F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

I N T H E M A T T E R O F : R U P A N J A L I S N O W D E N , Debtor

,

R U P A N J A L I S N O W

D E N , Debtor, Appellant

,

v

.

C H E C K I N T O C A S H O F W A S H I N G T O N I N C ., A ppellee

. N o. 13-35291

D.C. No. 2:12-cv-01095- RSL

I N T H E M A T T E R O F : R U P A N J A L I S N O W D E N , Debtor

,

C H E C K I N T O C A S H O F W A S H I N G T O N I N C ., Appellant

,

v

.

R U P A N J A L I S N O W

D E N , Debtor, A ppellee

. N o. 13-35322

D.C. No. 2:12-cv-01095- RSL

OPI NI ONI N R E : S N O W

D E N 2

A ppeal from the United States District Court

for the W e stern District of W ashing ton Robert S. L asnik, District J udg e , Presiding

Arg ued and Submitted J une 5, 2014—Seattle, W ashing ton

F iled September 12, 2014

B efore: Alfred T. Goodwin, M. Marg aret McKeown, and Paul J . W atford, Circuit J udg es.

Opinion by

J udg e McKeown; Concurrence by J udg e W atford

SUMMARY *

Bankruptcy

The panel affirmed in part and reversed in part the district

c o urt’s affirmance of the bankruptcy court’s judg men t awarding a chapter 7 debtor damag e s and attorney s’ fees for

a creditor’s w illful v iolation of the automatic s t a y u nder 11 U.S.C. § 362(k)(1).

The p a n e l a ffirmed the district court’s affirmance of the decisions of the bankruptcy c o urt on emotional distress a nd punitive damag es. The panel held that the emotional distress da m a ge s award was proper because the debtor suffered

* T h is su m m ary co n stitu

tes n o part o f th e o p in io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.I N R E : S N O W

D E N 3

sig nificant emotional harm, clearly established the sig nificant harm, and de m onstrated a c ausal c onnection between that sig nificant h arm and the violation of the automatic stay

. The panel concluded that the bankruptcy court applied the correct leg al standard for awarding punitive damag es b y considering whether the creditor recklessly or callously disreg arded the law or rig hts of others. I n addition, the awar d o f p u n i tive damag es was not an abuse of discretion.

The panel reversed the district court’s order affirming the bankruptcy court’s award of a ttorney s’ fees. The panel stated that under Sternbe r

g v. Johnston

, 595 F .3d 937 (9th Cir. 2010), attorney s’ fees under § 3 6 2 ( k) are limited to fees relating to enforcing the automatic stay and remedy ing the stay violation, not the fees incurred by the debtor in prosecuting the bankruptcy a dversary proceeding seeking damag es for the stay v iolation. T h e panel concluded that here, the stay

violation did not end when the creditor sent an e-mail cond i t i o n a l l y o f f e r i n g partial reimbursement; according ly

, the debtor was entitled to fe e s incurred in remedy ing the stay violation after re c e iving the e-mail, a nd the stay violation ended when the ba n k r u p t cy court found a violation of the automatic stay

. T h e p a n e l remanded for a recalculation of attorneys’ fees.

The p anel affirmed the district court’s affir m a n c e of the bankruptcy

court’s denial of sanctions.

Concurring

, J udg e Watford ag reed that the attorney s’ fees award must be vacated. He wrote that Sternberg c o n strued § 362(k)(1)’s authoriz ation of f ee awards more narrowly than Cong r ess likely intend ed. J udg e W a tford ag reed with the F ifth Circuit that § 362(k)(1) allows a plaintiff to r ecover attorney s’ fees incurring both in remedy ing a violation of theI N R E : S N O W

D E N 4

automatic stay and in bring ing a n action to recover the “actual damag es” caused by

that violation.

COUNSEL

Christina L

. Henry (arg

u e d ) and J acob DeGraaff, H enry , DeGraaff, & McC ormick, P.S., Seattle, W ashing ton, for Appellant.

Amit D. Ranade ( arg ued) and Alex ander M. W u, Hillis Clark Martin & Peterson P.S., Seattle, W ashing ton, for Appellee.

OP INION

McKEOW

N, Circuit J udg e:

This is the story of how a bankruptcy filing listing a $575
pay day loan snowballed into a v iolation of the automatic stay , and protracted litig ation, which left a stressed borrower with attorney s’ fees and emotional d istress. W hen th e a utomatic stay that accompanies a bankruptcy filing is viola t e d

, t he bankruptcy petitioner is entitled to recover damag es a nd attorney s’ f

ees. 11 U .S.C. § 362(k)(1). The issu e we consider is w hether a bankruptcy p eti t i o n er can collect attorney s’ fees incurred litig ating the violation of the automatic stay after the violator sends an e-mail conditionally offering partial reimbursem ent. W e conclude that such fees

are recoverable under § 362(k)(1). The ban k r u ptcy laws do
not permit a stay violator to undermine the remedies available under § 362(k) by forcing a b ankruptcy petitioner to accept a conditional o ff

e r in lieu of pursuing fair compensation a nd attorney s’ fees.I N R E : S N O W

D E N 5

B A C K G R O U N D A N D P R O C E D U R A L H I S T O R

Y

Rupanjali Snowde n t o o k out a $ 575 pay day loan 1 from Check I nto Cash of W ashing ton (“CI C”) to make ends meet for herself and her daug hter. B efore pay ment was due, Snowden put a stop pay

ment on the check. On the same day

, Snowden a dvised CI C’s Sequim, W ashing ton office that she

was “thinking about filing f or b ankruptcy ,” and provided her bankruptcy attorney ’s phone number. She was advised that she should let CI C know if s h e decided to file. W h en Snowden told CI C that she could not repay the loan, CI C said that sh e m u st call CI C every day

, otherwise the company would call her “references.” Snowden complied, calling CI C
every day un t i l t h e day she filed for bankruptcy because she “didn’t want to be embarrassed.”

Snowden was employ ed a s a hospital nurse. CI C employ e es c alled her at work numerous times asking why she had not y et repaid the loan. Snowden r e f e r r ed them to her attorney and asked that they stop c alling her at work, but the calls persisted. T hese calls affect e d h er work performance and were “very frustrating ” because every time Snowden heard her name over the loudspeaker she would, “run to the phone thinking

. . . [ h er d a u g hter h ad] an emerg ency .” CI C advised Snowden that it would n ot cash the c heck securing the loan.

1 “ ‘ Pay d ay ’ lo an s a r e s h o r t -term co n su m er lo an s (u su ally [f

ew er] th an 3 1 d ay s) secu red b y a co n s u m er’ s p o s t- dated ch eck

. T h e p ay d ay i n d u stry targ ets lo w to m ed iu m in co m e co n su m ers as w ell as in d iv id u als w h o h av e

n o sav in g s, an d liv e p ay ch eck to p ay ch eck .” Brid g e Fu n d Ca

p i ta l Co rp

. v. Fa stb u cks Fra nch ise Co r p

. , 6 2 2 F.3 d 9 9 6 , 9 9 9 n .1 (9 th Cir. 2 0 10 ).I N R E : S N O W

D E N 6

I n a n effort to g et her financial house in order, Snowden filed her Chapter 7 b ankruptcy petition without directly advising CI C. She listed CI C a s an unsecured creditor with

a $ 575 claim. W hen Snowden checked her bank a ccou n t a little over a month after the bankruptcy filing

, she saw that it

w a s overdrawn. The bank advised her that CI C h ad cashed the check securing the pay day loan. I nstead of h onoring the automatic stay , and a fter a number of harassing phone calls
to Snowde n a t the hospital, CI C used an electronic funds transfer to debit Snowden’s bank account for the amount due, overdrawing her account by $816.88, including bank charg es.

W h en Snowden found out about the overdraft, she went into a tailspin because her finances had c areened out o f control a t the mome n t w h e n she thoug ht she was finally
g etting them tog ether. “[ T] he number just panicked [ her]

, ” and she was “out of [ her] mind.” S h e w o rried that every other creditor would “do the same thi n g [ C I C] did,” which “was very overwhelming .” Snowden “had to b o rrow to pay those [ o v erdraft] fees, and had to tell her daug hter she could
not a fford to buy tennis shoes for her as promised or pay for

a haircut.” Snowden testified that she “ w a s g oing nuts,” “could not concentrate,” w as “ag itated,” and felt “miserable.”

S nowden went to CI C’s Sequim office to sort out th e situation and was told someone would contact her, but no o ne did. She left there “feeling really sick to [ h e r] stomach

. . . [ because she] just didn’t w ant to deal w ith this any more.” Snowden test i f

i ed that, o n the way to CI C, she ran into her daug hter’ s b a b y sitter, Christy Smith, and “broke down

. . . cry ing

. ” Smith, however, testified that the run-i n n ever occurred and that Snowden falsified an e-mail in Smith’s

name mirroring Snowden’s account o f their run-in. Smith testifi ed that Snowden offered her $600 in ex chang e forI N R E : S N O W

D E N 7

favorable testimony

. Snowden, on the other h and, testified that Smith w rote the e-mail and de n i e d t h at she offered her
any money

.

I n Ap r i l 2009, Snowden filed a motion for sanctions in the United States B ankruptcy Court for the W estern District of W ashing ton, alleg ing that CI C w ill f u lly violated the automatic stay provision of the bankruptcy code, 1 1 U.S.C. § 362, and seeking a return of the fu n d s and overdraft fees, emotional distress and p unitive damag es, and attorney s’ fees. Throug hout the proceeding s, CI C disputed that it violated the automatic stay

.

CI C rejec t e d Snowden’s request to settle the case for $25,000. I nstead, in an e-mail affirmatively claiming it was without fault, CI C p roposed repay ing Snowden the loan amount, bank fees, and three hours of attorney s’ fees, a total of $1,445. Understandably

, Snowden d i d n ot jump at this
sug g estion because the $1,445 did not compensate her f or the emotional distress CI C had caused.

The case proceeded to trial. Ultimately

, the ba nkruptcy
court rejected CI C’s defenses, found a w illful violation of the automatic stay , and awarded emotional distr ess damag e s o f $12,000 as well a s the $575 loan amount, $370 in bank fees, $12, 0 0 0 in punitive damag es, and $2,538.55 in attorney s’ fees, totaling $27,483.55. 2 I t denied Snowden’s request for

a f e e a w ard in the court’s inherent authority or under 11 U.S.C. § 105(a). T he court found Snowden’s testimony on emotional distress credible thoug h it could n ot “res o lve the contradiction between Ms. Smith and Ms. S n owden” a nd

2 T h e b an k

ru p tcy co u rt n o ted th e s tip u latio n t h at CIC p rev io u s ly p aid th e lo an am ou n t, b an k

f ees, an d p u n itiv e d am ag es aw ard s.I N R E : S N O W

D E N 8

concluded that “[ c] ashing o f the check upend e d both [ Snowden’s] finances a

n d her efforts to manag e her affai rs

. . . as did [ CI C’s] ong oing refusal to rectify the situation that i t created.” The court also a warded punitive dama ge s , determining that “CI C point[ ed] to n o policy directin g i t s local offices to forward bankruptcy notices to headquarters o r corporate collection or instructing h o w to check for bankruptcy ,” w hich “qualifies under the authorities

. . . a s reckless disr e g ard for the rig h ts of customers who file for bankruptcy r elief.” The court d etermined that Snowden was entitled only

to attorney s’ fees incurred up to May 20, 2009, the date on which CI C sent its e-mail.

CI C appealed the b ankruptcy court’s emotional distress and punitive damag es, and fees awards. The district court determined that althoug h th e b a n kruptcy court cited the controlling c ase, In re D awson , 3 9 0 F. 3d 1139 (9th Cir. 2004), it did not a

pply the proper st a n d a rd f or emotional distress damag es. The district court found, however, that the bankruptcy court applied the appropriat e p u nitive damag e s standard and indicated that it would be inclined to affirm the judg ment were i t not for the error reg arding emotional distress d amag es. The district court remanded for a determination of e motional distress d amag e s un d e r the appropriate stand ard and for a reevaluation of punitive dama g e s i n lig ht of any c hang e in the emotional distress damag es award.

The district cour t a lso affirmed on Snowden’s crossappeal of the attorney s’ fees award a nd the failure to impose sanctions under the bankruptcy c o u rt’s inherent a u t h o rity o r under § 105(a). T he d istrict court classified the May 20, 2009 e-mail a s a “ tender” that w ould have remedied the stay violation. I t therefore concluded that S ternberg v. Johnston

,I N R E : S N O W

D E N 9

595 F .3d 937 (9th Cir. 2010), “le[ ft] little to discuss” because it limited attorney s’ fees solely to those fees “associated with remedy ing the st a y violation.” Id. at 945. L ike the bankruptcy court, the district court reasoned that any damag e s

a ccrued after May 20, 2009 were not associate d w i t h remedy i ng the stay v iolation because if Snowden h ad accepted the amount mentioned in CI C’s e-mail, the violation would have ended.

O n r e mand, the bankruptcy court did not a lter i t s judg ment, even thoug h it reconsidered the trial record in lig ht of the district court’s decision. The ban k ruptcy court noted that it found Snowden’s testimony more credible than Smith’s, and that Snowden had clearly established sig nificant emotional distress because “a reasonable person in precarious financial c ircumstances who[ ] had to endure what Ms. Snowden did, after f

iling bankruptcy

, g oing throug h the stress that n ormally attends that process and b eg inn i ng to build a structure on which she could g o forward with her life, had the

r e peated calls at work, then h ad the beg inning s o f the financi a l structure she was rebuilding kicked out from underneath

. . . would [ suffer] substantial emotional d istress.”

F ollowing round two in the bankruptcy court, CI C ag ain appealed the emotional distress and punitive damag e s awards
to the distr i ct court. Snowden cross-appealed the sanctions decision and the attorney s’ fees d e termination under Sternberg

, and she soug ht to recover fees incurred on appeal. I n this s e c o n d a p peal to the district court, the court determined that i t s prior r u ling s on attorney s’ fees a nd sanctions remained the law of the case. I t als o d enied Snowden attorney s’ f

ees in c urred as a result of the appeal because those fees were not incurred i n an effort to e nforce the stay , but in pursuit of a damag es award f o r a stayI N R E : S N O W

D E N 10

v i o l ation. I n effect, the second appeal left in place th e bankruptcy

court’s orig inal order.

CI C now appeals the emotional di s t r e ss and punitive damag es awards, and Snowden cross-appeals the attorney s’ fees and sanctions ruling s.

A N A L Y S I S

I. Em otional Distress Dam ages

Section 362(k) p e r

mits an award of emotional d i s tress damag es if the bankruptcy petitioner “(1) suffer[ s] sig nificant harm, (2) clearly establish[ e s ] the sig nificant harm, and (3) demonstrate[ s] a causal connection between that sig n if i c ant harm and the violation of th e a utomatic stay (as distinct, for instance, f

rom the anx iety and pr es s u r es inherent in the bankruptcy process).” D awson , 390 F .3d at 1149. CI C takes issue only w ith the bankruptcy court’s finding s on the second
prong , a rgu i ng that Snowden did not clearly establish sig nificant emotional h arm but only “[ f ] leeting o r trivial

anx iety or distress.” S

ee id. at 1149. Reviewing the decision of the district court de n o v o , w e review for clear error the bankruptcy c o u r t’s finding s of fact and f or an abuse o f discretion the bankruptc y c ourt’s decision whether to award damag es and how much to award. Id. at 114 5
, 1150. W e affirm.

On remand, the bankruptcy court evaluated the evidence supporting Snowden’s claim f or emotional distress damag e s under the c orrect standard of p roof, namely whether she “clearly establish[ ed] ” that she suffered sig nificant emotional harm. Se e id. at 1149. Althoug h “the circumstances

s u r r ounding the violation make it obvious that a reasona b l eI N R E : S N O W

D E N 11

person would suffer sig nificant emotional harm,” id. at 1151, C I C contests whether Snowden “in fact suffered sig nifica n t emotional harm.” D iscrediting Smith’s testimony

, the bankruptcy court f

ound Snowden credible and determ i n ed that “Snowden d id suffer sig nificant and substantial emotional distress as a result of CI C’s actions in cashing the check and in c ontinuing to call her p o st-petition. Cashing o f the check upended both h e r finances and her efforts to manag e her a ffairs

. . . as d id [ CI C’s] ong oing r ef u sal to rectify the situation that it created.”

W h en asked why her declaration in support of the motion for sanction s d i d not include any information about the harassing telephone calls, Snowden replied “ I did not know I w as supposed to tell them. I didn’t know it was such a big thing

. . . . I t is a b ig t h i n g, b e c a u s e when y ou come out o f the room, it’s a burden to leave e very thing behind

. . . and to walk to the phone to answer the phone ev ery time. I don’t know if y ou’ve ever seen a nurse work.

. . . Not only are y ou leaving that r oom to come answer the p h o n e , y ou’re putting

a patient on h old.

. . . That’s a big thing .” CI C seiz es on the statement, “I didn’t know it w as s u c h a big thing ,” to claim that Snowden did n ot subjec t i v ely suffer emotional distress. I n view of the contex t e x plaining why the phone calls indeed

w e r e “a big thing ” and the testimony about her emotional distress, the district court did n o t e rr in confirming the emotional distress damag e s award.

II. P unitive Dam a ges

Section 362(k) provides for punitive damag es “in appropriate circumstances.” 11 U.S.C. § 362(k)(1). A n

a w ard of p unitive damag es requires “some showing o f reckless or callous disreg ard for the law or rig hts of others.”I N R E : S N O W

D E N 12

In re B l o o m , 8 7 5 F

. 2d 224, 228 (9th Cir. 1989). CI C is incorrect that the b ankruptcy c o ur t erroneously applied the “willful violation” standard rather than th e “ reckless disreg ard” standard. Th e b ankruptcy c ourt ex plained that punitive damag es were “ap propriate in the contex t of a stay violation w hen there’s a reckless and callous d isreg ard for the law or the rig hts of others or where the c onduct is malicious, wanton, o r oppressive.” T he bankruptcy co urt therefore applied the correct leg al standard.

The court’s award o f punitive d amag es was n ot an abuse of discretion. See Pavon v. S wift Transp. Co., Inc.
, 192 F .3d 902, 909 (9th Cir. 1999). The bankruptcy court supported the award with finding s that CI C failed to provi d e a policy o r employ e e training a b o u t how to address debt collection following a bankruptcy filing

. T h e bankruptcy court reasonably concluded that CI C de m o nstrated reckless a nd callous disreg a

rd for the law.

III. Attorneys’ F ees

“The filing of a bankruptcy petition immediately g ives rise to a n a utomatic stay

. ” Sternberg

, 595 F

. 3d at 940 (citing 11 U.S.C. § 3 62). Section 3 6 2 ( k ) ( 1 ) provides that “an individual injured by

any willful violation of a stay . . . shall

recover actual damag es, including costs and attorney s’ fees, and, in appropriate circums t a nces, may recover punitive damag es.” 11 U.S.C. § 362(k)(1).

I n Sternberg

, we held that a ttorney s’ fees under § 362(k)

are limited to “those a ttorney fees related to e nforcing the automatic stay and remedy ing the stay violation, n o t the fees incurred in prosecuting the bankruptcy a dversary proceeding in w hich he pursued his claim for those damag es.” 595 F .3dI N R E : S N O W

D E N 13

at 940. I n that case, an A riz ona state c o u r t p residing over a divorce proceeding e n t e r ed judg ment ag ainst an individual who was also involved in bankruptcy proceeding s

. I d

. at 9 41–42. The Ariz ona court required immediate pay m e n t o f the j u d g ment without determining whether there was any non-estate property or r equesting that the bankruptcy court determine whether the automatic stay a pplied to its order. Id. Simultaneously with f

iling an a

p peal, the p eti t i o ner commenced an adversary proceeding in the bankruptcy court arg uing that collection on the judg ment was a willful violation of the automatic sta y

. Id. The petitioner was successful in the adversary proceeding and re ce i ved a damag es award, which included attorney s’ fees. Id. at 942.

W e affirmed the findin g that the automatic stay was violated, but concluded that the petitioner was not entitled to attorney s’ fees from “ the subsequent adversary proceeding in which [ the petitioner] soug ht to collect damag es for the stay violation.” Id. at 9 45. W e interpreted § 362(k)(1) “ ag ainst the backdrop of the ‘American Rule,’” under which parties

are p r e sumed to bear their own litig ation costs. Id. at 945–47. W e also relied on the plain meaning o f “ a c t ual damag es” a s “[ a] n amount awarded

. . . to compensate for a proven injury

or loss; damag es that repay actual losses.” Id. a t 947 (citing Bl a c k ’s L aw Dictionary 416 (8th e d. 2004) (interna l quot a t i on marks omitted)). W e reasoned that “[ o ] nce the violation has ended, a

ny f ees the debtor incurs after that point in p ursuit of a damag e a

w ard would not be to c ompensate for

‘ actual d amag e s’ under § 3 62(k)(1).” 3 Id. “W e remand[ e d ]

3 S te rn berg ack

n o w led g ed th at th e d ecisio n created a circu it sp lit w i th th e Fif th Circu it

, s e e I

n re Rep in e , 5 36 F.3 d 5 12
, 5 2 2 (5 th Cir. 2 0 0 8 ),

w h ich rej ecte d t h e a r g u

m en t th at § 3 6 2 (k ) “ d o es n o t p ro v id e f o r aI N R E : S N O W

D E N 14

to the district court w ith instructions to remand to the bankrup t c y c ourt to determine which fees are properly allocable to efforts to enforce the automatic stay and prevent enforcement of the state court order t h a t v i olated the stay

. ” Id. at 948.

Sternberg established a brig htline rule that attorney s’ fees incurred in an attempt to collect damag es once the stay violation has en d

e d a re n ot recoverable. Id. However, the issue remains whether the e-mail CI C sent to Snowden ended the vio l ation. To answer this question, we look to whether the petitioner is using “[ t] he stay [ a] s a shield, not a sword.” Id. at 948. As w e ex plained in Sternberg

, the limitation on recovery of a ttorney s’ f

ees was a imed at reducing incentives for further litig ation while providing a bankruptcy p etitioner a remedy for the stay

violation. Id.

Our more recent decision in In re Schwartz-Tallard , No. 12-60052, 2014 W L 4251571 (9th Cir. Aug

. 29, 20 1 4 ), is instructive. There, we permitted recovery of a t t o r ney s’ fees incurred in defending an appeal from the deci s i o n o f the bankruptcy court finding a v iolat i o n o f the automatic stay

. 2014 W L 4251571, at * 3

– 4

. W e held that the d ebtor was

e n t i t l ed to f

ees because she “was forced to defend [ th e ] appeal to validate the b ankruptcy c o u rt’s r uling that [ the credi t o r] had v iolated the stay , a n d to p reserve her rig ht to collect t h e pre-remedy damag es awarded by the bankruptcy
court. I n other words, unlike in Sternberg

, Schwartz –Tallard

was not using the stay as a sword, b ut a s a shield f rom s t ay violation.” Id. a t *3 (first alteration in orig inal) (internal quotation marks omitted).

su ccessf u l claim an t t o c o llect th e f ees in cu rred in p ro secu tin g th eir actio n ,” id

. S ee S tern b erg , 5 9 5 F.3 d at 9 4 8.I N R E : S N O W

D E N 15

Here, the district court a ffirmed the ban kruptcy court’s rationale th at althoug h CI C never admitted a stay violation, Snowden’s “losses would have been rig hted and the violation would have come to an end” had she accepted the $1

, 4 4 5 tender. W e review that conclusion for an abuse of discretion. The bankruptcy court’s determination that the May 20, 2009 e-mail marked the e n d o f the stay violation was an abuse o f discretion because the court failed to ide n t i f y “the correct leg al standard for d ecision of the issue before it.” See United States v. Hinkson

, 585 F .3d 1247, 1251 (9th Cir. 2 0 0 9) (en ba n c )

. Having violated the automatic stay a ttendant to Snowden’s bankruptcy filing

, CI C h a d a n affirmative oblig ation to return any property it had wron g fully seiz ed from the bankruptcy esta t e. In re Abrams

, 127 B .R. 239, 242–43 (B .A.P. 9th Cir. 1994). I n s t e ad of returning that property with n o string s attached, CI C responded to Snowden’s o ffer to settle the case with a n e-mail c ontaining implied conditions. Snowden’s attorney deliv e red her demand for $25,000 only by voice mail, so we do not know
t he ex act terms o f the offer. B ut the most log ical in f e r e n c e, g iven the siz e and timing of the demand (it came just a week after Snowden filed a motion for s a n ctions seeking comprehensive relief from CI C) is that it represented an offer to settle all of Snowden’s claims.

B y declining the sum presented in CI C’s e-mail, Snowden

was using the stay not as a s w o r d b ut as a shield. CI C contested that it violated the a u tomatic stay and made it clear that g iving S n o w d e n the $1,445 was not an a dmission o f a violation of the automatic s tay

. CI C unsuccessfully maintained that position throug hout the litig ation i n the bankruptcy court. Snowden had to proceed with the litig ation
to establish a violation of the a utomatic stay ; p ut differently

, she had to g o to court to end the stay viola t i o n

. SeeI N R E : S N O W

D E N 16

Schwartz-Tallard

, 2 0 1 4 W L 4251571, at *4 (“[ T] he additional litig ation resulted from [ the violator’s] continued attempts to justify its stay -violating behavior—not from the debtor’s conduct.”); Sternberg

, 595 F .3d at 948. The fees Sno w d e n incurred in remedy ing the stay violation a fter receiving CI C’s e-mail fa l l s q uarely under the admonition that “ [ w] ithout a doubt, C o n gr ess intended § 362(k)(1) to permit recovery as damag e s fees incurred to [ end] violation of the automatic stay .” Sternberg , 595 F .3d at 946.

Permitting the violator to short-ci r c u i t the remedies available under § 362(k)(1) by making a conditional o ffer to return the p roperty wrong f ully seiz ed in violation of the automatic s tay would u n dermine the remedial scheme o f § 362(k). S

ee Sternberg

, 595 F .3d at 947–48. T h e automatic stay prevents f

urther liti ga t i o n in order to provide a “breathing spell” from creditors and preserves the petitioner’s

resources for c reditors. Id. at 948. Attorney s’ fe e s u n d e r § 362(k)(1) “deter stay violators from c ontinuing to disturb the breathing spell the stay aims to creat e.” SchwartzTallard , 2014 W L 4251571, at *4.

H ad Snowden accepted the $1,445 and soug ht dama g e s for e motional distress in a separate action, her recovery may have been p r ecluded because CI C never admitted a violation of the stay

—not to mention the r e ality that any settlement would have included a stand a r d release of liability

. A bankruptcy appellate panel of this court has decline d to find that a n a utomatic stay violation is remedied by a Rule 68 offer of judg men t, noting that “[ i] n retrospect, [ the creditor]
may reg ret not having ex plicitly included attorney ’s fees in its offer of judg ment and h aving o ffered a sum that would have been sufficient to make t h e d e b tor think very hard about whether continued litig ation is worthwhile.” In re Campion
,I N R E : S N O W

D E N 17

294 B .R

. 3 1 3
, 315, 318 (B

. A.P. 9th Cir. 2003) (internal quotation marks omitted). Althoug h t h e district court characteriz ed the e-mail as a “tender,” CI C never followed up wi t h a formal offer or terms of settlement. Since a Rule 68 offer of settlement does n o t r e m edy the stay violation, the sing le e-mail from CI C hardly serves to stop the train and cut off fees.

B e cause CI C did not return the property it had wrong f ully seiz ed from Snowden o n May 20, 2009, the bankruptcy court chose t h e wr o n g date to mark the end of the stay violation. The proper date is December 10, 2009, when the bankruptcy
court found a violation of the automatic stay

. The lit i ga tion leading up t o that ruling “relate[ d] to [ Snowden] ‘enforcing the automatic stay and remedy ing the stay violation.’” S ee Sc h w artz-Tallard

, 2014 W L 4251571, at *3 (quoting Sternberg

, 595 F .3d at 940). Th e r e f o re, we reverse the district c o u rt’s determination limiting fees to those incurred before May 20, 2 009, and we remand for a re c al c ulation o f attorney s’ fees.

Snowden cannot automatically recover all the fees she incurred before the end of the stay v i o l a t ion. Under Sternberg

, she can r e c over only those fees rel at e d to remedy ing the stay violation itself

. 5 9 5 F .3d at 940. Presumably some fees i n c u r r ed before December 10, 2009,

are the r e fore not recoverable, as they would h ave related to Snowden’s damag es claims rather than her efforts to end the stay

. “All f

ees related to proving [Snowden’s] d amag es a re disallowed under the American Rule.” I d. at 948.I N R E : S N O W

D E N 18

IV. Sanctions

Snowden cross-app e a ls the bankruptcy court’s failure to issue a sanctions a

ward unde r its inherent authority

, which “allows a b ankruptcy c o urt to deter and provide compensat ion for a broad rang e of improper litig ation tactics.” In re Dyer
, 322 F

. 3d 1178, 1196 (9th Cir. 2003). “B ecause of their very potency , inherent powers must b e ex e r cised with restraint a nd discretion,” Cham b ers v

. NASCO, Inc.
, 501 U.S. 32, 44 (1991); therefore, “[ s] anctions are justified when a party acts for an improper purpose.” F ink v

. Gomez
, 239 F .3d 9 89, 992 (9th Cir. 2001) (emphasis omitted).

The bankrupt c y c o urt declined to find any bad faith in CI C’s approach to Snowden’s bankru p t c y litig ation. B ased

on the record documenting the litig ation tactics, the bankruptcy court did not abuse it s d i scretion in deny ing sanctions u nder its inherent authority

. See Eskanos & A d ler, P.C. v. Leetien , 309 F .3d 1210, 1213 (9th Cir. 2002).

Snowden al so a

ppeals the b a

n kruptcy court’s failure to issue sanctions under 11 U.S

. C

. § 1 05(a), which vests bankruptcy courts with p owers “nece s s a r y or appropriate to carry out the provisions” of the bankruptcy code. B ecause a remedy was available to Sno wd en u nder § 362(k), no additional remedy was available u n der § 105(a). See In re Roman , 283 B .R. 1, 14–15 (B .A.P. 9th Cir. 2002).

C O N C L U S I O N

W e affirm the dis trict court’s order affirming the dec i s i ons of the bankruptcy court on emotional distress a nd punitive damag e s, and sanctions. W e reverse the dis t r i ct court’s order affirming the a w a r d of attorney s’ fees a ndI N R E : S N O W

D E N 19

remand for a calculation of a t t orney s’ fees related to remedy ing the stay v iolation, incl u d i n g those fees incurred after May 20, 2009.

The parties shall bear their own costs on appeal.

AF F IRMED in part; RE VERSED in part; REMANDED.

W A TF ORD, Circuit J udg e, concurring :

I join the court’s opinion and w rite se p arately to add a few words on the attorney ’ s fees issue.

I ag ree with my colleag ues that the fees award m u s t b e vacated, but it’s hard to f a ult e ither the bankruptcy court o r th e d i s t r ict court for that. O ur court has made calculating attorney ’s fees u nder 11 U .S.C. § 362(k)(1) unnecessar i ly complicated. The problem stems from our decisio n in Sternberg v. Johnston

, 595 F .3d 937 (9th Cir. 2010)

, w here

we construed § 362(k)(1)’s authoriz a tion of fee awards more narrowly than Cong ress likely intended. 1 Read most naturally

, the statute allows a plaintiff to recover attorney ’s fees incurred both in remedy ing a violation of the automatic stay a nd in bring ing an action to recover the “actual damag es” caused b y t h a t violation. T h at’s the sensible reading of the
statute the F ifth Circuit adopted. In re Repine
, 536 F .3d 512,

1 S ectio n 3 6 2 (k )(1 ) p ro v id es: “ Ex cep t as pro v id ed in p arag rap h (2 ), an in d iv i d u al in

j u red by an y w illf

u l v i o latio n of a stay pro v id ed b y th is sectio n sh all reco v er actu al d am ag es, in clu din g co sts an d atto rn ey s’ f ees,

an d , in ap pro p riate circu m stan ces, m ay reco v er p u n itiv e d am ag es.”I N R E : S N O W

D E N 20

522 (5th Cir. 2008). I n Sternberg

, however, we rejected that reading and held instead that § 362(k)(1) imposes a temporal l i m it o n the plaintiff’s rig ht to recover a ttorney ’s fees, su c h
t h at no fees may be recovered for any w ork performed af t e r the stay violation has ended. 595 F

. 3d at 947. Thus, un d e r

our reading o f § 362(k) ( 1 ), if the stay violation ends before the p laintiff ever files a n a ction to recover her “actual damag es,” n one o f the fees incurred in prosecuting the suit
may be awarded. I d on’t thi n k t h at’s the reg ime Cong ress contemplated.

Nonethe l e s s , as a three-judg e panel, we’re bound by the

r u l e in Sternberg

, w hich requires us to vacate the award at i s s u e here. Check I nto Cash v iolated the automatic stay b y wrong fully withdrawing $575 from Ms. Snowden’s bank
account. Our task under Sternberg is to determine when the stay v iolation ended. As the court notes , w h e n a creditor violates the stay by wrong fully seiz ing the debtor’s property , the stay violation usually doesn’t end until the creditor returns the property to the debtor. See I n re Abr a m s , 127 B .R. 239, 242–43 (B .A.P. 9 th Cir. 1 991). That didn’t occur on May 20, 2009, as the bankruptcy c ourt held, because Check I nto Cash didn’t send Snowden a check on that date for $575 plus the overdraft fees she was char g e d

. I t offered to return those funds, but w i t h s tring s attached: Check I nto Cash sty led its offer as a “counteroffer” to Snowden’s $25,00 0 s ettlement demand, so accepting the offer would have required Snowden
to release her claims for emotional distress a n d punitive damag es. Check I nto Cash’s conditional, string s -attached offer to return the property it h ad wrong fully seiz ed—an offer Snowden understandably rejected—did not e nd the stay violation.I N R E : S N O W

D E N 21

I ag ree w i t h t h e court that the stay violation ended b y December 10, 2009, when the bankruptcy court ordered the
return of Snowden’s wr o n gf ully seiz e d property

. Althoug h Check I nto Cash did not a ctually pay Snowden the $575 plus overdraft fees until some months later, by December 10, 2009, it n o long er contested its oblig ation to pay those sums. Nor did Check I n to Cash contest that it had a ctually v iolated the stay

. Cf. In re S

chwartz-Tallard

, __ F .3d __, 2 0 1 4 W L 4251571 a t *4 (9th Cir. Aug

. 29, 2014) (stay violation hasn’t ended if defendant continues to c ontes t whether a stay violati o n actually occurred). After the bankruptcy court’s December 10, 2009, ruling

, Chec k I nto Cash contested only whether Snowden was entitled to recover emotional distress and punitive damag es as a result of the stay violation.

So, under Sternberg

, we are left to remand this case to the bankruptcy court with instructions to (1) calculate the portion of Snowden ’s pre-December 10, 2009, attorney ’ s fees

a t t r i b u table to her efforts to r ecover the $575 plus overdraft fees, and ( 2) disallow all remaining fees. This impractical (and inevitably somewhat arbitrary ) ex ercise is sure to invite further litig ation. That Sternberg requi res such an odd, resource-consuming e x ercise, n ot dictated by the plain tex t o f § 362(k)(1), is another rea s o n to question the soundness o f Sternberg ’s holding

.