Monday, April 02, 2012

Florida Case Provides Textbook Example of How to Handle a Discharge Violation

A case involving an elderly woman and egregious violations of the discharge has generated a bit of buzz in the blogosphere. I first noticed it here on the Huffington Post. I decided to write about this case because I was frustrated with trying to verify the posts and because I think ithe case offers a good example of how to efficiently deal with a discharge violation. The case is In re Anita Smith, No. 6:08-bk-01035, which can be found here.

What Happened

The Debtor filed a chapter 7 petition on February 15, 2008. One of the debts that she listed was a mortgage debt owing to Countrywide Home Lending. The debtor surrendered the property during the chapter 7. The Debtor received a discharge on June 6, 2008 and Countrywide received notice of the discharge. Bank of America acquired Countrywide and obtained a judgment of foreclosure upon the real property.

At some point, Bank of America began calling the Debtor to try to try to collect upon the debt. Neither the opinion nor the motion say when the calls started, but on June 24, 2010, the Debtor's lawyer sent a polite letter to Bank of America informing them that they were violating the discharge.

The calls continued. In fact, at least fifty calls were made after the first letter.

The Debtor's attorney sent a second letter on November 16, 2011. The second letter informed Bank of America that the Debtor "is 79 years old, in deteriorating health, and has been hospitalized recently."

The calls continued.

The Debtor called Bank of America twice in November and December 2011 to ask them to stop calling.

The calls continued. There were forty-nine calls during a three week period from November 16, 2011 to December 6, 2011.

At this point, Debtor's counsel filed a Motion to Reopen the Case and a Motion for Sanctions.

Bank of America did not appear for the sanctions hearing.

The Court's Ruling

The Court did not have any problem finding a violation of the discharge. It stated:

Bank of America's behavior was intentional, egregious, and extreme. It blatantly and willfully ignored the discharge injunction, despite having received multiple notices of the discharge and requests to discontinue its collection efforts. Bank of America acted in bad faith. Its repeated telephone calls to the Debtor were vexatious and oppressive. Bank of America committed ninety-nine separate willful violations of the Debtor's discharge injunction.
Opinion, p. 5.

The Court awarded actual damages of $10,000.00 for "significant aggravation, emotional distress, and inconvenience." Opinion, p. 5. The Court stated:
Emotional distress constitutes actual damages. (citation omitted). Emotional distress is expected to occur where the conduct is egregious or extreme. (citation omitted). Significant emotional distress is readily apparent where the conduct is egregious and corroborating medical evidence is not required. (citation omitted). Entitlement to emotional distress damages exists "even in the absence of an egregious violation, if the individual in fact suffered significant emotional harm and the circumstances surrounding the violation make it obvious that a reasonable person would suffer significant emotional harm. (citation omitted.).

The Debtor's emotional distress is readily apparent due to Bank of America's intentional, egregious and extreme conduct. She is not required to present corroborating medical evidence. (citation omitted).
Opinion, pp. 8-9.

The Court awarded actual damages of $10,000.00 and attorney's fees of $1,500.00.

What the Debtor and the Debtor's Attorney Did Right

My firm is in the unusual position that we both represent debtors in bankruptcy and defend debt collectors accused of violating the stay or the discharge. In the former capacity, it is not unknown to get hit with a complaint that goes on for pages and pages of boilerplate allegations based on a few isolated contacts with no cease and desist letter from counsel.

In this case, counsel sent not one but two cease and desist letters. In the second letter, counsel specifically informed Bank of America that his client was elderly and, as a result, very sensitive, to continued calls. Counsel also had the Debtor document the continuing violations. The Motion for Sanctions details forty-nine (49) specific violations, identifying them by date and time.

Debtor's counsel also showed considerable restraint in filing a motion for sanctions rather than a complaint. While many plaintiff's lawyers prefer to file an adversary proceeding, there is no reason why contempt cannot be dealt with by motion. In this case, the debtor's attorney was able to proceed from motion to written opinion in a mere six weeks with only five hours of attorney time. Debtor's counsel was able to obtain relief for his client in a prompt, efficient manner. In my opinion, counsel placed his client's well-being ahead of his ability to recover fees, which is commendable.

A Note on Accuracy in the Blogosphere

Blogs sometimes get a bad reputation. When my daughter was doing a research project recently, her professor forbade the use of blogs as authority on the basis that they were "just someone's opinion." At A Texas Bankruptcy Lawyer's Blog, I make it a practice to provide case citations and links to original documents so that the reader can verify the accuracy of my comments. In this case, neither the initial post from The Bankruptcy Law Network nor the followup on The Huffington Post, provided much information from which the facts could be verified. Indeed, it is entirely possible that we are writing about different cases. I found the case that I wrote about above by researching recent opinions from Judge Arthur Briskman involving Bank of America. However, the case that I wrote about involved ninety-nine (99) violations, while the other posts refer to a case with thirty-eight (38) violations. While the failure to provide attribution may have led me to a more egregious case, it could just as well have caused the reader to dismiss it as unsubstantiated rumor.


Patches said...

Wow! Got to get that Op! We have done many many Motions for Sanctions and have always decided to go with motions instead of adv. Much more efficient. Now I get it! Adv..= more attorneys fees if you win... but with all that production, 12b(6)s, etc...

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