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11th Circuit Upholds $30,000 in Punitive Damages for Stay Violation

Joseph C Jeppson  | Published on 1/13/2016

A debt collector was socked with $40,000 in punitive damages and attorneys’ fees for trying to save money by using poorly trained nonattorneys.

A consumer filed for bankruptcy a few days after being sued in state court for the collection of a debt. Although the debtor immediately called the collection agency to say he had filed for bankruptcy, the suit continued, with service of process on the debtor personally and entry of a default judgment.

A month after the debtor sued in bankruptcy court alleging a willful violation of the stay, the collection agency finally dismissed the state court suit. However, the debt collector denied all the material allegations in the adversary proceeding.

The bankruptcy judge held a trial and granted $2,000 in compensatory damages for emotional distress, $10,000 in punitive damages and $30,000 in attorneys’ fees. The bankruptcy judge said the debtor was entitled to punitive damages to discourage the debt collector “from continuing to use unsophisticated advocates to prosecute collection actions as a cost-savings measure.”

The district court set aside the $2,000 in compensatory damages for lack of evidence but sustained the remainder of the judgment.

The Eleventh Circuit upheld the district court in a per curiam opinion on Dec. 17, saying that the debt collector “acted with reckless disregard of the automatic stay by using nonattorney staff to prosecute small claims actions for the admitted purpose of lessening its legal costs.”

The appeals court held that punitive damages were proper to serve the “dual purpose of punishing” the debt collector and “deter[ing] it from committing future similar misconduct.”

The debt collector argued that the debtor was not entitled to attorneys’ fees because there were no “actual damages.” The circuit panel rebuffed this contention, saying that “actual damages” under Section 362(k) include attorneys’ fees because the debtor was compelled to file suit to stop collection actions.

 

 Case Name: In re Parker

 Case Citation: Parker v. Credit Central South Inc. (In re Parker), 15-11204 (11th Cir. Dec. 17, 2015)