Opinion ID: 201293
Heading Depth: 2
Heading Rank: 2

Heading: The Superior Court Action

Text: 35 McMullen next contends that the bankruptcy court erred in holding that the Sevignys' state superior court complaint against McMullen was merely a technical violation of the automatic stay, rather than a willful violation compensable under Bankruptcy Code § 362(h). Once again we must disagree. 36 Under Bankruptcy Code § 362(h), a violation of the automatic stay must be willful or the violator cannot be held liable for damages. Bankruptcy Code § 362(h); 11 U.S.C. § 362(h). Generally speaking, a violation will be found willful if the creditor's conduct was intentional (as distinguished from inadvertent), and committed with knowledge of the pendency of the bankruptcy case. See Fleet Mortgage Group, Inc. v. Kaneb, 196 F.3d 265, 268-69 (1st Cir.1999). Absent such knowledge on the part of a creditor, however, the violation is merely technical, and no damages are to be awarded. See In re Will, 303 B.R. 357, 364 (Bankr.N.D.Ill.2003) (noting that no damages could be awarded under subsection 362(h) where creditor had not been listed, and hence had received no notice of the bankruptcy case and resultant automatic stay); Shadduck v. Rodolakis, 221 B.R. 573, 585 (Bankr.D.Mass. 1998) (noting that no damages are allowable for technical violation, even where debtor nonetheless incurred attorney fees as result of violation). Normally, however, a creditor that commits a technical violation of the automatic stay, due to lack of notice, has an affirmative duty to remedy the violation as soon as practicable after acquiring actual notice of the stay. See Will, 303 B.R. at 364. 37 The determination as to whether a violation of the automatic stay was willful, as defined in subsection 362(h), poses a factual issue, which we review only for clear error. See In re Campion, 294 B.R. 313, 315 (BAP 9th Cir.2003). As previously stated, in relation to the McMullen allegation of bad faith under subsection 362(b)(4), see supra Section II.A, the bankruptcy court credited the Sevignys' testimony that they did not have notice that the McMullen bankruptcy proceeding remained pending at the time their superior court action to recover their deposit was filed. As soon as McMullen informed them of the automatic stay, the Sevignys promptly dismissed their superior court action. At most, McMullen catalogs tidbits of record evidence which might have persuaded the factfinder to reach a contrary conclusion, 6 but in no event could such evidence compel a finding in McMullen's favor. Thus, the bankruptcy court finding that the Sevignys' violation of the automatic stay was not willful is amply supported by the record, hence cannot constitute clear error. See Campion, 294 B.R. at 315.
38 As her final claim on appeal, McMullen contends that the bankruptcy court erred in concluding that subsection 362(h) did not permit the McMullen claims for damages against Perry and Williams, wherein she alleged that Perry and Williams knowingly aided and abetted the Sevignys in filing their superior court complaint. As the instant claim involves an issue of statutory interpretation, we review the bankruptcy court decision de novo. See Charlie Auto Sales, 336 F.3d at 37. We discern no error of law. 39 The bankruptcy court correctly noted that McMullen failed to cite any case authority which specifically supported her contention that subsection 362(h) permits the imposition of damages against a person who aids and abets another in violating the automatic stay. None of the McMullen citations even mentions the phrase aiding and abetting, nor sets forth or analyzes the elements of such a derivative claim under subsection 362(h). 7 40 Moreover, none of the McMullen citations deals with the pertinent question on appeal: can a defendant be found liable in damages under subsection 362(h) for aiding and abetting a codefendant's mere technical violation of the automatic stay? Instead, the cases she cites involved groups of persons who jointly partook in willful and often egregious violations of the automatic stay, thereby rendering them directly liable — rather than derivatively liable as aiders and abettors — for the resulting subsection 362(h) damages. See Tsafaroff v. Taylor ( In re Taylor ), 884 F.2d 478, 483 & n. 6 (9th Cir.1989) (rejecting defense that creditors did not violate automatic stay, given that they relied on advice of their counsel, but reserving question as to whether counsel also would be liable for damages); In re Zick, 123 B.R. 825, 828 (E.D.Wisc.1990) (noting that both wife and attorney violated stay); In re McGinty, 119 B.R. 290, 295-96 (M.D.Fla.1990) (finding that wife, attorney, and paralegal all engaged in clear[] violations of stay); In re Lickman, 297 B.R. 162, 195, 198 (Bankr. M.D.Fla.2003) (holding that in violating the stay, all defendants acted egregiously and in concert); In re Timbs, 178 B.R. 989, 995 (Bankr.E.D.Tenn.1994) (noting that attorneys who aided clients in violating the stay may be subject to subsection 362(h) damages, but observing that their liability is coextensive with the liability of the person whose actions violated the stay, viz., the clients). 41 By contrast, the bankruptcy court noted that the Sevignys engaged in a technical violation of the automatic stay and that, [a]bsent such a [willful and compensable] violation [by the Sevignys], the alleged derivative liability of Williams and Perry, if it exists, is lacking a necessary condition precedent. McMullen has elected not to address this particular matter on appeal, choosing instead to focus exclusively upon whether Perry and Williams had the requisite knowledge of the automatic stay and substantially assisted the Sevignys by arranging to procure the affidavit of Lester Pryor. 42 A plaintiff normally establishes a defendant's liability as an aider and abettor by demonstrating three elements: (1) the primary actor committed a wrongful act that causes injury; (2) the aider and abettor was aware of his role in the overall wrongful activity when he provided the assistance; and (3) the aider and abettor knowingly and substantially assisted the primary actor's wrongful act. See Temporomandibular Joint Implants Recipients v. Dow Chem. Co. ( In re Temporomandibular Joint Implants Prods. Liab. Litig. ), 113 F.3d 1484, 1495 (8th Cir.1997); Colonia Ins. Co. v. City Nat'l Bank, 13 F.Supp.2d 891, 897 (W.D.Ark.1998); In re Northgate Computer Systs., Inc., 240 B.R. 328, 359 (Bankr.D.Minn.1999); see generally Restatement (Second) of Torts § 876(b). Assuming arguendo that McMullen adduced enough competent evidence on the latter two elements, the bankruptcy court held that the Sevignys had not committed a wrongful act which caused injury, but simply a technical violation of the automatic stay, which they promptly cured as soon as McMullen notified them of the automatic stay. As aiding and abetting liability is derivative in nature, cf. United States v. Loe, 248 F.3d 449, 458 (5th Cir.2001) (An aider-abettor is guilty in a derivative sense; his guilt is contingent on the acts of another.), and the factfinder already had found that the primary actors ( viz., the Sevignys) had committed no violation either cognizable or compensable under subsection 362(h), the bankruptcy court correctly found in favor of Perry and Williams as well. 8 43 We need not and do not determine whether an aiding and abetting claim is cognizable under subsection 362(h). We simply hold that, even if such a claim were cognizable, McMullen utterly failed to demonstrate her entitlement to relief on the record. 44 Affirmed.