1 – OPINION AND ORDER

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF OREGON

JONATHON ELDON HUNSAKER and 

CHERYL LYNN HUNSAKER,

Plaintiffs-Appellees, Case No. 6:16-cv-00386-MC

 v. OPINION AND ORDER

UNITED STATES,

Defendant-Appellant.

_____________________________

MCSHANE, Judge:

The Internal Revenue Service (IRS) appeals the bankruptcy court’s judgment awarding 

Jonathon and Cheryl Hunsaker emotional distress damages under 11 U.S.C. § 362(k). The

bankruptcy court concluded the IRS’s repeated violations of the automatic stay caused the 

Hunsakers significant emotional harm. The IRS argues any emotional distress suffered by the

Hunsakers was too fleeting or insignificant to support an award of emotional distress damages

under § 262(k). Because the bankruptcy court neither erred nor abused its discretion in awarding 

emotional distress damages to the Hunsakers, the bankruptcy court’s judgment is AFFIRMED.

BACKGROUND

The Hunsakers filed for Chapter 13 bankruptcy protection on November 5, 2012. Their 

filing triggered the automatic stay contained in 11 U.S.C. § 362(a). The automatic stay blocks
2 – OPINION AND ORDER

creditors from collection attempts outside of court-supervised reorganization proceedings. In this 

case, the parties agree the IRS violated the automatic stay four times.

On December 2, 2013, the IRS sent the first of four notices to the Hunsakers demanding 

payment for back taxes. The notice bore the headlines “Final Notice” and “Notice Of Intent to 

Levy And Notice Of Your Right To A Hearing.” The IRS sent three similar notices on February 

10, 2014, September 1, 2014, and December 8, 2014. Each notice violated the automatic stay. 

After each notice, the Hunsakers contacted their attorney and the attorney contacted the IRS 

notifying it of the automatic stay. The Hunsakers alleged the violations caused them significant 

emotional harm. As the Hunsakers’ claim is not barred by sovereign immunity, see Hunsaker v. 

United States, 902 F.3d 963, 971 (9th Cir. 2018), this Court now addresses the bankruptcy 

court’s emotional damages award.

STANDARD OF REVIEW

This Court reviews the bankruptcy court’s findings of fact for clear error “and review[s] 

for abuse of discretion the [bankruptcy] court’s decision whether to award emotional distress 

damages and, if so, how much to award.” In re Dawson, 390 F.3d 1139, 1150 (9th Cir. 2004)

(internal citations omitted). A bankruptcy abuses its discretion if it bases its decision on an 

incorrect legal rule, or if applies the correct rule but its “application of the correct legal standard 

was (1) illogical, (2) implausible, or (3) without support in inferences that may be drawn from 

the facts in the record.” United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir. 2009). 

DISCUSSION

To receive emotional distress damages resulting from a violation of the automatic stay, a

plaintiff “must suffer (1) suffer significant harm, (2) clearly establish the significant harm, and 

(3) demonstrate a causal connection between that significant harm and the violation of the 
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automatic stay (as distinct, for instance, from the anxiety and pressures inherent in the 

bankruptcy process).” Dawson, 390 F.3d at 1149. Even if the violation was not egregious, and 

even in the absence of corroborating evidence, emotional damages are available if “the 

circumstances . . . make it obvious that a reasonable person would suffer significant emotional 

harm.” Id. at 1150 (citing In re Flynn, 185 B.R. 89, 93 (S.D. Ga. 1995).

The bankruptcy court applied the three-part Dawson test. In doing so, it noted that despite 

the automatic stay, the Hunsakers received four notices from the IRS. ECF 13-10, 2. The notices 

demanded payment and threatened imminent enforcement should the Hunsakers not make the 

payment. Id. Two of the notices threatened to levy Mr. Hunsaker’s social security benefits, and 

another threatened to levy the Hunsakers’ state tax refund. Id. After the first notice, the notices 

continued even though the Hunsakers’ attorney contacted the IRS following each notice. Id. The 

bankruptcy court reasonably found that the Hunsakers believed that if the IRS took the 

threatened actions in the notices, it would jeopardize their Chapter 13 reorganization efforts. This 

finding is supported by the record. See ECF 13-9 43:7-21 (Ms. Hunsaker testified at being “quite 

shocked” upon receiving the notices because the IRS agreed to the reorganization plan “and now 

they’re telling it’s the full amount. And these are the big guys. They’re the IRS, so they can do—

I am under the impression they can do what they’re going to do.”). 

The bankruptcy court did not clearly err in finding that both the Hunsakers experienced 

credible and significant emotional harm. Evidence introduced at trial supports a finding that 

following each notice, Mrs. Hunsaker experienced day-long migraine headaches, stiffening of 

her neck, appetite loss, and added anxiety and frustration. Id. at 21:10-14, 40:15-23, 44:21-22, 

45:6-9, 52:8-15, 53:21-24. Also, from the notices, Mr. Hunsaker experienced loss of appetite and 

extra stress over his wife’s harm. Id. at 30:14-20, 40:21-23, 52:23-25. They both feared losing 
4 – OPINION AND ORDER

Mr. Hunsaker’s social security income because the IRS threatened to levy his social security 

benefits. Id. at 18:14-25, 32:6-11, 47:3-15. This would have rendered the Hunsakers’ Chapter 13 

plan unfeasible. See id. at 31:6-9, 47:3-15. Mr. Hunsaker would have lost significant additional 

income on top of the previous loss of income that led to bankruptcy. Id. at 30:8-20, 47:3-15. The 

notices are stressors distinct from bankruptcy’s inherent pressures and would not have existed

but for the IRS’ repeated automatic stay violations. See id. at 43:11-16 (Ms. Hunsaker testified 

that “we thought everything was in control. We were making our bankruptcy payments” and then 

the notices arrived demanding immediate payment). 

The bankruptcy court did not abuse its discretion in awarding emotional damages to the 

Hunsakers. The bankruptcy court applied the correct legal rule: Dawson, 390 F.3d at 1149

(referring to the three-part test above). ECF 13-10 4:15-16. And, it applied Dawson logically,

finding that the record and the testimony established that the IRS’s repeated violations caused the 

Hunsakers significant emotional harm. Id. at 5:22-26, 6:1-14. The bankruptcy court noted the 

Hunsakers’ prayer for “a modest award of $5,000 for the two of them.” Id. at 6:15-16. It noted 

the significant, but “not overwhelming” nature of the Hunsakers’ damages. Id. at 6:18. In 

awarding the Hunsakers’ damages, it cited the record and exercised its reasoned judgment to 

reduce the award by $1,000, resulting in a $4,000 award. See id. at 6:21-22. The award 

compensated Mrs. Hunsaker $3,000 for her more intense harm. Id. at 6:21. Because the 

bankruptcy court applied the correct law and logically based its decision off testimony and the 

record, this Court affirms the Hunsakers’ $4,000 emotional damages award. 

/ / / /

/ / / /
5 – OPINION AND ORDER

CONCLUSION

The bankruptcy court neither erred nor abused its discretion in awarding emotional 

distress damages to the Hunsakers. Thus, the bankruptcy court’s judgment is AFFIRMED.

IT IS SO ORDERED.

DATED this 20th day of July, 2019.

 ______/s/ Michael McShane_____

Michael McShane

United States District Judge