Grinspan v. Grinspan (In re Grinspan)
Grinspan v. Grinspan (In re Grinspan)
Opinion of the Court
Plaintiff Isaac Grinspan commenced this adversary proceeding against his ex-spouse, Tomor Grinspan, and her attorney, David J. Seidemann, to recover damages under
The Court has jurisdiction over this matter under
Having considered the parties' pretrial submissions and the evidence presented at trial, the Court makes the following findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure, made applicable here by *730Bankruptcy Rule 7052. To the extent that a finding of fact includes a conclusion of law, it is deemed a conclusion of law and vice versa.
For the following reasons, the Court finds in favor of plaintiff. Defendants willfully violated the automatic stay and, by statute, are liable for actual damages, including costs and attorneys' fees under § 362(k). The Court reserves judgment on actual damages pending submission of supplemental briefing, and will issue a separate order scheduling a hearing to determine the amount of appropriate damages. The Court declines to award plaintiff punitive damages and dismisses plaintiff's request for permanent injunctive relief as moot.
I. Findings of Fact
The following findings of fact are based on the trial record, which include the trial testimony, exhibits entered into evidence, and the parties' stipulation of certain facts.
A. Pre-Petition State Court Proceedings
Plaintiff and Tomor are former spouses and have two children together. Stip. ¶¶ 2, 3. They entered into a divorce stipulation of settlement (the "Settlement") dated July 27, 2010. Defs.' Ex. A; Stip. ¶ 4. The Settlement provides that if either plaintiff or Tomor failed to comply with their respective obligations under the Settlement, the defaulting party will reimburse the non-defaulting party for legal fees incurred in connection with enforcing the Settlement, so long as the non-defaulting party prevails. Stip. ¶ 5; see Defs.' Ex. A at 41 ("[T]he defaulting party ... agrees to indemnify the non-defaulting party against and/or to reimburse him/her for any and all expenses, costs, and reasonable attorneys' fees resulting from or made necessary by the bringing of any suit or other legal proceeding to enforce any of the terms, covenants or conditions of this [Settlement]."). If the non-defaulting party loses, he or she must reimburse the legal fees incurred by the other party. Defs.' Ex. A at 41. On May 3, 2011, a judgment of divorce was entered. Defs.' Ex. B; Stip.¶ 6. The judgment of divorce incorporated the Settlement. Stip. ¶ 6.
In May 2013, Tomor sought to enforce plaintiff's obligations under the Settlement and plaintiff sought to decrease his child support payments. Defs.' Ex. E at 2. Thereafter, Nassau County Supreme Court Judge Edward Maron entered a Consent Order, dated July 1, 2013, that required plaintiff to reinstate his child support payments and to cure any arrears, pay for one of his children's therapy, and restore Tomor as the beneficiary of his life insurance policy. Defs.' Ex. E ¶¶ 2, 12, 19; Stip. ¶ 8. The Consent Order also provided that plaintiff must pay Tomor $ 18,000 for attorneys' fees she incurred during the enforcement proceeding. Defs.' Ex. E ¶ 25.
Plaintiff defaulted under the Consent Order, and Tomor obtained a money judgment against plaintiff in the amount of $ 18,372.61, which consisted of the attorneys' fees owed to Tomor plus accrued interest (the "Money Judgment"). Defs.' Ex. I; Stip. ¶ 9. On or about September 9, 2013, defendant Seidemann, Tomor's attorney in the post-judgment phase of her state court matrimonial action, served *731plaintiff with an "Information Subpoena." Defs.' Ex. J; Stip. ¶¶ 7, 10. Plaintiff did not respond to the Information Subpoena or fulfill his obligations set forth in the Consent Order, which included payment of the Money Judgment. Stip. ¶ 11. As a result, on or about November 14, 2013, Seidemann moved by order to show cause to hold plaintiff in contempt for his alleged non-compliance with the Consent Order and for him to be imprisoned, again seeking to enforce the Money Judgment and obtain answers to the Information Subpoena (the "Contempt Motion"). Pl.'s Ex. 6; Stip. ¶ 11; Tr. 17:14-18:1. The Contempt Motion did not request relief related to custody or visitation rights of plaintiff and Tomor's children. Stip. ¶ 12. The return date of the Contempt Motion was December 5, 2013. Stip. ¶ 13.
On December 2, 2013, plaintiff, by his then-counsel in the state court proceeding, Steven Borofsky, submitted answers to the Information Subpoena. Stip. ¶ 14. However, Seidemann was dissatisfied with plaintiff's answers. Seidemann emailed Borofsky and stated "[he] will give [plaintiff] till [sic] Thursday to answer [the Information Subpoena] again truthfully. Otherwise, [he] will seek his incarceration." Stip. ¶ 15.
B. Plaintiff's Bankruptcy Case and Post-Petition State Court Proceedings
Plaintiff filed a chapter 7 bankruptcy petition on December 3, 2013. Stip. ¶ 1. On the petition date, plaintiff's bankruptcy counsel, Richard Kanter, faxed Seidemann a letter and called Seidemann's cellphone to advise him of plaintiff's bankruptcy filing. Pl.'s Ex. 9; Tr. 133:18-24, 134:7-139:1. However, Seidemann testified that he was not in his office on December 3 to receive the fax, Tr. 135:5-7, and that he was not definitively told by Kanter during the phone call that plaintiff actually filed a bankruptcy petition, Tr. 134:2-6. Although Seidemann claimed he did not have actual knowledge of the bankruptcy filing on December 3, the parties stipulated that both Seidemann and Tomor had actual notice of the filing "at least prior to December 5, the return date of the Contempt Motion." Stip. ¶ 16. Seidemann testified to the same. Tr. 146:14-16.
On December 5, 2013, the parties appeared in state court on the Contempt Motion. Stip. ¶ 18. Debtor arrived in state court on this day under the impression that he would be sent to jail if he did not pay the Money Judgment. Tr. 106:10-107:10. Although it is defendants' position that the Contempt Motion was exempt from the automatic stay, Stip. ¶ 17, Seidemann advised Judge Maron that it's possible that the relief he was seeking in the Contempt Motion was subject to the stay, Tr. 171:6-9. In spite of this awareness, Seidemann continued to prosecute the Contempt Motion in its entirety. Adv. Dkt. No. 34-13 at 24:9-16. Seidemann testified that Judge Maron was going to carry the motion "to the end of time," Tr. 173:12-13, and Borofsky stated it to be "the practice of Judge Mar[o]n to carry ... motions when he's not sure what to do with them," Adv. Dkt. No. 34-13 at 31:8-10. At the December 5 hearing, Judge Maron asked the parties to file briefs on the applicability of the automatic stay to the Money Judgment, and entered an order that directed the parties to appear for a conference on January 4, 2014 and appointed Jeffrey Halberich as the children's attorney. Adv. Dkt. No. 34-13 at 38:7-17, 41:4-7; Stip. ¶ 19; Tr. 265:14-19. Thereafter, Seidemann submitted a brief and a proposed order to Judge Maron. Defs.' Ex. O. Borofsky did not file a brief because he was relieved as plaintiff's counsel shortly after the hearing and replaced by Danielle Seid-Vazana.
*732Following the December 5 hearing, there were five court appearances by the parties: December 19, January 14, February 6, April 17, and April 29. Stip. ¶ 20; Tr. 256:24-257:2. There are no transcripts or other records of any of these hearings because of more than forty appearances before Judge Maron, the parties were on the record "twice, maybe three times at most." Tr. 174:10-21. Seidemann testified he did not move forward with the Contempt Motion at any of these court proceedings and that there was "zero discussion" of it. Tr. 257:3-6. However, Seidemann's testimony is contradicted by both a letter he wrote to Seid-Vazana on December 16, 2013, which he claims Judge Maron instructed him to send, and Seid-Vazana's testimony. Seidemann's letter advised Seid-Vazana that she was "scheduled to appear before Judge Maron on the Contempt Motion on January 14, 201[4]," Pl.'s Ex. 15, and Seid-Vazana testified she appeared on January 14 for the Contempt Motion, Tr. 81:8-13. The Contempt Motion and Seidemann's letter caused Seid-Vazana to believe that plaintiff could potentially be incarcerated because she testified that she has had clients in the past who have been arrested and "taken away in handcuffs." Tr. 20:18-21:22.
With respect to the December 19, February 6, and April 17 appearances, there is a lack of evidence to support a finding by this Court that they concerned the Contempt Motion. Seid-Vazana could not recall what matters those court appearances concerned, Tr. 41:22-44:7, and Halbreich had no knowledge of any discussions related to the Contempt Motion on those days because he only attended court conferences related to the children, Tr. 94:17-20.
Seidemann's December 16, 2013 letter to Seid-Vazana not only told her to appear in state court for the Contempt Motion on January 14, 2014, but it sought her opposition papers as well. Plaintiff's opposition to the Contempt Motion was filed in advance of the January 14, 2014 court conference, and Tomor's reply, which included her affidavit and an affirmation signed by Seidemann, was filed in March 2014. Stip. ¶¶ 24, 25. Seidemann's affirmation and Tomor's affidavit both requested that the state court grant the Contempt Motion "in its entirety." Stip. ¶ 26. The Contempt Motion was marked fully submitted on or about April 29, 2014. Stip. ¶ 29. Despite the Contempt Motion being marked fully submitted, on April 29, 2014, Seidemann advised the state court to "hold off decision on any part of the [Contempt Motion], including the request to enforce the Money Judgment or compel answers to the Information Subpoena." Stip. ¶¶ 27, 29. Also on April 29, 2014, Seidemann advised the state court that he was withdrawing the Information Subpoena. Stip. ¶ 27. At no point prior to April 29, 2014 did Seidemann seek to withdraw or modify the Contempt Motion to exclude the demand for payment of the Money Judgment or advise plaintiff not to respond to the Information Subpoena. Stip. ¶¶ 21, 28.
The Money Judgment has since been vacated. Tr. 58:10-13. In August 2014, Seidemann withdrew the Contempt Motion. Tr. 223:4-9. No ruling was made by Judge Maron as to whether the Money Judgment is a domestic support obligation or whether the automatic stay applies to the relief sought in the Contempt Motion. Stip. ¶ 23. Defendants did not move this Court for relief from the automatic stay to allow the Contempt Motion to proceed. Stip. ¶ 22.
II. Conclusions of Law
As noted above, plaintiff alleges that defendants willfully violated the automatic stay imposed under § 362(a) when they *733continued to litigate the Contempt Motion in state court after plaintiff commenced his bankruptcy case. Plaintiff asks this Court to assess both actual and punitive damages under § 362(k) for defendants' willful violation of the stay. The Court will first identify the burden of proof for plaintiff's cause of action, and then consider the legal principles applicable to the automatic stay. The Court will then resolve the three primary questions presented at trial: (1) whether defendants violated the automatic stay; (2) if so, whether the Money Judgment is a domestic support obligation and defendants' conduct is therefore exempt from the automatic stay under § 362(b)(2)(B) ; and (3) if defendants' conduct is not allowed under § 362(b)(2)(B), whether that conduct constitutes a willful violation of the automatic stay.
A. Burden of Proof
To prevail on his claim, plaintiff has the burden of proof to present evidence in support of the allegations in his complaint that defendants willfully violated the automatic stay and to prove those allegations by a preponderance of the evidence. In re Manchanda , No. 16-10222 (JLG),
B. The Automatic Stay:
The automatic stay "is one of the most fundamental bankruptcy protections and ... 'give[s] the debtor a breathing spell' and ... prevent[s] creditors from obtaining payment of their claims in preference to and to the detriment of other creditors." Sec. Inv'r Prot. Corp. v. Bernard L. Madoff Inv. Sec. LLC (In re Madoff ),
The onus is on the creditor to inform other courts of a debtor's bankruptcy *734filing and to discontinue any pending proceedings that run afoul of the stay provisions. Soares v. Brockton Credit Union (In re Soares ),
Section 362(a) lists eight activities - acts and actions - that are stayed by the filing of a bankruptcy petition. Three of the listed activities covered by the automatic stay are relevant to plaintiff's claim that defendants willfully violated the stay by continuing to litigate the Contempt Motion, and in particular, enforcement of the Money Judgment. Plaintiff relies on the provisions that stay: "(1) the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against the debtor that arose before the commencement of the case under this title; (2) the enforcement, against the debtor or against property of the estate, of a judgment obtained before the commencement of the case under this title; ... [and] (6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title."
Although the automatic stay brings to a halt virtually all creditor collection activity, § 362(b) contains twenty-eight exceptions to the stay. The exceptions are "read narrowly to secure [a] broad grant of relief to the debtor." Stringer v. Huet (In re Stringer ),
C. Plaintiff Has Established that Defendants Violated the Automatic Stay
The Money Judgment was entered against plaintiff in August 2013. Pl.'s Ex. 4. In November 2013, Seidemann filed the Contempt Motion in state court to enforce payment of the Money Judgment, with the motion's return date scheduled for December 5, 2013. Adv. Dkt. No. 48 at 3; Pl.'s Ex. 6. Plaintiff filed his bankruptcy petition on December 3, 2013. Adv. Dkt. No. 48 at 1. While the filing of the Contempt Motion itself did not violate the automatic stay because it was filed before plaintiff commenced his bankruptcy case, the evidence in this case reveals that defendants' post-petition conduct violated the automatic stay. Specifically, defendants' conduct in respect of the pending Contempt Motion was prohibited by § 362(a)(1), (2), and (6). Those provisions protect the bankruptcy estate by prohibiting the very acts taken here by defendants, to wit, the continuation of a legal proceeding, the enforcement of a judgment obtained pre-petition, and an act to collect or recover a claim that arose pre-petition.
The facts show defendants had actual knowledge of the filing of plaintiff's bankruptcy case "at least prior to December 5, 2013, the return date of the Contempt Motion," Stip. ¶ 16, and Seidemann testified that was the case, Tr. 146:14-16. Even if defendants were unaware of plaintiff's bankruptcy filing, "a party's knowledge of the [bankruptcy] filing is 'immaterial' to a determination of whether the stay was violated." In re Prusan ,
Although Seidemann testified that he "did nothing to enforce the [Money Judgment] after December 5" and that "there was no danger of the Contempt Motion being heard" because Judge Maron was going to "carry [the Contempt Motion] to the end of time," Seidemann's testimony is *736belied by the events as they actually unfolded. He continued to litigate the motion post-petition. Tr. 173:12-15, 182:1-3. Seidemann's post-petition letter to Seid-Vazana reminded her of the scheduled court appearance before Judge Maron on the Contempt Motion and the date by which plaintiff's opposition to the Contempt Motion must be filed. After plaintiff's opposition was filed, Seidemann filed a reply, which still sought for the Contempt Motion to "be granted in its entirety." Pl.'s Ex. 8; Tr. 47:18-25, 48:1-10. It is hardly the case that Seidemann "did nothing" to enforce the Money Judgment post-petition. The evidence introduced at trial demonstrates that defendants' post-petition conduct falls squarely within the ambit of § 362(a)(1), (2), and (6), and the Court finds that Seidemann's own actions in continuing to prosecute the Contempt Motion after plaintiff commenced his bankruptcy case violated the automatic stay. See Picard v. Fairfield Greenwich Ltd. ,
Having established that defendants violated the stay by continuing to prosecute the Contempt Motion, the next question for the Court is whether defendants' actions are exempt from the automatic stay under § 362(b)(2)(B). If so, defendants' excepted conduct is allowed. If not, the Court will address the final question: whether defendants' conduct is subject to sanctions under § 362(k).
D. Applicability of
At trial, defendants took the position that any action taken by them after plaintiff commenced his bankruptcy case is exempt from the automatic stay under § 362(b)(2)(B).
Accordingly, the heart of the parties' dispute is not whether defendants took steps after the bankruptcy filing to obtain payment of the Money Judgment, but rather, whether the Money Judgment constitutes a domestic support obligation and whether the term "collection" in § 362(b)(2)(B) includes the enforcement of a domestic support obligation through contempt proceedings.
1. Is the Money Judgment a Domestic Support Obligation?
The determination of what constitutes a domestic support obligation is based on principles of federal law and is a fact intensive inquiry. Romano v. Romano (In re Romano ),
The term "domestic support obligation" means a debt that accrues before, on, or after the date of the order for relief in a case under this title, including interest that accrues on that debt as provided under applicable nonbankruptcy law ... that is:
(A) owed to or recoverable by-
(i) a spouse, former spouse, or child of the debtor or such child's parent ...;
....
(B) in the nature of alimony, maintenance, or support ... of such spouse, former spouse, or child of the debtor or such child's parent, without regard to whether such debt is expressly so designated;
(C) established or subject to establishment before, on, or after the date of the order for relief in a case under this title, by reason of applicable provisions of-
(i) a separation agreement, divorce decree, or property settlement agreement;
(ii) an order of a court of record;
(iii) a determination made in accordance with applicable nonbankruptcy law by a governmental unit; and
(D) not assigned to a nongovernmental entity ....
The Settlement states that if either party is in default, the defaulting party will reimburse the non-defaulting party for reasonable attorneys' fees incurred in bringing suit or another proceeding to enforce the Settlement so long as the non-defaulting party prevails. Defs.' Ex. A at 41; Stip. ¶ 5. The facts show that the Money Judgment is based on an award of attorneys' fees pursuant to this default provision. It did not arise by reason of a separate award for alimony, maintenance or support in the parties' matrimonial action. Plaintiff argues therefore that the Money Judgment is not a domestic support obligation, but rather a penalty for not complying with the terms of the Settlement. Adv. Dkt. No. 51 at 11-12. In support of this argument, plaintiff cites Smith v. Pritchett (In re Smith ),
In addition, the Court finds instructive the well-reasoned and thoughtful opinion of Bankruptcy Judge Dorothy Eisenberg in Gilman v. Golio (In re Golio ),
In further support of their argument, defendants cite to cases in which an award for attorneys' fees has been held to be a domestic support obligation. Although the Court agrees with the general premise that attorneys' fees awarded in a pre-petition matrimonial action may under certain circumstances fall within the definition of a domestic support obligation, see Golio ,
Here, the Court finds no persuasive evidence that the obligation to pay attorneys' fees in this case is in the nature of alimony, maintenance or support. Simply stated, the attorneys' fees awarded to Tomor by reason of plaintiff's noncompliance with his obligations under the Settlement do not come within § 101(14A)'s definition. As noted above, the fees were intended to incentivize the performance by the parties under the Settlement rather than to provide support for Tomor and/or the parties' children.
There are three salient facts that support the Court's finding that plaintiff's obligation to pay attorneys' fees awarded by the Money Judgment is not a domestic support obligation as defined in § 101(14A). First, the default provision in the Settlement was not intended to exclusively benefit Tomor. Rather, the default provision was meant to protect both Tomor and plaintiff in the event either of them defaulted in their respective obligations under the Settlement. In addition, if, hypothetically, Tomor brought suit as the non-defaulting party and did not secure a judgment in her favor, under the terms of the default provision, she would be responsible for plaintiff's attorneys' fees. See Defs.' Ex. A at 41. Second, as was the case in *740Smith , the Settlement contained a separate provision for attorneys' fees incurred by Tomor, not inclusive of those that could potentially be awarded under the default provision. Smith ,
2. Is Litigating the Contempt Motion "Collection" or "Enforcement"?
Even if the Court had determined that the Money Judgment constitutes a domestic support obligation, the inquiry of whether defendants' conduct is exempt from the automatic stay under § 362(b)(2)(B) would not end there. Identifying the Money Judgment as a domestic support obligation is only the first step in determining whether the exemption applies. The second step is to determine whether the exemption for "the collection of a domestic support obligation" in § 362(b)(2)(B) permits defendants to proceed unimpeded in state court to enforce plaintiff's financial obligation under the Money Judgment. The answer turns on how the term "collection" is construed. In other words, what does the term "collection" mean? Defendants urge the Court to broadly construe the term "collection" to include proceedings to enforce domestic support obligations, such as contempt proceedings. Adv. Dkt. No. 49 at 4-6. If defendants' reading of the statute is correct, the exception takes hold, and their post-petition conduct with respect to the Contempt Motion is free of the constraints imposed by the automatic stay. Of course, plaintiff disagrees. Plaintiff contends a narrower reading of "collection" is consistent with the express language found in other exceptions to the stay under § 362(b), and that § 362(b)(2)(B) cannot be read to encompass contempt proceedings to enforce domestic support obligations. Adv. Dkt. No. 51 at 5-10. While there is a split of authority on this issue, for the reasons that follow, the Court finds persuasive the reasoning of those courts that adhere to a narrow reading of the term "collection" when determining whether actions to enforce domestic support obligations transgress the automatic stay. The Court agrees with plaintiff's interpretation of § 362(b)(2)(B) that post-petition enforcement of a support obligation through contempt proceedings violates the automatic stay. See Gorokhovsky v. Ocheretner (In re Gorokhovsky ), No. 17-28901-beh,
*741Lori v. Lori (In re Lori ),
"No one provision of the Bankruptcy Code can be viewed in isolation from the others; each provision must be construed in the context of the entire statute." Geron v. Valeray Realty Co., Inc. (In re Hudson Transfer Grp., Inc. ),
The Court begins its inquiry by looking to the language of § 362(b). See In re Phillips ,
This narrow interpretation of § 362(b)(2)(B) has been followed by numerous courts across the country. See, e.g. , Hass v. Duncan , No. 1:05cv91(JCC),
Unlike some of the other exceptions to the stay listed in section 362(b), [ section 362(b)(2)(B) ] did not extend, prior to the 2005 amendments, to the commencement *742or continuation of proceedings to enforce an obligation. Section 362(b)(2)(B) protects an obligee who receives property that is not property of the estate on a prepetition obligation, for example, through a prior wage attachment, from claims that such receipt is improper. However, this provision did not authorize, prior to the 2005 amendments, enforcement litigation against the debtor without relief from the automatic stay. A separate provision, section 362(b)(2)(A), which grants an exception for the commencement or continuation of an action or proceeding, had been limited to the establishment or modification of an order for alimony, maintenance or support. Proceedings to enforce such orders were conspicuously omitted from the exception and were stayed, except in cases criminal in nature and permitted by section 362(b)(1).
COLLIER ON BANKRUPTCY ¶ 362.05[2] (Richard Levin & Henry J. Sommer eds., 16th ed.) (footnotes omitted). Collier further provides that the 2005 amendments to the Bankruptcy Code "added several exceptions permitting the commencement or continuation of certain proceedings related to the enforcement of a domestic support obligation."
"Since proceedings to enforce alimony or support orders are normally continuations of earlier proceedings, the absence of language in section 362(b) excepting the continuation of enforcement proceedings from the stay casts significant doubt on whether such proceedings are included in the exception to the automatic stay." COLLIER FAMILY LAW AND THE BANKRUPTCY CODE ¶ 5.03[3][b][iii]. Moreover, Collier notes that "[u]nless the word 'collection' is interpreted to encompass the continuation of a proceeding for the purpose of collection, a proceeding to enforce an earlier support or alimony order or agreement is barred by the automatic stay."
However, there are a number of courts that disagree with the Collier interpretation of "collection" and interpret "collection" to include "enforcement." See, e.g. , In re Toronto , No. 15-10663-BAH,
The Johnston Court utilized a "plain meaning" interpretation of the word "collection" to critique the Collier position-it believed the Collier reading of § 362(b)(2)(B) to "stand[ ] or fall[ ]" on whether "collection" is active or passive and if there is any significance to Congress' decision not to use "enforcement" in that subsection. Johnston ,
*743In a similar vein, the Angelo Court fully embraced Johnston 's interpretation of § 362(b)(2)(B). Angelo ,
The Court disagrees with the broad interpretation of § 362(b)(2)(B) advanced in Johnston and Angelo , and adopts the narrow interpretation utilized by Collier . "However tempting it may be to unqualifiedly protect a debtor's paramour, spouse, or children, exceptions to the automatic stay must be construed narrowly and relief from the automatic stay is readily available should a creditor choose to pursue that course." Jenkins ,
E. Did Defendants Willfully Violate the Automatic Stay?
Having found the automatic stay was violated under § 362(a), and that the exemption under § 362(b)(2)(B) is not applicable, the Court now considers whether sanctions should be imposed against defendants pursuant to § 362(k). In resolving this question, the Court first considers the legal principles applicable to § 362(k), and then addresses plaintiff's arguments that defendants willfully violated the automatic stay.
Section 362(k) creates "a private right to sue for damages on behalf of *744an individual injured by a willful violation of the automatic stay." In re Ampal-Am. Isr. Corp. ,
Where a violation of the stay is willful, § 362(k) mandates an award of actual damages. Whether to assess punitive damages lies within the discretion of the Court. "An additional finding of maliciousness or bad faith on the part of the offending creditor warrants the further imposition of punitive damages ...." Crysen/Montenay ,
At trial, Seidemann disputed that he had actual knowledge of plaintiff's bankruptcy case on December 3, 2013, the date the chapter 7 petition was filed. See Tr. 133:15-25, 134:1-6. Seidemann testified he was not in his office that day to receive the letter Kanter sent him via fax which expressly stated that the automatic stay was in effect due to plaintiff's having commenced a bankruptcy case. Pl.'s Ex. 9; Tr. 134:18-135:14. However, Seidemann admitted he did see the letter on December 9. Tr. 255:10-12. Seidemann also testified that he received a telephone call, during which he "was advised that an attorney was retained by Mr. Grinspan to file bankruptcy on his behalf." Tr. 134:2-3. While Seidemann's testimony relating to this phone conversation indicates he had notice that plaintiff intended to file for bankruptcy relief, an indication that a bankruptcy may be filed is insufficient to constitute actual notice for purposes of a willful stay violation. Prusan ,
Even if Seidemann did not have actual knowledge of the bankruptcy petition on its filing date, as mentioned above, Seidemann did have actual knowledge of plaintiff's filing, and consequently the automatic stay, as early as the date of the Contempt Motion hearing on December 5, 2013. He testified that he believed the stay was "inapplicable" from December 3, 2013 onwards because the Money Judgment was a domestic support obligation and that the bankruptcy filing "gave [him] pause as to how to deal with monetary issues" before he proceeded to court on December 5. Tr. 167:21-25, 188:2-8. Seidemann contends that Judge Maron found that the Money Judgment was a domestic support obligation - he testified that Judge Maron *745"affirmatively [told him] that [the Money Judgment] is a domestic support order" and that he was asked to submit a proposed order reflecting as such. Adv. Dkt. No. 2-12; Tr. 220:24-221:5. Defendants did not produce a transcript of any hearing at which Judge Maron made such a ruling. Additionally, despite this purported directive, Seidemann knew that Judge Maron did not sign any proposed order nor issue a written opinion concluding that the Money Judgment was a domestic support obligation. Tr. 176:7. The evidence introduced at trial establishes that Seidemann had actual knowledge of the bankruptcy filing and decided to take steps post-petition to enforce the Money Judgment via the Contempt Motion. Despite the bankruptcy filing, he sought to have the Contempt Motion granted in its entirety. Based on the trial record, the Court finds that Seidemann had the requisite general intent to take actions that had the effect of violating the stay under § 362(k). See Beckford v. Romano (In re Beckford ),
Because the Court finds defendants willfully violated the automatic stay, an award of actual damages incurred by plaintiff is mandated by § 362(k)(1). Gilford ,
As for plaintiff's request for an award of punitive damages, the evidence presented at trial, including the testimony of Seidemann, does not support a finding that defendants acted with malice or in bad faith. While Seidemann could have prevented this outcome by simply asking this Court for relief from the automatic stay before unilaterally deciding to continue with the state court proceeding, a "callous disregard" for the automatic stay is insufficient to support a finding of bad faith. Beckford ,
F. Plaintiff's Request for a Permanent Injunction
Plaintiff also asks the Court to permanently enjoin defendants from enforcing the Money Judgment and compelling plaintiff to answer the Information Subpoena. Adv. Dkt. No. 51 at 1. The Court need not address plaintiff's request for permanent injunctive relief because Seidemann withdrew the Contempt Motion, plaintiff answered the Information Subpoena, and the Money Judgment was vacated *746by the state court. Moreover, there is nothing in the trial record to support a finding that Seidemann will file another contempt motion seeking to relitigate issues regarding the Money Judgment or Information Subpoena. Tr. 247:20-248:2.
III. Conclusion
For the foregoing reasons, the Court finds that plaintiff has proven by a preponderance of the evidence that defendants willfully violated the automatic stay. Having determined that a willful violation of the stay occurred, the Court reserves judgment on actual damages pending submission of supplemental briefing. The Court will issue a separate order setting forth a briefing schedule and a hearing date on actual damages. No other or further damages are appropriate. Plaintiff's request for a permanent injunction is dismissed as moot.
SO ORDERED.
All statutory references to sections of the United States Bankruptcy Code,
For convenience, the Court will refer to filings in the adversary proceeding as "Adv. Dkt. No. __" and filings in the lead bankruptcy case as "Dkt. No. __". The Court will also refer to the trial transcript [Adv. Dkt. No. 55] as "Tr.", exhibits as "Ex. __", and the parties' stipulated facts set forth in their joint pre-trial memorandum [Adv. Dkt. No. 48] as "Stip. ¶ __".
Although not argued by the parties, for the sake of completeness, the Court also considers whether defendants' actions were excepted from the automatic stay pursuant to § 362(b)(1) as the continuation of a criminal action. At trial, the contempt motion was referred to as both civil and criminal in nature. Tr. 21:7-8, 203:18. However, the language appearing on the face of the Contempt Motion is required by N.Y.C.P.L.R. § 756 for civil contempt and the type of relief sought was to vindicate Tomor's private rights under her divorce agreement with plaintiff, which is indicative of civil contempt, as opposed to the vindication of an offense against the public, which is indicative of criminal contempt. In re White ,
At trial, the parties agreed not to introduce evidence as to whether plaintiff incurred actual damages unless the Court determined that defendants willfully violated the automatic stay. Tr. 61:8-64:24.
Reference
- Full Case Name
- IN RE: Isaac J. GRINSPAN, Debtor. Isaac J. Grinspan v. Tomor Grinspan and David J. Seidemann
- Cited By
- 11 cases
- Status
- Published