*

Honorable Edward S. Smith, Senior U.S. Circuit Judge for

the Federal Circuit, sitting by designation. 

United States Court of Appeals,

Eleventh Circuit.

No. 94-9089.

In re Pierce Lamar HARDY, Debtor.

Pierce Lamar HARDY, Plaintiff-Appellant,

v.

UNITED STATES of America, acting By and Through the INTERNAL

REVENUE SERVICE, Defendant-Appellee.

Sylvia Ford Drayton, Barnee C. Baxter, Trustees.

Oct. 21, 1996.

Appeal from the United States District Court for the Southern

District of Georgia. (No. CV193-186), Dudley H. Bowen, Jr.,

District Judge.

Before BIRCH and BARKETT, Circuit Judges, and SMITH*

, Senior

Circuit Judge.

EDWARD S. SMITH, Senior Circuit Judge:

Debtor Pierce Lamar Hardy appeals the decision of the United

States District Court for the Southern District of Georgia denying

him relief against the Internal Revenue Service ("IRS") under the

permanent injunction provision of 11 U.S.C. § 524(a)(2). The

district court dismissed Hardy's action due to lack of jurisdiction

after finding that there was no express unequivocal waiver of

sovereign immunity allowing recovery under § 524. Hardy v. United

States (In re Hardy), 171 B.R. 912 (S.D.Ga.1994). Due to the

intervening enactment of the Bankruptcy Reform Act of 1994, Pub.L.

No. 103-394, 108 Stat. 4106 (1994), we find that Congress has

waived sovereign immunity for violations of 11 U.S.C. §§ 524 and
 1

Because the bankruptcy court and the district court

dismissed for lack of subject matter jurisdiction, no factual

findings were made. The facts as asserted by the debtor are,

therefore, taken as true for purposes of this appeal. 

105, and that, therefore, the district court has subject matter

jurisdiction over the case. We remand to the district court to

make findings of fact, determine liability and, if warranted,

assess damages and attorney fees consistent with 28 U.S.C. §

2412(d)(2)(A), 26 U.S.C. § 7430, and our recent decision in the

companion case of Jove Engineering, Inc. v. Internal Revenue

Service, 92 F.3d 1539 (11th Cir.1996).

Facts1

On January 7, 1986, Hardy filed a Chapter 13 petition for

bankruptcy, listing IRS as a creditor in the filed schedules. In

response to Hardy's bankruptcy petition, IRS filed a proof of claim

for $11,640.99, which was paid in full over the lifetime of the

bankruptcy plan pursuant to the order of confirmation dated April

15, 1985. After completion of the plan, Hardy received a discharge

of his debts on April 5, 1991.

After receiving a copy of the discharge, IRS sent Hardy a

letter requesting payment of $4,109.31 for the tax period ending

December 1984. This amount represented pre-petition, discharged

tax liability. Hardy's bankruptcy attorney, John Wills, sent a

letter to IRS, notifying them of the discharge in bankruptcy.

On July 9, 1992, IRS levied on Hardy's bank account. Mr.

Wills sent another letter on July 14, 1992, to the attention of the

levy officer, Agent W. Roberts, notifying Agent Roberts and IRS of

the discharge in bankruptcy. Agent Roberts visited Mr. Hardy's
home on August 7, 1992, and coerced Mr. Hardy into signing a blank

check made payable to IRS. Agent Roberts then filled in the amount

of $3,465.61, the amount he contended that Hardy owed IRS, and then

indicated that Mr. Hardy's account was settled.

Despite Agent Roberts' assurances that Mr. Hardy's account was

clear, on January 16, 1993, Mr. Hardy received a Notice of Levy for

the tax period ending December 1984 in the amount of $2,902.41.

Proceedings Below

Mr. Hardy's Chapter 13 case was closed on April 11, 1991. On

February 16, 1993, Mr. Hardy filed a motion to reopen his Chapter

13 case pursuant to 11 U.S.C. § 350(b) in order to file an

adversary proceeding against IRS for alleged violations of the

discharge order. The motion was granted on February 25, 1993. On

March 18, Mr. Hardy filed a complaint with the bankruptcy court

against IRS, requesting sanctions for contempt under 11 U.S.C. §

105 for alleged violations of the discharge injunction of § 524,

seeking actual damages, punitive damages, costs and attorney fees.

The bankruptcy court dismissed Hardy's claim for lack of

subject matter jurisdiction, relying on former bankruptcy code

section 11 U.S.C. § 106 which delineates the waiver of sovereign

immunity in bankruptcy cases and finding that the doctrine of

sovereign immunity barred the imposition of monetary damages in

this case where sovereign immunity was not unequivocally waived.

Hardy v. United States (In re Hardy), 161 B.R. 320, 325

(Bankr.S.D.Ga.1993).

Hardy appealed the dismissal of his case by the bankruptcy

court to the United States District Court for the Southern District
of Georgia. Hardy v. United States (In re Hardy), 171 B.R. 912

(S.D.Ga.1994). After reviewing the appropriate bankruptcy

provisions and case law, the district court reluctantly affirmed

the bankruptcy's court's dismissal of the case for lack of subject

matter jurisdiction. Id. at 916.

On October 22, 1994, President Clinton signed the Bankruptcy

Reform Act of 1994 ("Act"), which contained amendments to § 106

that specifically and unequivocally waive sovereign immunity for

governmental units for numerous sections of the bankruptcy code,

including §§ 105, 106, and 524. Bankruptcy Reform Act of 1994,

Pub.L. 103-394, § 113, 108 Stat. 4106, 4117 (1994). The waiver of

sovereign immunity applies to cases before, on, or after the date

of enactment of the Act. Bankruptcy Reform Act of 1994, Pub.L.

103-394, § 702(b)(2)(B), 108 Stat. 4150 (1994).

Jurisdiction and Standard of Review

Under 28 U.S.C. § 158(d), this court has jurisdiction to hear

all final orders from a district court that exercised appellate

jurisdiction over bankruptcy court orders. 28 U.S.C. § 158(d)

(1993).

 This court exercises complete and independent review over

conclusions of law made by both the bankruptcy court and district

court. Glatter v. Mroz (In re Mroz), 65 F.3d 1567, 1570 (11th

Cir.1995); B.F. Goodrich Employees Federal Credit Union v.

Patterson (In re Patterson), 967 F.2d 505, 508 (11th Cir.1992);

Equitable Life Assurance Society v. Sublett (In re Sublett), 895

F.2d 1381, 1383 (11th Cir.1990).

Sovereign Immunity
 The doctrine of sovereign immunity prohibits suits against

the United States unless the United States specifically consents to

be sued. In order to be effective, "[w]aivers of the Governments'

sovereign immunity ... must be unequivocally expressed ... [and]

are not generally to be liberally construed." United States v.

Nordic Village, Inc., 503 U.S. 30, 33-34, 112 S.Ct. 1011, 1014, 117

L.Ed.2d 181 (1992).

Such an unequivocal waiver is now contained in revised section

106 of the bankruptcy code for specifically enumerated bankruptcy

provisions. Section 106 provides, in pertinent part:

(a) Notwithstanding an assertion of sovereign immunity,

sovereign immunity is abrogated as to a governmental unit to

the extent set forth in this section with respect to the

following:

(1) Sections 105, 106, ... 524 ... of this title.

(2) The court may hear an determine any issue arising

with respect to the application of such sections to

governmental units.

(3) The court may issue against a governmental unit an

order, process, or judgment under such sections or the

Federal Rules of Bankruptcy Procedure, including an order

or judgment awarding a money recovery, but not including

an award of punitive damages.

11 U.S.C. § 106.

 Section 106 further provides that it is not a provision for

relief standing alone, stating, "[n]othing in this section shall

create any substantive claim for relief or cause of action not

otherwise existing under this title, the Federal Rules of

Bankruptcy Procedure, or nonbankruptcy law." 11 U.S.C. §

106(a)(5). Therefore, although appellant is correct in asserting

that sovereign immunity is waived by section 106, he must

demonstrate that a source outside of section 106 entitles him to
the relief sought. See Jove, 92 F.3d at 1548.

Liability for Violations of the Discharge Injunction

 Appellant points to two provisions outside of section 106 on

which to predicate IRS's liability, sections 105 and 524 of the

bankruptcy code. IRS asserts that because Hardy only requested

relief under § 524 in his appellate brief, that is the only

provision under which this court can grant such relief. Hardy did

request damages arising under the statutory contempt powers of §

105 in his complaint. Moreover, IRS argued fully the application

of § 105 in this case in its appellate brief and will not be unduly

prejudiced. Due to the parties' misconstruction of the scope of

the abrogation of sovereign immunity contained in revised § 106 and

this court's resolution thereof in Jove, this court will consider

Mr. Hardy's request as one for relief under either § 524 or § 105.

A. Section 524(a)(2):

Liability Under § 524(a)(2):

Section 524 of the bankruptcy code provides the debtor with a

post-discharge injunction against collection of debts discharged in

bankruptcy, and thus embodies the "fresh start" concept of the

bankruptcy code. This provision is the barrier that prevents

creditors from reaching the debtors' wages, property or assets.

Section 524 provides, in relevant part:

(a) A discharge in a case under this title ...

(2) Operates as an injunction against the commencement or

continuation of an action, the employment of process, or

an act, to collect, recover or offset any such debt as a

personal liability of the debtor, whether or not

discharge of such debt is waived ...

11 U.S.C. § 524.
 2

IRS compares § 524 to § 362(h), which provides for monetary

damages for violation of the automatic stay, stating, "[a]n

individual injured by any willful violation of a stay provided by

this section shall recover actual damages, including costs and

attorneys' fees, and, in appropriates circumstances, may recover

punitive damages." 11 U.S.C. § 362(h). 

 3IRS may be sanctioned under the court's inherent contempt

powers only if its actions in violating the discharge provisions

were in bad faith. See Chambers v. NASCO, Inc., 501 U.S. 32, 49,

50, 111 S.Ct. 2123, 2135, 115 L.Ed.2d 27 (1991); Mroz, 65 F.3d

at 1575. Bad faith conduct includes conduct that is vexatious,

wanton or oppressive. Mroz, 65 F.3d at 1575. 

IRS argues that because section 524 does not expressly provide

for relief other than injunctive relief, section 524 itself is not

a "provision outside of section 106" which independently authorizes

monetary relief.2 While it is true that § 524 does not

specifically authorize monetary relief, the modern trend is for

courts to award actual damages for violation of § 524 based on the

inherent contempt power of the court. Walker v. M & M Dodge, Inc.

(In re Walker), 180 B.R. 834, 847 (Bankr.W.D.La.1995); Miller v.

Mayer (In re Miller), 81 B.R. 669, 679 (Bankr.M.D.Fla.1988), and

later proceeding, 89 B.R. 942, 944 (Bankr.M.D.Fla.1988) (actual

damages, attorney fees, and costs allowed). Cf. In re Bowling, 116

B.R. 659, 664-65 (Bankr.S.D.Ind.1990) (relying solely on statutory

contempt powers of section 105 to award actual damages).

Additionally, other courts have awarded sanctions and costs to

recompense the debtor including amounts wrongfully withheld for

violations of the post-discharge injunction. See Matthews v.

United States (In re Matthews), 184 B.R. 594, 598

(Bankr.S.D.Ala.1995).3

The Supreme Court has warned that a court must "exercise

caution in invoking its inherent power," stating:
Because of their very potency, inherent powers must be

exercised with restraint and discretion. A primary aspect of

that discretion is the ability to fashion an appropriate

sanction for conduct which abuses the judicial process ...

[W]hen there is bad-faith conduct in the course of litigation

that could be adequately sanctioned under the Rules, the court

ordinarily should rely on the Rules rather than the inherent

power. But if in the informed discretion of the court,

neither the statute nor the Rules are up to the task, the

court may safely rely on its inherent power.

Chambers v. NASCO, Inc., 501 U.S. 32, 44-45, 50, 111 S.Ct. 2123,

2132, 2136, 115 L.Ed.2d 27 (1991).

Instead of grounding liability for violation of the permanent

stay in the court's inherent contempt powers and § 524, we exercise

the caution recommended by the Court in Chambers and rely on the

other available avenue for relief, statutory contempt powers under

§ 105.

B. Section 105:

1. Liability Under § 105:

 Section 105 grants statutory contempt powers in the

bankruptcy context, stating, "The court may issue any order,

process, or judgment that is necessary or appropriate to carry out

the provisions of this title." 11 U.S.C. § 105(a). Section 105

creates a statutory contempt power, distinct from the court's

inherent contempt powers in bankruptcy proceedings, for which

Congress unequivocally waives sovereign immunity. Jove, 92 F.3d at

1553. The language of § 105 encompasses "any type of order,

whether injunctive, compensative or punitive, as long as it is

"necessary or appropriate to carry out the provisions of' the

Bankruptcy Code." Id. at 1553-54. Therefore, "§ 105(a) grants

courts independent statutory powers to award monetary and other

forms of relief for automatic stay violations to the extent such
awards are "necessary and appropriate' to carry out the provisions

of the Bankruptcy Code." Id.

2. Waiver of Sovereign Immunity for § 105

 Congress amended § 106 to expressly and unequivocally waive

sovereign immunity under § 105, permitting a court to "issue

against a governmental unit ... an order, process, or judgment

awarding a money recovery, but not including an award of punitive

damages." 11 U.S.C. § 106(a)(3); see Jove, 92 F.3d at 1554. This

court has found that "§ 106(a) unequivocally waives sovereign

immunity for court-ordered monetary damages under § 105, although

such damages may not be punitive." Jove, 92 F.3d at 1554.

Therefore, Hardy may seek any "necessary or appropriate" monetary

relief under the statutory contempt powers of § 105 for violation

of the discharge injunction.

3. Liability for Contempt under § 105

 While a defendant may be cited for contempt under the court's

inherent powers only upon a showing of "bad faith," Mroz, 65 F.3d

at 1575, IRS may be liable for contempt under § 105 if it willfully

violated the permanent injunction of § 524. Jove, 92 F.3d 1553-54,

see Havelock v. Taxel (In re Pace), 67 F.3d 187, 193 (9th

Cir.1995). This court has stated that "the focus of the court's

inquiry in civil contempt proceedings is not on the subjective

beliefs or intent of the alleged contemnors in complying with the

order, but whether in fact their conduct complied with the order at

issue." Howard Johnson Co. v. Khimani, 892 F.2d 1512, 1516 (11th

Cir.1990) (quoted in Jove, 92 F.3d at 1554). In Jove, this court

adopted a two-pronged test to determine willfulness in violating
the automatic stay provision of § 362. Under this test the court

will find the defendant in contempt if it: "(1) knew that the

automatic stay was invoked and (2) intended the actions which

violated the stay." Jove, 92 F.3d at 1555. This test is likewise

applicable to determining willfulness for violations of the

discharge injunction of § 524.

If the court on remand finds, as the plaintiff claims, that

IRS received notice of Mr. Hardy's discharge in bankruptcy, and was

thus aware of the discharge injunction, Mr. Hardy will then have to

prove only that IRS intended the actions which violated the stay.

We remand to the district court for factual determinations and for

determination of IRS's liability for willful violations of § 524 in

accordance with the guidelines set forth in Jove.

Sanctions Available Under §§ 105

1. Coercive Sanctions

 The court may only impose sanctions for contempt that are

coercive and not punitive. Jove, 92 F.3d at 1557-58. In

determining whether a sanction for contempt is coercive, the court

must ask "(1) whether the award directly serves the complainant

rather than the public interest and (2) whether the contemnor may

control the extent of the award." Id. If the court finds, as in

Jove, that the appellant primarily seeks monetary damages in the

form of a fixed non-compensatory fine, then the court may not order

such monetary damages, as they are punitive and not coercive.

2. Attorney Fees

 Section 106's unequivocal waiver of sovereign immunity

provides that an "order or judgment for costs or fees under this
 4

Section 2412 provides that "the provisions of this section

shall not apply to any costs, fees, and other expenses in

connection with any proceeding to which section 7430 of the

Internal Revenue Code of 1986 applies." 28 U.S.C. § 2412(e). 

title ... shall be consistent with the provisions and limitations

of section 2412(d)(2)(A) of title 28." 11 U.S.C. § 106(a)(3).

Section 2412(d)(2)(A) defines "fees and other expenses' under the

Equal Access to Justice Act ("EAJA"). Accordingly, the award of

attorney fees under the contempt powers of § 105 or inherent

contempt powers of the court must be consistent with this section

of the EAJA. See Jove, 92 F.3d at 1559-60.

Likewise, an award of attorney fees must be consistent with

section 7430 of the Internal Revenue Code ("IRC"). Section 7430

waives sovereign immunity for costs and fees "[i]n any ... court

proceeding which is brought ... against the United States in

connection with the ... collection ... of any tax, interest, or

penalty." 26 U.S.C. § 7430. While the EAJA is limited to

proceedings to which § 7430 does not apply,4

 the provision of § 106

that waives sovereign immunity is not so limited. Jove, 92 F.3d at

1559-60. Because the waiver in § 106 does provide, however, that

enforcement should be consistent with nonbankruptcy law applicable

to such governmental unit, 11 U.S.C. § 106(a)(4), awards for

contempt under §§ 105 must be consistent with the requirements of

§ 7430. Id.

Conclusion

We REVERSE the district court's finding of no subject matter

jurisdiction due to the intervening Bankruptcy Reform Act of 1994

which unequivocally waives sovereign immunity for bankruptcy code
sections 105 and 524. The court may find IRS in contempt under §

105 by finding that IRS acted willfully, according to the test set

forth in the companion case of Jove.

The court may award sanctions for contempt only to the extent

that they are coercive, and not punitive. The court may also, in

its discretion, award attorney fees and costs, as long as such

awards are consistent with the requirements of 28 U.S.C. § 2412 and

26 U.S.C. § 7430. We REMAND to the district court for further

proceedings consistent with this opinion.