CD Case Summary: Judge Maureen A. Tighe on Contempt for Violation of Discharge Injunction and Automatic Stay

The creditor here had three excuses. First, they did not have actual notice of the bankruptcy (so there was no willful violation of the stay); second, that the statute of limitations for violating the automatic stay had run; and third, that it was the former attorney’s fault.

A violation of the automatic stay is willful if a party knew of the automatic stay, and its actions in violation of the stay were intentional. Note, it is not the intent to violate the stay that is at issue; it is having knowledge of the bankruptcy and voluntarily doing something that violates the stay! Even worse, once a creditor has knowledge of the bankruptcy, it is deemed to have knowledge of the automatic stay!

The Court did not buy the creditor’s argument that the notice of the bk was sent to “Creditors Specialty Service” instead of “Creditors Specialty Services.” The Court did not allow the creditor to blame its attorney but suggested that if the creditor though its attorney was to blame, it could pursue that claim. The conduct of an attorney is attributable to the client. See Seacall Development v. Santa Monica Rent Control Bd., 86 Cal. App. 4th 201, 204-205 (Cal.Ct.App. 1999) (citing Carroll v. Abbott Labroatories, 32 Cal. 3d 892, 895, 898 (1982)).

Finally, the Court reiterated the concept that Congress did not establish any limitations period for damage claims under § 362(k).

Full opinion here.

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