The Debtor Does Not Have To Prove Up Injury Seperate And Apart From A Willful Violation Of The Stay

12 Jan

Wests-bankrupcty-reporter In reading bankruptcy court opinions concerning violations of the automatic stay, and from my practice in prosecuting these violations, it would appear the greatest misunderstanding of 11 U.S.C. § 362(k) (and the pre-BAPCPA provision of § 362(h)), is the distinction between damages and injury.

As I have often said, “damages” do not constitute a element that must be established to establish liability under § 362(k). Damages are simply a consequence of the bankruptcy court otherwise finding a willful violation of the stay.

Injury, on the other hand does not have to be individually proved up by a Plaintiff in a stay violation for the simple reason that the proving up of a violation (any violation, willful or otherwise) establishes the violation of a core right, which constitutes an injury. If you prove what you otherwise need to prove under § 362(k), you have established injury.

Yet, well meaning bankruptcy judges, as well as less than well meaning defense counsel, continue to spend much time and effort attempting to (1) confuse actual, out-of-pocket damages with injury, and (2) attempting to refute injury is separately established, contesting whether a defendant is liable under § 362(k). It is an analysis that is simply unnecessary.

As to the issue of damages v. injury the tendency is to treat these a synonomous terms. Defendants, and some judges, continue to believe that if actual, out-of-pocket damages cannot be established at the outset of the case prosecuting a violation, then the plaintiff simply cannot prevail. This would seem, however, to ignore proper legal construction. Words in a statute are not to be read so as to render them superfluous. Hence, the elementary rule of statutory construction is that, wherever possible, effect must be given to every word of a statute. United States v. Nordic Village, Inc., 503 U.S. 30, 112 S.Ct. 1011, 1015 (1992). The terms injury and damages are included in the same sentence and cannot be interchangable terms.

Further, the 5th Circuit (as with all circuit courts) does not establish either injury or damages as any one of the elements necessary for a determination of liability in its reading of § 362(k). In re Chesnut, 422 F.3d 298, 302 (5th Cir. 2005), In re Repine, 536 F.3d 512 (5th Cir. 2008), and Campbell v. Countrywide Home Loans, Inc., Case No. 07-20499, Pg. 9 (5th Cir. October 13, 2008).

The finding of a willful violation of the injunctions of a court, injury is already established. “Injury” is broadly defined as being “a violation of another’s legal right, for which the law provides a remedy.” Black’s Law Dictionary 801 (8th ed. 2004). Since the automatic stay of 11 U.S.C. § 362(a) is a legal right afforded to Mr. and Mrs. Henderson that protects them from continued collection efforts by their Creditors. (H.R. Rep. No. 595, 95th Cong., 1st Sess. 174-75 (1977)) “the mere violation of the automatic stay constitutes an injury to the debtor inasmuch as the creditor’s violation restricts the debtor’s breathing spell and subjects the debtor to continued collection efforts, possibly including harassment and intimidation.” Jackson v. Dan Holiday Furniture, LLC (In re Jackson), 309 B.R. 33, 38 (Bankr. W.D. Mo. 2004). Also see, In re Reed, 102 B.R. 243, 245 (Bankr. E.D. Okl. 1989); Bukowski v. Patel, 266 B.R. 838 (Bankr. E.D. Wis. 2001); and, In re Preston, 333 B.R. 346, 350 (Bankr. M.D. NC 2005). The United States Supreme Court recently confirmed that “injury” constitutes a standing issue, ruling that one of the elements to Article III standing a plaintiff must establish “a ―concrete and particularized‖ invasion of a ―legally protected interest”, as is the case with 11 U.S.C. § 362(a) and other bankruptcy provisions. Sprint Communications Co. v. APCC Services, Inc., 07-552, pg. 4 (U.S. 6-23-2008). The willful violation of 11 U.S.C. § 362(a)(1) and other bankruptcy provisions and rules does constitute the invasion of such a legally protected interest and the undisputed material facts above demonstrate such an invasion.

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