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Parker v. Credit Central South, Inc.

United States District Court, M.D. Alabama, Southern Division

March 10, 2015

MARION PARKER, Plaintiff-Appellee,
CREDIT CENTRAL SOUTH, INC., Defendant-Appellant.


W. KEITH WATKINS, Chief District Judge.

Appellant Credit Central South, Inc., appeals the orders of the United States Bankruptcy Court for the Middle District of Alabama ("the Bankruptcy Court") in Adversary Proceeding No. 12-1066-WRS, which found that Credit Central violated the automatic stay resulting from Appellee Marion Parker's Chapter 13 bankruptcy petition. See 11 U.S.C. § 362(a), (k). The Bankruptcy Court awarded Mr. Parker a judgment for actual damages for emotional distress and punitive damages (Docs. # 2-14, 2-15) and entered a separate order awarding attorney's fees expended to prosecute the adversary proceeding. (Docs. # 7-1, 7-2.) Credit Central's timely appeal of the judgment and order has been fully briefed. (Docs. # 6, 13, 18, 21.) Upon consideration of the parties' arguments, the record, the Bankruptcy Court's reasoned memorandum decisions, and relevant law, the court concludes that the judgment (Doc. # 2-15) awarding damages is due to be affirmed in part and vacated and remanded in part, and the attorney's fee order (Doc. # 7-2) is due to be affirmed.[1]


This court has jurisdiction to hear appeals from orders of the Bankruptcy Court. 28 U.S.C. § 158(a). Venue is proper because an appeal "shall be taken only to the district court for the judicial district in which the bankruptcy judge is serving." Id. Jurisdiction and venue are uncontested.


A bankruptcy court's findings of fact are reviewed for clear error, and its legal conclusions and any mixed questions of law and fact are reviewed de novo. Educ. Credit Mgmt. v. Mosley (In re Mosley), 494 F.3d 1320, 1324 (11th Cir. 2007); Christopher v. Cox (In re Cox), 493 F.3d 1336, 1340 n.9 (11th Cir. 2007). A finding of fact "is clearly erroneous when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Anderson v. City of Bessemer City, N.C., 470 U.S. 564, 573 (1985) (citation, internal quotation marks, and alterations omitted).

"[A]n award of attorneys' fees in a bankruptcy proceeding will be reversed only if the court abused its discretion." Hatcher v. Miller, ( In re Red Carpet Corp. of Panama City Beach), 902 F.2d 883, 890 (11th Cir. 1990). "An abuse of discretion occurs if the judge fails to apply the proper legal standard or to follow proper procedures in making the determination, or bases an award upon findings of fact that are clearly erroneous." Id.


Mr. Parker owed a $1, 200 debt to Credit Central. Credit Central lawfully attempted to collect the debt by suing Mr. Parker in Dale County District Court on August 14, 2012. Credit Central utilized non-attorneys in its Ozark, Alabama office to file the suit. On August 23, 2012, Mr. Parker filed for bankruptcy protection under Chapter 13 and orally informed Credit Central that he had done so. Credit Central also received written notice of the bankruptcy case from the Bankruptcy Court. Credit Central filed a proof of claim in the bankruptcy case on August 28, 2012. ( See Claim # 1, Claims Register, Bankruptcy Case No. 12-11502.)

On September 29, 2012, over a month after filing for bankruptcy relief, Mr. Parker was served with process of the Dale County suit at his place of work by a deputy sheriff. On October 25, 2012, two months after filing for bankruptcy relief, a default judgment was entered against him, apparently sua sponte. [2] Mr. Parker initiated this adversary proceeding on October 26, 2012, for Credit Central's violation of the automatic stay, and on November 2, 2012, Credit Central finally filed a written motion to dismiss the suit, which the Dale County District Court granted two weeks later. In response to the adversary proceeding complaint, Credit Central denied practically every allegation, including the existence and amount of Mr. Parker's underlying debt, its receipt of notice of the bankruptcy case, and that it had filed a proof of claim for that debt, or that it has served Mr. Parker with process in the state court suit. Discovery followed.

The Bankruptcy Court held a trial on December 18, 2013, during which Mr. Parker testified that he had not suffered psychological harm and had not sought medical treatment, but that he was embarrassed to have been served with process at work and that he remained "upset" for "a few days." (Doc. # 2-25, at 20.)

The branch manager of Credit Central's Ozark office, Kimi Speaks, testified at trial, explaining that she called the Dale County District Court twice after becoming aware of Mr. Parker's bankruptcy. Ms. Speaks was informed by a court clerk that the case would not be dismissed until Mr. Parker's counsel provided the court with notice of the bankruptcy. Ms. Speaks called[3] the court to request dismissal of Credit Central's suit three more times - first, after the district court unsuccessfully attempted serving Mr. Parker with process, next after successfully serving him with process, and again after entering the default judgment.[4]

The Bankruptcy Court entered a judgment in favor of Mr. Parker and awarded $2, 000 in actual damages and $10, 000 in punitive damages in the adversary proceeding. (Docs. # 2-14, 2-15.) It announced its intent to award attorney's fees by separate order. (Doc. # 2-15.) After reviewing Mr. Parker's request for fees and Credit Central's objections, the Bankruptcy Court awarded him $30, 318 in attorney's fees (Doc. # 7-2), a sum that the Bankruptcy Court found reasonable in view of the risk assumed by counsel for Mr. Parker and in view of Credit Central's "mendacity and utter lack of good faith." (Docs. # 7-1, at 26.) Credit Central timely appeals the judgment and the order awarding fees.


According to Credit Central, the Bankruptcy Court erred in finding that it willfully violated the automatic stay, in awarding damages for Mr. Parker's emotional distress, in awarding attorney's fees, and in awarding punitive damages. These arguments are addressed in turn.

A. Finding that Credit Central Willfully Violated the Automatic Stay

Credit Central asserts that it did not knowingly and willfully violate the automatic stay. "A willful violation simply requires [a creditor's] knowledge of the automatic stay and an intent to perform the actions which violated the automatic stay." Credit Nation Lending Servs., LLC v. Nettles, 489 B.R. 239, 247 (N.D. Ala. 2013) (internal quotation marks omitted). The Bankruptcy Court's conclusion that Credit Central's stay violation was willful arguably is a mixed question of fact and law. See Talley v. Ala. Dep't of Pub. Safety, 472 F.Supp.2d 1323, 1325 (N.D. Ala. 2007). To the extent that Credit Central disputes the Bankruptcy Court's application of the law to the facts, the court agrees that there was a willful violation under 11 U.S.C. § 362(k)(1). It was proper to find a willful violation because Credit Central knew about Mr. Parker's bankruptcy petition and allowed its state court suit to progress for over two months before effectually staying or dismissing that litigation.[5] The finding is due to be affirmed.

B. Award of Actual Damages for Emotional Distress

Credit Central argues that Mr. Parker was not injured by a violation of the automatic stay, and therefore, actual damages were not due to be awarded. The Eleventh Circuit has recently held that "emotional distress damages fall within the broad term of actual damages' in § 362(k)." Lodge v. Kondaur Capital Corp., 750 F.3d 1263, 1271 (11th Cir. 2014).[6] But "at a minimum, to recover actual' damages for emotional distress..., a plaintiff must (1) suffer significant emotional distress, (2) clearly establish the significant emotional distress, and (3) demonstrate a causal connection between that significant emotional distress and the violation of the automatic stay." Id. "Fleeting or trivial anxiety or distress" is not "significant" emotional distress. Id. at 1272.[7] Measuring the evidence in Lodge by this standard, the Circuit held that the plaintiffs failed to show significant emotional distress. Specifically, plaintiffs "offered ...

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