3, 1998, the Probate Court granted Lomas's request for damages in the amount of $201,557.10. Lomas never sought relief from the automatic stay in the Bankruptcy Court to take any of the above-described actions against Judge after he and his wife filed for bankruptcy in June 1997.
IV. DISCUSSION
"Section 362(a)(1) of the Bankruptcy Code provides that the filing of a bankruptcy petition stays the commencement or continuation of all nonbankruptcy judicial proceedings against the debtor." Soares v. Brockton Credit Union (In re Soares), 107 F.3d 969, 973 (1st Cir. 1997). The stay springs into being immediately upon the filing of a bankruptcy petition. See id. at 975 (quoting Sunshine Dev., Inc. v. FDIC, 33 F.3d 106, 113 (1st Cir. 1994)). It is automatic because it operates without the necessity for judicial intervention. See id. "It remains in full force until a federal court either disposes of the case . . . or lifts the stay. . . ." Id. (citing 11 U.S.C. § 362(c)(2) and (d)-(f)). "Litigants who take action against a bankruptcy estate without receiving the prior approval of the court or falling under one of the statutory exceptions are subject to sanctions." Nelson v. Taglienti (In re Nelson), 994 F.2d 42, 44 (1st Cir. 1993). Section 362(h) of the Bankruptcy Code 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.
11 U.S.C. § 362(h). In the present case, Judge is entitled to summary judgment in his favor and to actual damages, including costs and attorney's fees, if the Court finds that the undisputed facts demonstrate that Lomas willfully violated the automatic stay.
Lomas admits in his opposition to the motion for summary judgment that he violated the automatic stay, but argues that his violation was not willful. This Court has previously held that "a creditor acts willfully if it (1) has knowledge of the petition, and (2) the act which violates the stay was intentional." Putnam v. Rymes Heating Oils, Inc. (In re Putnam), 167 B.R. 737, 740 (Bankr.D.N.H. 1994). See also Maritime Asbestosis Legal Clinic v. LTV Steel Co., Inc. (In re Chateaugay Corp.), 112 B.R. 526, 530 (S.D.N.Y.) ("Section 362(h), thus, requires only general intent to take actions which have the effect of violating the automatic stay and not specific intent to violate the automatic stay. . . . `Not even a "good faith" mistake of law or a "legitimate dispute" as to legal rights relieve a willful violator of the consequences of the act.'") (quoting In re Sansone, 99 B.R. 981, 985-87 (C.D.Cal. 1989)), rev'd on other grounds, 920 F.2d 183 (2d Cir. 1990). Lomas's violation of the automatic stay in bringing suit and obtaining a default judgment against Judge in Probate Court, months after the Judges filed bankruptcy, was willful in the sense intended by section 362. Lomas was aware of the Judges' bankruptcy case as his attorney attended the first meeting of creditors in July 1997. In addition, Lomas was aware, through counsel, that under section 362 the filing of a bankruptcy petition institutes an automatic stay of all proceedings. Lomas's attorney has admitted that, after the Judges filed bankruptcy, he read and familiarized himself with section 362 before taking further action to obtain a judgment against Judge in state court. See Defendants' Opposition to
"There is no question that there was a technical violation of the stay in this case." Defendants' Opposition to the Motion for Summary Judgment at 3.
Motion for Summary Judgment at 1 and attached Affidavit of David A. Young at ¶¶ 4 and 5. The parties do not dispute that Lomas's actions in filing the complaint in Probate Court and requesting damages upon default were intentional. Taken together, these facts are sufficient to support a finding that Lomas's violation of the automatic stay was willful.
Section 362(h) provides that an individual "shall recover actual damages, including costs and attorney's fees . . ., and, in appropriate circumstances, . . . punitive damages" if he is injured by a willful violation of the stay. Judge does not request any damages for harm personally suffered by him (e.g., lost wages attributable to time spent dealing with violation of the stay); rather, he seeks an award of $2,850 for the attorney's fees he incurred litigating the stay violation.
As previously held by Judge Yacos, attorney's fees associated with bringing litigation to determine and enforce the sanctions under section 362(h) may be recovered under that section. See Joslyn v. Ford Motor Credit Corp. (In re Joslyn), 75 B.R. 590, 593 (Bankr.D.N.H. 1987) ("The whole point of the § 362(h) provision is to discourage violations of the automatic stay by appropriate sanctions-and litigation to determine and enforce the sanctions is necessarily implied. This court accordingly believes it appropriate to award damages for the violation of the automatic stay and to make an appropriate award of the attorneys' fees necessary to remedy that violation."). Section 362(h) and its sparse legislative history are silent, however, on the standards and methodology to be used in determining assessments of fees and costs for willful violations of the automatic stay. See Putnam, 167 B.R. at 741. Courts that have awarded fees under section 362(h) have tempered such awards by a reasonableness standard. See id.
Judge seeks damages of $2,850, which consist of nineteen hours of attorney time at $150 per hour. Several items on counsel's itemized bill clearly are not appropriate for inclusion in Judge's request for sanctions. First, fees in the amount of $150 for time spent preparing amendments to schedules are not related to the stay violation and therefore should not be included as part of the attorney's fees to be paid by Lomas. Second, fees in the amount of $150 for time spent preparing an automatic stay notice should not be allowed because the purpose of this notice and its recipient are unclear from the bill. Third, fees in the amount of $150 for time spent preparing a motion for clarification should not be included as part of the damages because these services were not sufficiently described so as to provide the Court with a basis for determining their necessity and relevance to the stay litigation. Fourth, the Court has no record of a hearing being held on March 4, 1999 in either the bankruptcy case or in any of the adversary proceedings involving the plaintiffs and the defendants. Therefore, attorney's fees in the amount of $150 for the alleged hearing should not be included as damages. Fifth, fees in the amount of $150 incurred in preparing an answer and objection to the defendants' motion for escrow in the main case should not be paid by Lomas as this related to the defendants' claim to funds from the bankruptcy estate and not to the stay litigation. Sixth, the hearing on April 30, 1999 concerned confirmation of the debtors' Chapter 13 plan, motions to dismiss or convert the debtors' case, the debtors' objection to the defendants' proof of claim, and the defendants' motion for escrow. Again, this hearing related to activities in the main case and not to this adversary proceeding; therefore, these fees in the amount of $300 should not be included in the sanction award. Seventh, fees in the amount of $150 related to plaintiffs' objection to the motion to compel should be disallowed. The Court has previously granted the defendants' motion to compel discovery and awarded sanctions to the defendants for the plaintiffs' failure to timely and to adequately answer the interrogatories. See Memorandum Opinion dated June 18, 1999. Lastly, the Court finds that fees in the amount of $825 for five and a half hours spent in attorney-client meetings is excessive given the straightforward nature of the case; the Court finds that two hours and fees of $300 are reasonable for various attorney-client meetings. In a similar vein, the Court finds that $100 is reasonable for various telephone conferences with defendant's attorney.
Having reviewed all items on counsel's bill, the Court finds that the remaining attorney's fees are reasonable and should be included in the sanction award in this case. Accordingly, pursuant to section 362(h), Judge is awarded $1,075 as a sanction for Lomas's violation of the automatic stay.
These fees include $300 for various meetings with client, $150 for research at the registry of deeds and probate court, $225 for preparing the complaint for sanctions for the stay violation, $100 for telephone conferences with David Young, $150 for attending a hearing in Probate Court, and $150 for preparing answers to interrogatories.
V. CONCLUSION
Because there are no genuine issues of material fact and the record, when viewed in the light most favorable to the defendants, supports a finding that Judge is entitled to a judgment as a matter of law, the Court grants the plaintiffs' motion for summary judgment. As a sanction pursuant to section 362(h), the Court orders Lomas to pay attorney's fees in the amount of $1,075 to Judge by August 18, 1999.
This opinion constitutes the Court's findings of fact and conclusions of law in accordance with Federal Rule of Bankruptcy Procedure 7052. The Court will issue a separate order consistent with this opinion.