Court Opinion

ID: 2722188
Source: CourtListenerOpinion
Date Created: 2014-08-29 18:00:30.776575+00
Date Added: 2024-06-11T15:45:46.358998
License: Public Domain

FOR PUBLICATION

         UNITED STATES COURT OF APPEALS
              FOR THE NINTH CIRCUIT

 IN RE: IRENE MICHELLE SCHWARTZ-                       No. 12-60052
 TALLARD,
                           Debtor,                        BAP No.
                                                          11-1429

 AMERICA’S SERVICING COMPANY,                          ORDER AND
                       Appellant,                       OPINION

                       v.

 IRENE MICHELLE SCHWARTZ-
 TALLARD,
                       Appellee.

              Appeal from the Ninth Circuit
               Bankruptcy Appellate Panel
Kirscher, Pappas, and Dunn, Bankruptcy Judges, Presiding

                    Argued and Submitted
          March 14, 2014—San Francisco, California

                       Filed August 29, 2014

 Before: J. Clifford Wallace and Ronald M. Gould, Circuit
     Judges, and Paul C. Huck, Senior District Judge.*

  *
     The Honorable Paul C. Huck, Senior District Judge for the U.S.
District Court for the Southern District of Florida, sitting by designation.
2                  IN RE: SCHWARTZ-TALLARD

                    Opinion by Judge Huck;
                    Dissent by Judge Wallace

                           SUMMARY**

                            Bankruptcy

    The panel filed an order withdrawing its previous opinion
and dissent and filing a superseding opinion and dissent
affirming the Bankruptcy Appellate Panel’s reversal of the
bankruptcy court’s decision and holding that a bankruptcy
debtor was not precluded from recovering, as damages,
attorneys’ fees for defending against a creditor’s appeal of a
finding that the creditor violated the automatic stay.

     The panel distinguished Sternberg v. Johnston, 595 F.3d
937 (9th Cir. 2010), which held that a debtor’s attorneys’ fees
for work on an adversary proceeding seeking damages for a
stay violation were not actual damages and thus were not
recoverable under 11 U.S.C. § 362(k)(1) (providing that “an
individual injured by any willful violation of a stay . . . shall
recover actual damages, including costs and attorneys’ fees”).
The panel held that the attorneys’ fees in this case were
incurred for a different purpose than those in Sternberg and
fell within the meaning of “actual damages” in § 362(k)(1)
because they related to the debtor’s enforcing of the
automatic stay and remedying of the stay violation. The
panel further wrote that the BAP’s use of precedent expressly
rejected in Sternberg was improper.

  **
     This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
                IN RE: SCHWARTZ-TALLARD                       3

     Dissenting, Judge Wallace wrote that Sternberg
controlled and required reversal. He also wrote that the
BAP’s reliance upon one of its own cases, notwithstanding
the Ninth Circuit’s previous rejection of the statement of law
at issue, was an attack on Article III of the Constitution.

                         COUNSEL

Andrew Martin Jacobs (argued), Snell & Wilmer L.L.P.,
Tucson, Arizona; Kelly Harrison Dove, Snell & Wilmer
L.L.P., Las Vegas, Nevada, for Appellant.

Christopher P. Burke (argued), Chris P. Burke & Associates,
Las Vegas, Nevada, for Appellee.

                           ORDER

    The opinion and dissent in the above-captioned matter
filed on April 16, 2014 and published at 751 F.3d 966 are
WITHDRAWN. The superseding opinion and dissent shall
be filed concurrently with this order.

    The parties shall have fourteen (14) days from entry of the
superseding opinion to file petitions for rehearing or petitions
for rehearing en banc in the above-captioned matter.

   IT IS SO ORDERED.
4                IN RE: SCHWARTZ-TALLARD

                          OPINION

HUCK, District Judge:

    The issue on appeal is whether a debtor in bankruptcy can
recover, as damages, attorneys’ fees for defending against a
creditor’s appeal of a finding that the creditor violated the
automatic stay. The Bankruptcy Code provides that “an
individual injured by any willful violation of a stay . . . shall
recover actual damages, including costs and attorneys’ fees.”
11 U.S.C. § 362(k)(1). We recently held that a debtor’s
attorneys’ fees for work on an adversary proceeding seeking
damages for a stay violation were not actual damages under
§ 362. Sternberg v. Johnston, 595 F.3d 937, 948 (9th Cir.
2010). In Sternberg, we stated that “the proven injury is the
injury resulting from the stay violation itself. Once the
violation has ended, any fees the debtor incurs after that point
in pursuit of a damage award would not be to compensate for
‘actual damages’ under § 362(k)(1).” Id. at 947.

    In this case, we are asked to apply § 362(k)(1) to a set of
facts different than that addressed in Sternberg. Unlike in
Sternberg, where a debtor filed an adversary proceeding in
pursuit of damages, the debtor in this case is seeking
attorneys’ fees incurred in defense of America’s Servicing
Company’s (“ASC”) appeal of the bankruptcy court’s
determination that ASC had violated the automatic stay.
Because the attorneys’ fees at issue in this case were incurred
for a different purpose than those in Sternberg, Sternberg
does not prohibit the awarding of the attorneys’ fees at issue
here. Moreover, following the reasoning in Sternberg, the
fees at issue in this case fall within the meaning of “actual
damages” in § 362(k)(1). Therefore, we affirm the
                IN RE: SCHWARTZ-TALLARD                      5

Bankruptcy Appellate Panel (“BAP”) and grant Schwartz-
Tallard’s request for an award of attorneys’ fees.

                         I. FACTS

    ASC serviced a mortgage on Schwartz-Tallard’s home.
On March 30, 2007, Schwartz-Tallard filed for Chapter 13
bankruptcy, but continued to make mortgage payments. ASC
believed Schwartz-Tallard had fallen behind on her payments,
and moved for relief from the automatic stay to foreclose on
the property. On April 6, 2009, following ASC’s motion, the
bankruptcy court lifted the automatic stay. Schwartz-Tallard
moved to reinstate the stay and the bankruptcy court orally
granted the motion on May 13, 2009. ASC did not appear at
the hearing. On May 20, 2009, ASC caused Schwartz-
Tallard’s home to be sold at a trustee’s sale. It was not until
June 3, 2009—after the property had been sold—that the
bankruptcy court entered the written order reinstating the
stay.

    On June 9, 2009, Schwartz-Tallard filed a motion
asserting that ASC had violated the automatic stay in her
Chapter 13 bankruptcy, and seeking sanctions. Schwartz-
Tallard presented evidence that she was current on her
mortgage payments through March 2009, but that ASC
returned her April 2009 payment with a letter stating that her
loan was in foreclosure. Schwartz-Tallard also established
that when the bankruptcy court reinstated the stay, she sent
ASC the payments for April and May 2009, and enclosed a
letter notifying ASC of the stay’s reinstatement.
Inexplicably, ASC rejected the payments, still asserting that
the property was in foreclosure.
6                  IN RE: SCHWARTZ-TALLARD

    On February 10, 2010, the bankruptcy court ruled that
ASC had violated the stay and awarded Schwartz-Tallard
damages, including attorneys’ fees and punitive damages.
The bankruptcy court ordered that the property be put back
into Schwartz-Tallard’s name within two days of the order
(by February 12, 2010). On March 2, 2010, ASC appealed
that order to the United States District Court for the District
of Nevada. The next day, on March 3, 2010, ASC
reconveyed the property to Schwartz-Tallard, thereby,
according to ASC, remedying the stay violation. On appeal,
the district court affirmed the bankruptcy court’s finding that
ASC had violated the stay, and largely affirmed the
bankruptcy court’s damages award.1

    Schwartz-Tallard then moved to recover the attorneys’
fees incurred in litigating ASC’s appeal to the district court.
These are the fees at issue in this appeal. The bankruptcy
court denied the motion, and Schwartz-Tallard appealed to
the BAP. The BAP held that Schwartz-Tallard’s attorneys’
fees for defending ASC’s appeal were actual damages under
§ 362(k)(1). ASC now appeals.

 1
   The district court reversed and remanded the bankruptcy court’s award
of attorneys’ fees, but not because it found attorneys’ fees were not
warranted by § 362(k)(1). Rather, it remanded for the bankruptcy court
to make a determination of actual fees expended or charged in connection
with enforcing the stay and remedying the stay violation. America’s
Servicing Co. v. Schwartz-Tallard, 438 B.R. 313, 321 (D. Nev. 2010).
These are not the attorneys’ fees at issue in the instant appeal.
                IN RE: SCHWARTZ-TALLARD                     7

                      II. ANALYSIS

                  A. Standard of Review

   We review the BAP’s conclusions of law and statutory
construction de novo, meaning we independently review the
decision of the bankruptcy court. In re Su, 290 F.3d 1140,
1142 (9th Cir. 2002).

                       B. Sternberg

    The Bankruptcy Code provides that “an individual injured
by any willful violation of a stay . . . shall recover actual
damages, including costs and attorneys’ fees.” 11 U.S.C.
§ 362(k)(1). However, in Sternberg we held that not all
attorneys’ fees associated with a stay violation are
recoverable under § 362(k)(1).

     In Sternberg, the debtor in bankruptcy’s ex-wife sought
to have a state court hold the debtor in contempt for
non-payment of spousal support. 595 F.3d at 940. The state
court was aware of the debtor’s bankruptcy and had not yet
resolved the issue of whether the contempt proceedings
violated the stay. Nonetheless, the state court entered an
order holding the debtor in violation of the divorce decree,
and granting a specific monetary judgment for the debtor’s
ex-wife. Id. at 941. The debtor sought relief from the order
in two ways: by filing a motion asking the bankruptcy court
to vacate the state court’s stay-violating order, and by
initiating an adversary proceeding against his ex-wife and her
counsel for not acting to remedy the state court’s order. Id.
The bankruptcy court granted the debtor’s motion and
vacated the state court order. Id. at 942. The adversary
proceeding later went to trial in the bankruptcy court to
8               IN RE: SCHWARTZ-TALLARD

determine whether the debtor’s ex-wife and her counsel had
violated the stay, and, if so, the appropriate damages. Id.
The bankruptcy court ruled in favor of the debtor’s ex-wife
and her counsel; the debtor appealed; the district court
reversed and found that the ex-wife and her counsel had
violated the stay. Id. On remand, the bankruptcy court
awarded damages, and the debtor’s ex-wife’s counsel
appealed the damages award. Id.

     In Sternberg, we reviewed the damages award and held
that the debtor could not recover attorneys’ fees incurred
prosecuting the adversary proceeding under §362(k)(1). Id.
at 948. We stated that “the proven injury is the injury
resulting from the stay violation itself. Once the violation has
ended, any fees the debtor incurs after that point in pursuit of
a damage award would not be to compensate for ‘actual
damages’ under § 362(k)(1).” Id. at 947. The outcome, we
held, was consistent with the “financial and non-financial”
purposes of the stay. Id. The financial purpose of the stay, as
we explained, is to give the debtor time to put his finances
back in order, allowing creditors to be satisfied to the extent
possible and preventing creditors from pursuing their own
remedies at each other’s expense. Id. at 948. The stay is
“meant to help the debtor deal with his bankruptcy for the
benefit of himself and his creditors alike. We have never said
the stay should aid the debtor in pursuing his creditors, even
those creditors who violate the stay. The stay is a shield, not
a sword.” Id. The non-financial goal of the stay is to create
a “breathing spell” for the debtor, and we reasoned that more
litigation was not consistent with that end. Id. Therefore, we
concluded that “a damages action for a stay violation is akin
to an ordinary damages action, for which attorney fees are not
available under the American Rule.” Id.
                    IN RE: SCHWARTZ-TALLARD                                9

    The Sternberg decision overruled prior BAP precedent
holding that “actual damages” under § 362(k)(1) were meant
to return the debtor to the position the debtor was in before
the stay violation, and that “‘the attorneys’ fees and costs
incurred in prosecuting an adversary proceeding arising from
a violation of the automatic stay are recoverable.’” Id. at 947,
citing Beard v. Walsh (In re Walsh), 219 B.R. 873, 878 (9th
Cir. B.A.P. 1998); Havelock v. Taxel (In re Pace), 159 B.R.
890, 900 (9th Cir. B.A.P. 1993), vacated in part on other
grounds by 67 F.3d 187 (9th Cir. 1995).2

                              C. Analysis

    The issue here is whether the attorneys’ fees
Schwartz-Tallard seeks relate to her “enforcing the automatic
stay and remedying the stay violation,” Sternberg, 595 F.3d
at 940, or whether they are more akin to prosecuting an
adversary proceeding in pursuit of a claim for damages.
Schwartz-Tallard’s defense of ASC’s appeal differs
fundamentally from the independent damages action in
Sternberg. Here, unlike in Sternberg, ASC appealed not only
the damages award, but importantly, the bankruptcy court’s

  2
     Schwartz-Tallard asks us to re-consider the wisdom of Sternberg,
arguing that it is an outlier among the circuits and has received substantial
criticism for both its statutory construction and policy analysis. See In re
Repine, 536 F.2d 512, 522 (5th Cir. 2008) (awarding attorneys’ fees under
section 362(k) to a debtor seeking damages); In re Webb, 472 B.R. 665,
*16 (B.A.P. 6th Cir. 2012) (unpublished) (same); In re Duby, 451 B.R.
664, 676-77 (B.A.P. 1st Cir. 2011) (same and criticizing Sternberg).
However, we are bound by the decisions of prior panels so long as those
decisions cannot be fairly distinguished. Miller v. Gammie, 335 F.3d 889,
900 (9th Cir. 2003) (en banc); In re Southern California Sunbelt
Developers, Inc., 608 F.3d 456, 464 (9th Cir. 2010) (distinguishing
Sternberg and holding that it does not bar a fee award under a different
bankruptcy statute).
10                  IN RE: SCHWARTZ-TALLARD

determination that the stay had been violated. In re Schwartz-
Tallard, 473 B.R. 340, 349 (B.A.P. 9th Cir. 2012)
(“[Schwartz-Tallard] was required to defend the bankruptcy
court’s decision, not only to protect the award of damages,
but also to uphold the bankruptcy court’s determination that
ASC had, indeed, violated the stay.”)3

     Sternberg specifically held that any fees a debtor incurs
“in pursuit of a damage award” are not covered. 595 F.3d at
947 (emphasis added). But here, the debtor was not pursuing
a damage award—she had already been awarded damages for
the breach of the stay. She was, however, “remedying the
stay violation,” within the meaning of Sternberg. Id. at 940.
But for ASC’s appeal, Schwartz-Tallard’s litigation of this
matter would have been complete. Even though the property
was reconveyed to Schwartz-Tallard before the parties
litigated the appeal, the appeal put not only the damages

  3
    This fact was made clear throughout the appeal from the bankruptcy
court and in this proceeding. In ASC’s brief on appeal of the stay
violation order, it argued that “the foreclosure sale . . . was not a violation
of the automatic stay.” Brief of ASC at 8, In re Schwartz-Tallard, No. 10-
cv-00292 (D. Nev. 2010). Similarly, in the district court, counsel for ASC
opened his argument by stating that “If the Court decides there was a stay
and my client violated it . . . .” Transcript of Evidentiary Hearing at 7, In
re Schwartz-Tallard, No. 10-cv-00292 (D. Nev. 2010). In its published
order, the district court noted and rejected these contentions, holding that
the foreclosure sale of Schwartz-Tallard’s home “was an immediate
violation of the stay” and ASC’s contrary position “was not a persuasive
argument.” In re Schwartz-Tallard, 438 B.R. 313, 319–20 (D. Nev.
2010). ASC’s counsel conceded that its appeal included an attempt to
have the stay violation set aside during oral argument in front of our panel.
Recording of Oral Argument at 7:03–7:35, ASC v. Schwartz-Tallard, No.
12-60052 (9th. Cir. 2014). To the extent that ASC now argues otherwise,
see Appellant’s Petition for Rehearing and Rehearing En Banc at 3, 9,
ASC v. Schwartz-Tallard, No. 12-60052 (9th Cir. 2014), we find those
contentions unavailing.
                    IN RE: SCHWARTZ-TALLARD                               11

award, but importantly the finding that the stay had been
violated in jeopardy. As the BAP noted, Schwartz-Tallard
“was forced to defend [the] appeal to validate the bankruptcy
court’s ruling that ASC had violated the stay, and to preserve
her right to collect the pre-remedy damages awarded by the
bankruptcy court.” In re Schwartz-Tallard, 473 B.R at 350.
In other words, unlike in Sternberg, Schwartz-Tallard was not
using the stay as a sword, but as a shield from stay violation.
Sternberg, 547 F.3d at 948.4

  4
     The dissent argues that ASC did not attempt to reclaim Schwartz-
Tallard’s home in its appeal. Dissent at 22–25. This is correct as a
description of ASC’s legal strategy and literal argument. But that fact
does not bear the weight that the dissent’s analysis places on it. Because
ASC explicitly challenged the finding that the stay existed at the time of
its foreclosure, and challenged whether its foreclosure sale had violated
any stay, Schwartz-Tallard’s defense of that action was a continuation of
her efforts to “enforce the automatic stay.” See Sternberg, 595 F.3d at
948. As such, she may recover fees under both § 362(k)(1) and Sternberg.

     As Sternberg recognized, “Without a doubt, Congress intended
§ 362(k)(1) to permit recovery as damages of fees incurred to prevent
violation of the automatic stay.” 595 F.3d at 946. Preventing violation of
the automatic stay should contain at least litigation against stay violators
in the bankruptcy courts to obtain a declaration of stay violation, and the
defense of findings of stay violation on appeal. If we apply the dissent’s
theory of Sternberg, efforts in the bankruptcy court to enforce the stay
would be ineffective, because a stay violator could seek to avoid a finding
of stay violation by filing an appeal, which the debtor would then be
unable to defend for lack of attorneys’ fees.

     We read Sternberg in light of its plain language: Fees are available for
“efforts to enforce the automatic stay,” which logically includes defending
appeals that challenge a finding of stay violation, but fees are not available
for a debtor in pursuit of damages, which Schwartz-Tallard was not
engaged in here. See 595 F.3d at 948.
12              IN RE: SCHWARTZ-TALLARD

    Because we hold that Sternberg does not apply to a
situation where a debtor defends herself when a creditor who
had violated the automatic stay appeals that finding,
Schwartz-Tallard is entitled to recover her attorneys’ fees as
“actual damages” under 11 U.S.C. § 362(k)(1). The plain
language of the statute includes attorneys’ fees in the
definition of actual damages, and in the absence of
Sternberg’s limitations, there is no reason to contort that
language to avoid this result. As we said in Sternberg,
“Without a doubt, Congress intended § 362(k)(1) to permit
recovery as damages fees incurred to prevent violation of the
automatic stay.” 595 F.3d at 946. Where, as here, the debtor
is defending an appeal that seeks to eliminate the finding that
the stay was violated, we hold that the fees incurred
defending such an appeal meet that Congressional purpose
and are included in § 362(k)(1)’s definition of actual
damages.

     Our decision here is consistent with both the financial and
non-financial purposes of the automatic stay that we
emphasized in Sternberg. As to the financial purpose of
preserving a debtor’s resources for creditors, ASC’s appeal
compelled Schwartz-Tallard to spend money on litigation that
would otherwise have been available to creditors. Awarding
her attorneys’ fees under § 362(k)(1) eliminates this problem.
As to the non-financial goal of allowing the debtor time to
reorganize her finances, we noted in Sternberg that “[m]ore
litigation is hardly consistent with the concept of a ‘breathing
spell.’” 595 F.3d at 948. Here, unlike in Sternberg, the
additional litigation resulted from ASC’s continued attempts
to justify its stay-violating behavior—not from the debtor’s
conduct. Awarding Schwartz-Tallard fees as damages under
§ 362(k)(1) furthers the non-economic goal of the automatic
                   IN RE: SCHWARTZ-TALLARD                           13

stay—it should act to deter stay violators from continuing to
disturb the breathing spell the stay aims to create.5

                       III. CONCLUSION

    Because the debtor was not pursuing a damages award,
but rather defending ASC’s appeal of a previous finding of
stay violation and thereby “remedying the stay violation,”
Sternberg, 595 F.3d at 940, Sternberg does not prohibit the
awarding of attorneys’ fees at issue here. The decision of the
BAP, which reversed and remanded the bankruptcy court’s
decision denying Schwartz-Tallard’s request for an award of
attorneys’ fees, is

     AFFIRMED.

 5
   In reaching its conclusion, the BAP relied in part on In re Walsh, 219
B.R. 873 (B.A.P. 9th Cir. 1998). See In re Schwartz-Tallard, 473 B.R.
340, 350 (B.A.P. 9th Cir. 2012). However, in Sternberg, we rejected
Walsh’s reading of § 362(k)(1) to mean that the “actual damages”
available to the injured party would necessarily make the injured party
whole. Id. at 878. Walsh’s holding—that fees expended resisting the stay
violator’s appeal were available under § 362(k)(1) as actual
damages—was based in part upon the reasoning we later expressly
rejected in Sternberg. Therefore, the BAP’s use of Walsh to explain the
proper application of § 362(k)(1) is improper in view of Sternberg. See
In re Burley, 738 F.2d 981, 986 (9th Cir. 1984) (holding that the role of
the BAP is as an adjunct to the circuit court, and explaining the
importance of that relationship to the constitutionality of the BAP). In
reaching our conclusion today, we do not rely on the partially abrogated
Walsh decision.
14              IN RE: SCHWARTZ-TALLARD

WALLACE, Circuit Judge, dissenting:

     I respectfully dissent. Our decision in Sternberg, properly
read, controls this case and requires reversal. However, even
if it did not control, we should still reverse.

    Although these errors are significant, they solely affect
the outcome of this case. More troubling is the BAP’s
decision to rely upon one of its own cases, notwithstanding
the fact that we had previously rejected the statement of law
at issue. The implications of such cavalier disregard by the
BAP for its subordinate status within the federal judiciary are
far-ranging, and merit much greater attention than the
majority bestows on them.

                               I.

    Schwartz-Tallard voluntarily petitioned for Chapter 13
bankruptcy in March 2007 in the Bankruptcy Court for the
District of Nevada. In February 2009, America’s Servicing
Company (ASC), a creditor of Schwartz-Tallard’s, contended
that she failed to make payments on a note held by ASC.
ASC moved the bankruptcy court to lift the automatic stay so
it could foreclose upon property Schwartz-Tallard owned in
which ASC held a security interest. On April 6, 2009, the
bankruptcy court vacated the automatic stay so ASC could
foreclose on the property.

    Schwartz-Tallard moved to reinstate the stay for the
property on May 6, 2009. She argued she had not failed to
make payments on the note so the lifting of the stay was
erroneous, and requested swift relief from the bankruptcy
court because ASC had announced it would sell the property
on May 20, 2009. On May 13, 2009, the bankruptcy court
                IN RE: SCHWARTZ-TALLARD                    15

held a hearing and orally granted Schwartz-Tallard’s motion
to reinstate the stay as to the property. The bankruptcy court
did not enter a written order memorializing the reinstatement
of the stay (the Reinstatement Order), however, until June 3,
2009. In the interim, ASC sold the property in a foreclosure
sale on May 20, 2009.

    On June 9, 2009, Schwartz-Tallard moved the bankruptcy
court to sanction ASC for the sale, which had occurred
despite the oral order reinstating the stay. The bankruptcy
court heard the motion on January 7, 2010. During the long
period between when the Reinstatement Order was entered on
the docket and the hearing on the sanctions motion, ASC did
not convey the property back to Schwartz-Tallard. At the
hearing, the bankruptcy court ordered the property returned
to Schwartz-Tallard, and ASC acceded. The bankruptcy court
ordered sanctions imposed for a number of reasons, including
ASC’s improper motion in February 2009 to set aside the
automatic stay, ASC’s sale of the property on May 20, 2009
despite the oral grant of reinstatement on May 13, and for
ASC’s failure to reconvey the property after the
Reinstatement Order was entered onto the docket. The
bankruptcy court also awarded Schwartz-Tallard attorneys’
fees and fees for emotional damages. The bankruptcy court
entered an order on February 17, 2010 directing the property
to be put back to Schwartz-Tallard’s name and memorializing
the sanctions and attorneys’ fees (Conveyance and Sanctions
Order).

   On March 2, 2010, ASC filed a notice of appeal from the
Conveyance and Sanctions Order. ASC finally put the
property back in Schwartz-Tallard’s name on March 3, 2010.
16              IN RE: SCHWARTZ-TALLARD

    ASC filed its appellate brief in the district court on May
10, 2010, in which ASC attacked the Conveyance and
Sanctions Order on five grounds. First, ASC argued that the
bankruptcy court’s oral order of May 13, 2009 did not take
effect immediately, so “any sanctions based upon [the
bankruptcy court’s conclusion in the Conveyance and
Sanctions Order that the foreclosure sale of May 20, 2009
violated the stay] must be reversed.” Second, ASC argued
that it had not been required to undo the foreclosure sale and
reconvey the property back to Schwartz-Tallard until the
hearing on January 7, 2010, so the bankruptcy court’s “award
of damage attributed to th[e] erroneous legal conclusion [that
ASC had continued to violate the automatic stay from May
13, 2009 to when it returned the property to Schwartz-
Tallard] must be reversed.” Third, ASC argued that the
damages the bankruptcy court awarded to Schwartz-Tallard
“were not properly awarded under [Federal Rule of
Bankruptcy Procedure] 9011,” which governed the sanctions
award. Fourth, ASC argued that the amount of attorneys’ fees
awarded to Schwartz-Tallard was unreasonable. Fifth, ASC
argued that the bankruptcy court erred in awarding Schwartz-
Tallard emotional damages.

    Critically, all five of these arguments attacked the amount
and propriety of the sanctions and fees awarded to Schwartz-
Tallard. ASC never argued that Schwartz-Tallard actually
defaulted on her note, as it had originally argued in February
2009. ASC did not attack the validity of the Reinstatement
Order. That meant ASC never challenged the bankruptcy
court’s conclusion in the Conveyance and Sanctions Order
that the property should be conveyed back to Schwartz-
Tallard. If ASC’s appeal had been wholly successful, it would
not have owed Schwartz-Tallard any money. But ASC would
not have retaken Schwartz-Tallard’s property.
                IN RE: SCHWARTZ-TALLARD                     17

    Schwartz-Tallard filed an answering brief on June 3,
2010. In her brief, she stated that ASC’s “main argument is
that the Bankruptcy Court did not follow the proper
procedure in awarding sanctions and damages under F.R.B.P.
9011.” She did not defend the bankruptcy court’s judgment
ordering the property returned to her.

    The district court issued an order on September 14, 2010.
In that order, the court affirmed most of the Conveyance and
Sanctions Order, but rejected some of the attorneys’ fees
calculations made by the bankruptcy court. On remand, the
bankruptcy court reassessed those attorneys’ fees.

    On February 16, 2011, Schwartz-Tallard moved for
additional attorneys’ fees before the bankruptcy court. She
argued that ASC owed her $10,103.00 for attorneys’ fees she
incurred by defending ASC’s appeal of the Conveyance and
Sanctions Order. In an oral hearing on July 12, 2011, the
bankruptcy court rejected her motion, holding that Schwartz-
Tallard was “not entitled to [those] fees for the sole reason
that I believe that Sternberg [v. Johnston, 595 F.3d 937 (9th
Cir. 2010)] precludes the award of attorneys fees on appeal.”
The bankruptcy court continued that because “the wrongful
act,” namely ASC’s failure to return her property in
contravention of the Reinstatement Order, “stopped before
the appeal [] the attorneys fees don’t continue through there.”
Though the bankruptcy court stated its belief that Sternberg
was wrongly decided, and that Schwartz-Tallard should
receive these fees, “I’m bound by what I believe Sternberg
says.” The bankruptcy court entered a written order on July
26, 2011.

   In Sternberg, we considered the scope of “actual
damages” under 28 U.S.C. § 362(k)(1). Section 362(k)(1)
18              IN RE: SCHWARTZ-TALLARD

allows “an individual injured by any willful violation of [the
automatic] stay . . . [to] recover actual damages, including
costs and attorneys’ fees . . .” We concluded that “actual
damages” does not include attorneys’ fees expended by the
debtor for the prosecution of an adversary proceeding to
recover damages suffered from a violation of the stay.
Sternberg, 595 F.3d at 945–48.

    Schwartz-Tallard appealed the bankruptcy court’s denial
of the $10,103.00 in appellate attorneys’ fees she sought. The
bankruptcy court had suggested at the July 12 hearing that the
appeal be taken directly to this court under 28 U.S.C.
§ 158(d)(2), so we could potentially reconsider Sternberg.
The bankruptcy court rethought that suggestion, though, and
denied Schwartz-Tallard’s request for direct certification to
our court, presumably because the court concluded that
Sternberg was controlling.

    Schwartz-Tallard’s appeal proceeded before the
Bankruptcy Appellate Panel (BAP). In her brief, Schwartz-
Tallard offered two possible distinctions of Sternberg, but
mostly focused on her argument that our decision in that case
“ha[d] been sharply criticized by other courts.” ASC
disagreed with Schwartz-Tallard’s distinctions, but pointed
out that Schwartz-Tallard had basically “concede[d] that
Sternberg is binding.” Thus far, the bankruptcy court and
even the parties seemed to agree that Schwartz-Tallard could
not recover attorneys’ fees for defending ASC’s appeal of the
Conveyance and Sanctions Order under our decision in
Sternberg.

    But then the BAP issued its decision. In re Schwartz-
Tallard, 473 B.R. 340 (B.A.P. 9th Cir. 2012). The BAP first
attempted to distinguish Schwartz-Tallard’s appeal from
                 IN RE: SCHWARTZ-TALLARD                      19

Sternberg. The BAP concluded that the defense of an
opposing party’s appeal “is fundamentally different” from the
affirmative adversary proceeding action filed by the debtor in
Sternberg. Schwartz-Tallard, 473 B.R. at 349. Unlike in
Sternberg, said the BAP, Schwartz-Tallard was “not using the
automatic stay as a sword to pursue damages from ASC.” Id.

    After attempting to distinguish this case from Sternberg,
the BAP held that Schwartz-Tallard is entitled to attorneys’
fees for her defense of ASC’s appeal, because the defense of
the appeal “was consistent with the goals of the automatic
stay identified by the court in Sternberg,” and ASC’s appeal
“deprive[d] [Schwartz-Tallard] of the benefits of her
automatic stay,” so her “defense of the bankruptcy court’s
decision was an extension of her efforts to enforce her
automatic stay.” Id. The BAP suggested that Schwartz-
Tallard was entitled to attorneys’ fees because ASC’s stay
violation was not remedied until ASC lost its appeal. Id. at
350 (“[o]f course, in Sternberg, the point at which the stay
violation had been ‘remedied’ was clear. . . . In contrast, here,
while the Property was finally reconveyed to [Schwartz-
Tallard] the day after ASC filed its notice of appeal,
[Schwartz-Tallard] was forced to defend that appeal to
validate the bankruptcy court’s ruling”). The BAP also relied
on its prior decision of In re Walsh, where it held that
“[c]learly, fees and costs experienced by an injured party in
resisting the [stay] violator’s appeal are part of the damages
resulting directly from the stay violation.” Id., quoting In re
Walsh, 219 B.R. 873, 878 (B.A.P. 9th Cir. 1998).

    The majority now affirms the BAP. The basic structure of
the majority’s opinion is the same as the BAP’s. First, the
majority attempts to distinguish Sternberg. The majority
states that there we “specifically held” “that any fees a debtor
20               IN RE: SCHWARTZ-TALLARD

incurs ‘in pursuit of a damage award’ are not covered” by
section 362(k)(1). Majority Op. at 10. Here, however, the
majority asserts that Schwartz-Tallard “was not pursuing a
damage award,” was “remedying the stay violation,” and
“was not using the stay as a sword.” Majority Op. at 10–11.
The majority then explains why Schwartz-Tallard is entitled
to attorneys’ fees: it believes awarding these fees is consistent
with the plain language of section 362(k)(1), and in the
absence of Sternberg’s limitations, awarding those fees “is
consistent with both the financial and non-financial purposes
of the automatic stay that we emphasized in Sternberg.” Id.
at 12–13.

                               II.

    The majority errs in several respects, but the most
significant of its mistakes is its failure to recognize that
Sternberg controls this case. The majority characterizes the
holding of Sternberg as “any fees a debtor incurs ‘in pursuit
of a damage award’ are not covered” as “actual damages”
under section 362(k)(1). Majority Op. at 10–12, quoting
Sternberg, 595 F.3d at 947. But that is not the holding of
Sternberg. The holding of Sternberg is that “actual damages”
are “an amount awarded to compensate for a proven injury or
loss.” Id. at 947. Only attorneys’ fees “related to enforcing
the automatic stay and remedying the stay violation”
constitute actual damages. Id. at 940.

    On March 3, 2010, ASC returned the property to
Schwartz-Tallard. That ended and remedied the violation of
the automatic stay. On May 10, 2010, ASC filed its opening
brief in the appeal. By not seeking to retake Schwartz-
Tallard’s property then, ASC waived its right to do so. By
May 10, 2010, at the latest, it was both evident to Schwartz-
                IN RE: SCHWARTZ-TALLARD                    21

Tallard and legally true that ASC’s appeal was not related to
enforcing the automatic stay or remedying the stay violation.
Instead, the only possible result of Schwartz-Tallard’s
defense of ASC’s appeal was to maintain the sanctions she
had been awarded by the bankruptcy court. Attorneys’ fees
expended to that end are not actual damages under Sternberg.

                             A.

     In Sternberg, we interpreted 11 U.S.C. § 362(k)(1), which
allows an individual injured by a willful violation of the
automatic stay “actual damages, including costs and
attorneys’ fees.” We determined that a debtor “can recover as
actual damages only those attorney fees related to enforcing
the automatic stay and remedying the stay violation.”
595 F.3d at 940. We stated that section 362(k)(1) did not
define “actual damages,” which we considered an ambiguous
phrase. Id. In order to define the term, we turned to Black’s
Law Dictionary, which defines “actual damages” as “an
amount awarded to compensate for a proven injury or loss.”
Id., quoting BLACK’S LAW DICTIONARY 416 (8th ed. 2004).
The next sentence is the holding of Sternberg: “the proven
injury [and thus, actual damages under section 362(k)(1)] is
the injury resulting from the stay violation itself.” Id. We
later made clear that under our precedent the automatic stay
“is designed to effect an immediate freeze of the status quo.”
Id. at 948, quoting Hillis Motors, Inc. v. Hawaii Auto.
Dealers’ Ass’n, 997 F.2d 581, 585 (9th Cir. 1993).

   In this case, the parties were returned to the status quo
when Schwartz-Tallard received her property back from
ASC. That occurred on the date ASC reconveyed the
property, March 3, 2010. Once the status quo was re-
22              IN RE: SCHWARTZ-TALLARD

established, the violation of the stay ended. Id.; Hillis,
997 F.2d at 585.

    ASC appealed the Conveyance and Sanctions Order that
required it to return the property to Schwartz-Tallard on
March 2, 2010. In that appeal, ASC conceivably could have
argued that the Reinstatement Order was erroneous, and that
the property should revert. But it did not do so. In its appeal
brief to the district court, filed on May 10, 2010, ASC sought
only to reduce or reverse the award of damages owed to
Schwartz-Tallard. By failing to attack the Reinstatement
Order or otherwise argue that Schwartz-Tallard had defaulted
on her note and was not entitled to the property, ASC waived
any argument that could have led to retaking the property
under the Nevada Local Rules and the Federal Rules of
Bankruptcy Procedure. D. Nev. L.R. 8018 (“[p]ractice in
bankruptcy appeals that may come before the district court
will be governed by Part VIII of the Federal Rules of
Bankruptcy Procedure”); Fed. R. Bankr. P. 8010(a)(1)(C)
(appellate briefs must contain “[a] statement of the issues
presented and the applicable standard of appellate review”);
In re Marquam Inv. Corp., 942 F.2d 1462, 1467 (9th Cir.
1991) (“failure to comply with Rule 8010(a)(1)(C) waives
[an] issue on appeal”).

    After ASC waived any attempt to retake Schwartz-
Tallard’s property, the appeal was limited to whether and in
what amount ASC owed Schwartz-Tallard damages. This is
made particularly clear by the substance of Schwartz-
Tallard’s answering brief, filed on June 3, 2010. In that brief,
for which Schwartz-Tallard seeks attorneys’ fees in this
appeal, Schwartz-Tallard defended the bankruptcy court’s
award of sanctions, but never argued (because ASC had never
argued to the contrary) that the property should remain with
                IN RE: SCHWARTZ-TALLARD                      23

her. Thus, on May 10, 2010, the stay violation had been
remedied by the Conveyance and Sanctions Order, because
the status quo had been returned, and ASC could no longer
disrupt that status quo. All litigation Schwartz-Tallard
engaged in after May 10, 2010 was not “related to enforcing
the automatic stay and remedying the stay violation.”
Sternberg, 595 F.3d at 940. Thus, the litigation was
“attenuated from the actual bankruptcy,” and her expenses
paid thereafter not “actual damages.” Id. at 948.

                              B.

    The majority confuses this simple analysis. First, the
majority contorts language in Sternberg to improperly
distinguish between “pursuit” and “defense” of an award of
damages for a violation of the automatic stay. Second, in its
fourth footnote, the majority opinion leads inextricably to a
clear conflict with Sternberg.

                               1.

    The majority ignores the holding in Sternberg, and
instead misinterprets the next sentence of our decision.
Majority Op. at 8. In that sentence, we stated that “[o]nce the
violation has ended, any fees the debtor incurs after that point
in pursuit of a damage award would not be to compensate for
‘actual damages’ under § 362(k)(1).” 595 F.3d at 947. The
majority contorts this statement by emphasizing the phrase
“pursuit of a damage award.” The majority distinguishes that
“pursuit” from “defense” of a damages award. Majority Op.
at 9. The majority argues that if not for ASC’s appeal,
“Schwartz-Tallard’s litigation of this matter would have been
complete.” Id. at 10. Citing the BAP, the majority also states
that Schwartz-Tallard “was forced to defend [the] appeal to
24              IN RE: SCHWARTZ-TALLARD

validate the bankruptcy court’s ruling,” and thus “Schwartz-
Tallard was not using the stay as a sword.” Id. at 11.

    But this analysis is wrong. The discussion of the “pursuit
of a damage award” is not the “specific[] h[olding]” of
Sternberg, which is more properly characterized as I have
stated above: “actual damages” is an amount awarded to
compensate for “proven injury,” which in turn “is the injury
resulting from the stay violation itself.” 595 F.3d at 947.
Indeed, the correct interpretation of the Sternberg sentence
the majority focuses on compounds its error: “once the
violation [of the automatic stay has ended, i.e., by the latest
May 10, 2010, when ASC could no longer attempt to retake
Schwartz-Tallard’s property] any fees the debtor incurs after
that point in pursuit of a damage award would not be to
compensate for ‘actual damages’ under § 362(k)(1).” Id. That
should end the discussion and we should reject the majority’s
analysis.

    Further, the majority (and the BAP) are wrong to
conclude that Schwartz-Tallard was “forced” to defend
ASC’s appeal. Had Schwartz-Tallard not defended the
appeal, she would have lost the damages properly awarded to
her for ASC’s violation of the automatic stay. But she would
have retained her property. As of May 10, 2010, Schwartz-
Tallard was in the same position as the debtor in Sternberg:
had the debtor, Johnston, not sued the violators of the
automatic stay in an adversary proceeding, he may not have
ever received the damages award owed him. The adversary
proceeding he filed, considered in this respect, was “an
extension of [his] efforts to enforce [his] automatic stay.”
Schwartz-Tallard, 473 B.R. at 349. But we held in Sternberg
that Johnston could only recover “actual damages,” “even
though it could be said he is not made whole as a result.”
                IN RE: SCHWARTZ-TALLARD                    25
595 F.3d at 947. Nor does our Sternberg statement that the
automatic “stay is a shield, not a sword,” id. at 948, change
our holding in that case denying damages to Johnston once he
was finally returned to the status quo, even if he had to take
legal action to maintain damages that were properly owed to
him.

                              2.

    The majority’s error is made plainest in its fourth
footnote. The majority states in opposition to my reasoning
that “[b]ecause ASC explicitly challenged the finding that the
stay existed at the time of its foreclosure, and challenged
whether its foreclosure sale had violated any stay, Schwartz-
Tallard’s defense of that action was a continuation of her
efforts to enforce the automatic stay.” Majority Op. at 11 n.4
(citation omitted). But regardless of ASC’s challenge to the
finding that a stay existed when it foreclosed, the appeal
could not lead to a retaking of Schwartz-Tallard’s property,
because ASC waived any argument to that effect by its brief
filed on May 10, 2010. That meant, by definition, the appeal
had nothing to do with enforcing the automatic stay or
remedying the stay violation, because the stay had been
reinstated on March 3, 2010 when ASC returned the property
to Schwartz-Tallard.

    The majority’s reasoning leads to a statement that is
obviously at odds with Sternberg. According to the majority,
“[p]reventing violation of the automatic stay should contain
at least litigation against stay violators in the bankruptcy
courts to obtain a declaration of stay violation, and the
defense of findings of stay violation on appeal.” Id. at 11 In
Sternberg itself, Johnston, the debtor, filed an adversary
proceeding against Sternberg, seeking an order that he had
26               IN RE: SCHWARTZ-TALLARD

violated the automatic stay. 595 F.3d at 942. Ultimately, after
Johnston’s motion was denied by the bankruptcy court but
reversed by the district court, the bankruptcy court entered an
order concluding that “Sternberg wilfully violated the
automatic stay.” Id. Regardless of the fact that Johnston had
engaged in “litigation against stay violators in the bankruptcy
courts to obtain a declaration of stay violation,” we refused to
grant Johnston attorneys’ fees for his adversary proceeding.
A debtor is not entitled for attorneys’ fees for litigation in the
bankruptcy court that sought an order declaring a party in
violation of the automatic stay, because “actual damages”
“do[es] not include fees incurred in prosecuting the adversary
proceeding to obtain damages.” Id. at 949.

    The rest of the majority’s footnote fares no better. The
majority states that under my theory, “efforts in the
bankruptcy court to enforce the stay would be ineffective,
because a stay violator could seek to avoid a finding of stay
violation by filing an appeal, which the debtor would then be
unable to defend for lack of attorneys’ fees.” Majority Op. at
11 n.4. If ASC had sought to reclaim Schwartz-Tallard’s
property in its appeal, then Schwartz-Tallard might be
entitled to attorneys’ fees for defense of that appeal. But if all
a stay violator seeks is a finding that the stay was not
violated, and that it should not have to pay the damages
associated with such a finding, then the appeal is not related
to enforcing the automatic stay. “[A] plaintiff cannot
ordinarily recover attorney fees spent to correct a legal injury
as part of his damages, even though it could be said he is not
made whole as a result.” Sternberg, 595 F.3d at 947.

    Ultimately, the logic of the majority opinion does not
follow. Both this case and Sternberg are governed by section
362(k)(1). How can the same statutory text require a
                 IN RE: SCHWARTZ-TALLARD                        27

bankruptcy court to award attorneys’ fees to Schwartz-Tallard
but bar a bankruptcy court from awarding attorneys’ fees to
Johnston?

     Sternberg controls this appeal. Our disposition should be
quite simple under our holding in that case. Schwartz-Tallard
was entitled to “actual damages” for ASC’s violation of the
automatic stay. The violation of the stay ended after the status
quo when Schwartz-Tallard took back her property on March
3, 2010. Schwartz-Tallard’s defense of the appeal was not
related to remedying the stay violation after ASC waived any
claim to the property in its appellate brief in the district court,
on May 10, 2010. Any attorneys’ fees Schwartz-Tallard paid
after that date are not “an amount awarded to compensate for
proven injury or loss,” because the fees did not “result[] from
the stay violation itself.” Id. I would reverse the BAP because
of its misinterpretation of Sternberg.

                               III.

    But strangely enough, even if the majority is correct that
Sternberg is not controlling, we should still reverse the BAP.
If Sternberg does not control the outcome of this case, then
there is no Ninth Circuit precedent governing this appeal, and
we independently interpret the relevant statute to determine
whether to award Schwartz-Tallard the attorneys’ fees she
seeks. The BAP apparently realized this and sought such an
independent basis in its own precedent of In re Walsh, 219
B.R. 873 (B.A.P. 9th Cir. 1998). Schwartz-Tallard, 473 B.R.
at 350. The majority cannot take refuge in Walsh, as it has
correctly abandoned the BAP’s improper reliance on that
decision because we overruled it in Sternberg. Majority Op.
at 13 n.5. Of course, we all agree the BAP improperly relied
on Walsh. But the legal sources on which the majority does
28              IN RE: SCHWARTZ-TALLARD

rely are also not sufficient to grant Schwartz-Tallard
attorneys’ fees.

                              A.

      If Sternberg does not control, although I would hold it
does, we would have to assess independently whether to
award Schwartz-Tallard attorneys’ fees for her defense of the
appeal from the Reconveyance and Sanctions Order. This is
a question of statutory interpretation of section 362(k)(1), so
we start with the text of the statute itself. In re Blixseth,
684 F.3d 865, 870 (9th Cir. 2012). That section allows “an
individual injured by any willful violation of a stay . . . [to]
recover actual damages, including costs and attorneys’ fees
. . . ” 11 U.S.C. § 362(k)(1).

    Although the plain language of the statute includes
attorneys’ fees as “actual damages,” the term “actual
damages” itself “is an ambiguous phrase.” Sternberg,
595 F.3d at 947. “Congress legislates against the backdrop of
the ‘American Rule,’” whereby “parties are to bear their own
attorney’s fees.” Id. at 945–46, citing Fogerty v. Fantasy,
Inc., 510 U.S. 517, 533 (1994). Because of that backdrop and
the ambiguity of the phrase “actual damages,” we only grant
attorneys’ fees for “litigation attenuated from the actual
bankruptcy” when Congress uses “explicit statutory
language” to authorize the award of attorneys’ fees. Id. at
948; Hardisty v. Astrue, 592 F.3d 1072, 1076–77 (9th Cir.
2010) (a statute that “creates an exception to the American
rule” does not “extend[] fee-shifting to” a related
circumstance, and “[i]n the absence of clear statutory text
authorizing fee-shifting, we decline to become a ‘roving
authority’ awarding attorneys’ fees”) (citation omitted).
                IN RE: SCHWARTZ-TALLARD                      29

                              B.

    The text of section 362(k)(1) does not explicitly address
the award of attorneys’ fees to litigants like Schwartz-Tallard.
Awarding such fees is “a bold departure from traditional
practice” and so usually requires “explicit statutory language
and legislative comment.” Fogerty, 510 U.S. at 534; see also
Fulfillment Servs., Inc. v. United Parcel Serv., Inc., 528 F.3d
614, 624 (9th Cir. 2008) (explaining that “[h]ad Congress
aspired to such a radical departure [from the American Rule],
it no doubt would have so indicated with explicit language to
that effect”).

    Legislative history that “is at best ambiguous . . . is
clearly insufficient to alter the accepted meaning of the
statutory term,” “[p]articularly in view of the ‘American
Rule’ that attorney’s fees will not be awarded absent ‘explicit
statutory authority.’” Buckhannon Bd. & Care Home, Inc. v.
W. Va. Dep’t of Health & Human Resources, 532 U.S. 598,
607–08 (2001); accord Kwai Fun Wong v. Beebe, 732 F.3d
1030, 1044 (9th Cir. 2013) (en banc) (holding that
“legislative history cannot supply a ‘clear statement’”). We
do not generally allow “inferences from . . . statutory
purpose” to constitute an “unequivocal[] express[ion]” of
legislative intent. See, e.g., Alaska v. E.E.O.C., 564 F.3d
1062, 1066 (9th Cir. 2009). Indeed, we have specifically held
that when a party seeking attorneys’ fees argues that the
“purpose” of a statute supports awarding attorneys’ fees, we
will not award attorneys’ fees if the cited statutory purpose
reduces to “competing policy arguments,” because “[s]uch a
debate is not enough to overcome the absence of statutory
text authorizing supersession of the American Rule.”
Hardisty, 592 F.3d at 1079.
30              IN RE: SCHWARTZ-TALLARD

                              C.

    The majority first claims that the “plain language of
[section 362(k)(1)] includes attorneys’ fees in the definition
of actual damages,” and states that “there is no reason to
contort that language” to avoid awarding attorneys’ fees.
Majority Op. at 12. Though the majority is correct that the
text of section 362(k)(1) allows attorneys’ fees as part of
actual damages, it incorrectly concludes that this supports its
holding. The question in this appeal is whether these
attorneys’ fees are actual damages, an “ambiguous phrase.”
Sternberg, 595 F.3d at 947. No plain language in the statute
states that attorneys’ fees expended after a creditor waived
any attempt to retake property are recoverable as actual
damages. As we have recognized, if the plain text of a statute
“creates an exception to the American rule,” we do not
expand that text to award attorneys’ fees in a related
circumstance not explicitly covered by the statute. Hardisty,
592 F.3d at 1076–77; see also Sternberg, 595 F.3d at 948
(refusing to award attorneys’ fees for “litigation attenuated
from the actual bankruptcy” even though section 362(k)(1)
specifically authorizes some attorneys’ fees). There is no
“explicit statutory language” in section 362(k)(1) to support
the majority’s conclusion. Fogerty, 510 U.S. at 534.

    The majority’s only other legal basis for awarding these
attorneys’ fees is that “the fees incurred defending . . . an
appeal meet [the] Congressional purpose” behind section
362(k)(1) in that its “decision here is consistent with both the
financial and non-financial purposes of the automatic stay
that we emphasized in Sternberg.” Majority Op. at 12. An
inference from legislative purpose can never be “explicit
statutory language and legislative comment,” Fogerty,
510 U.S. at 534, and is thus insufficient to demonstrate
                 IN RE: SCHWARTZ-TALLARD                      31

Congressional intent to deviate from the American Rule.
Alaska, 564 F.3d at 1066.

    Indeed, the majority wrongly concludes that allowing
Schwartz-Tallard to collect the attorneys’ fees is “consistent
with both the financial and non-financial purposes of the
automatic stay that we emphasized in Sternberg.” Majority
Op. at 12.

    Allowing attorneys’ fees would not further the financial
goals of the automatic stay recognized in Sternberg. ASC was
a creditor of Schwartz-Tallard. “We have never said the stay
should aid the debtor in pursuing his creditors, even those
creditors who violate the stay.” Sternberg, 595 F.3d at 948. If
Schwartz-Tallard had not defended ASC’s appeal, she would
never have been able to recover the damages her creditor
owed her, but the “stay is a shield, not a sword.” Id. The
economic purpose of the stay, to give Schwartz-Tallard time
to put her finances back in order, would not be served if she
were encouraged to continue to retrieve money from her
creditor.

     Nor does awarding attorneys’ fees further the non-
economic purpose of the stay recognized in Sternberg. “More
litigation is hardly consistent with the concept of a ‘breathing
spell.’” Id. By defending against ASC’s appeal, Schwartz-
Tallard only created more litigation “attenuated from the
actual bankruptcy.” Id.

    I understand that my suggestion that Schwartz-Tallard
could have simply not defended ASC’s appeal may seem
unfair, but it is perfectly consistent with the “breathing spell”
inherent in the automatic stay. It is also consistent with our
recognition that the American Rule disfavors granting
32              IN RE: SCHWARTZ-TALLARD

attorneys’ fees “even though it could be said [the debtor] is
not made whole as a result.” Id. at 947.

    Thus, I do not believe the supposed purposes of the
automatic stay divined by the majority clearly weigh in favor
of Schwartz-Tallard. Like many disputes over statutory
purposes, the majority’s argument and what it calls
Sternberg’s “policy analysis,” Majority Op. at 9 n.2, “at most
confronts us with competing policy arguments,” which are
not enough to overcome the background “American Rule”
that each party bears its own costs. Hardisty, 592 F.3d at
1079. Thus, even if Sternberg does not compel the outcome
of this case, I would still reverse the BAP because there is no
“explicit statutory language and legislative comment”
authorizing a departure from the traditional practice that
Schwartz-Tallard should bear her own attorneys’ fees.
Fogerty, 510 U.S. at 534.

                             IV.

    Although the majority errs in affirming the BAP, the
majority is correct in its footnote to deem the BAP’s reliance
on the decision in Walsh “improper.” Majority Op. at 13 n.5.
I agree with the majority on this point for a fundamental
reason: the BAP cannot rely upon any of its own precedent
that we have overruled without creating serious constitutional
problems.

                              A.

    The Constitution vests the “judicial power of the United
States” in the Supreme Court and inferior courts. U.S. Const.
art. III, § 1. The federal judges subject to Article III “hold
their Offices during good Behavior,” which means they have
                 IN RE: SCHWARTZ-TALLARD                       33

lifetime tenure unless impeached, and their “Compensation []
shall not be diminished during their Continuance in Office.”
Id.

    Congress has the power to create certain other federal
tribunals under its constitutionally delegated powers found in
Article I. One type of federal tribunal acts as an “adjunct” to
the Article III federal courts, a term used by the Supreme
Court to describe the role of certain administrative agencies
and the magistrate courts. N. Pipeline Constr. Co. v.
Marathon Pipe Line Co., 458 U.S. 50, 77 (1982) (plurality),
describing Crowell v. Benson, 285 U.S. 22 (1932)
(administrative agencies) and United States v. Raddatz,
447 U.S. 667 (1980) (magistrate courts). For instance, the
magistrate courts are subject to the Article III district courts
in the district in which they are located. “[T]he district court
has plenary discretion whether to authorize a magistrate to
hold an evidentiary hearing,” and “the magistrate acts
subsidiary to and only in aid of the district court,” so that “the
entire process takes place under the district court’s total
control and jurisdiction.” Raddatz, 447 U.S. at 681.

    But Congress does not have plenary authority to create
federal tribunals. Congress cannot grant jurisdiction over
cases that are rightfully within the “judicial power of the
United States” described in Article III to an Article I tribunal
without violating the Constitution and its separation of
powers principle. N. Pipeline, 458 U.S. at 63–64 (plurality).
Likewise, if Congress vests “essential attributes” of the
judicial power to an Article I adjunct that is not subject to
searching review by an Article III court and that can issue
binding and enforceable final judgments, the enacting law
also violates the Constitution. Id. at 85–86 (plurality).
34              IN RE: SCHWARTZ-TALLARD

    Under the Bankruptcy Reform Act of 1978, Congress
dramatically altered the existing bankruptcy system to
modernize the bankruptcy laws. S. REP. No. 95-989, at 1
(1978). Congress replaced the bankruptcy “referees” from the
Bankruptcy Act of 1898 with bankruptcy “judges” with far
more power to resolve bankruptcy disputes. Id. at 2–3. The
Reform Act also authorized the judicial councils of the
circuits to order the chief judge of the circuit to designate
panels of three bankruptcy judges to hear appeals from
judgments, orders, and decrees of each bankruptcy court. Pub.
L. No. 95-598, title II, § 201, adding 28 U.S.C. § 160. These
“bankruptcy appellate panels,” composed of bankruptcy
judges, had jurisdiction of appeals from all final judgments,
orders, and decrees of bankruptcy courts, as well as
interlocutory judgments, orders, and decrees, if the panel
granted leave. Id., title II, § 241, adding 28 U.S.C. § 1482.
Under the 1978 Act, if a Judicial Council of a circuit
authorized a BAP, all appeals from decisions of bankruptcy
judges had to be heard by that BAP, unless all parties
stipulated to have the appeal taken to the court of appeals.
Thomas E. Carlson, The Case for Bankruptcy Appellate
Panels, 1990 B.Y.U. L. REV. 545, 546–47. Only the Judicial
Councils of the First and Ninth Circuits authorized the BAP,
and our circuit did so only for certain district courts. Id. at
547.

                              B.

    In Northern Pipeline, the Supreme Court struck down the
composition and jurisdiction of the bankruptcy courts enacted
under the 1978 Act. 458 U.S. at 77 (plurality); id. at 91–92
(Rehnquist, J., concurring). In that fractured decision, a four-
justice plurality concluded that the bankruptcy courts as
constituted exercised jurisdiction over cases properly
                IN RE: SCHWARTZ-TALLARD                     35

assigned to the Article III federal courts under the
Constitution, id. at 63–76, and that the bankruptcy courts
possessed too much power, with too little scrutiny by Article
III federal courts, to be constitutionally acceptable adjuncts.
Id. at 84–87. Justices Rehnquist and O’Connor concurred
with both propositions, though on narrower grounds. Id. at
90–91 (Rehnquist, J., concurring) (without wholly addressing
the general framework for adjudication of Congressional
authority to create Article I courts, nonetheless agreeing that
Article I tribunals cannot adjudicate certain types of common
law actions and that the bankruptcy courts under the 1978
Reform Act were not constitutionally acceptable adjuncts
because the only way for review by an Article III court was
through “traditional appellate review”). Because the Court
agreed that the decision involved an “unprecedented question
of interpretation of [Article III],” it applied the rule only
prospectively, and did not disturb previous orders of the
bankruptcy courts. Id. at 87–88 (plurality).

    In light of Northern Pipeline, the Judicial Conference of
the United States issued a model “Emergency Rule” that
was adopted by all of the district courts in the Ninth Circuit.
See In re Burley, 738 F.2d 981, 984 n.2 (9th Cir. 1984).
Under the Rule, “the district courts refer[red] all bankruptcy
cases and proceedings to bankruptcy judges, who make
recommendations and enter certain orders and judgments on
behalf of the district court, subject to later district court
review.” Id.

    The Bankruptcy Appellate Panel of the First Circuit
reviewed the constitutionality of the BAP soon after Northern
Pipeline, and concluded that although Northern Pipeline itself
had not struck down review of bankruptcy decisions by the
BAP, under the principles the Supreme Court recognized,
36               IN RE: SCHWARTZ-TALLARD

BAP review “violates Article III’s command that the judicial
power must be vested in Article III courts.” In re Dartmouth
House Nursing Home, 30 B.R. 56, 62 (B.A.P. 1st Cir. 1983).
The First Circuit affirmed, not because the BAP violated the
Constitution, but instead because it held that the Emergency
Rule promulgated by the Judicial Council of the First Circuit
“had the implicit effect of withdrawing from [the BAP] their
earlier conferred authority to hear appeals.” Massachusetts v.
Dartmouth House Nursing Home, 726 F.2d 26, 29 (1st Cir.
1984).

     A few months later, we reviewed a decision from the
BAP that was entered after Northern Pipeline. Burley,
738 F.2d at 985–87. We focused on the constitutionality of
the BAP because unlike in the First Circuit, our order
adopting the Emergency Rule “expressly provid[ed] that the
BAP shall” continue to hear appeals if the underlying
bankruptcy order was entered before Northern Pipeline went
into effect. Id. at 985 n.3. Unlike the BAP of the First Circuit,
we concluded that the bankruptcy appellate panels were not
unconstitutional. This was because, unlike in Northern
Pipeline, the Article III court of appeals, rather than the BAP,
retained the “essential attributes of the judicial power.” Id. at
985. We may overturn the BAP’s decisions “more freely”
than the district courts could overturn the bankruptcy courts
under the 1978 Bankruptcy Act, and thus “effectively” review
their decisions de novo. Id. at 985–86. We concluded that the
BAP meets the constitutional requirements for an adjunct
tribunal, because we review their decisions de novo, retain
full power to make final decisions, and retain control over the
BAP through the discretionary choice to establish the panel
by order of the Judicial Council of the Circuit. Id.
                IN RE: SCHWARTZ-TALLARD                     37

    In response to Northern Pipeline, and soon after we had
affirmed the constitutionality of the BAP in Burley, Congress
passed the “Bankruptcy Amendments and Federal Judgeship
Act of 1984.” Pub. L. No. 98-353. Under that statute, the
BAP could only hear an appeal from a bankruptcy judge if
“all the parties” consented, and the court of appeals had
appellate jurisdiction over any final decision, judgment, order
or decree issued by the BAP. Id. at § 104, inserting 28 U.S.C.
§ 158. In August 1984, our Judicial Council of the Circuit re-
established our BAP pursuant to the new statute, but no other
circuit joined us. Thomas A. Wiseman, Jr., The Case Against
Bankruptcy Appellate Panels, 4 GEO. MASON L. REV. 1, 2
(1995).

    Because we were the only circuit to create a BAP,
Congress modified the bankruptcy appeals statute in 1994 to
require that the judicial council of each circuit establish a
BAP unless the council decided that it did not have sufficient
judicial resources or that the creation of the BAP would
create undue delay or increased costs. 28 U.S.C. § 158(b).
Since 1994, we have been joined by the First, Sixth, Eighth
and Tenth Circuits. Jonathan Remy Nash & Rafael I. Pardo,
An Empirical Investigation into Appellate Structure and the
Perceived Quality of Appellate Review, 61 VAND. L. REV.
1745, 1757 (2008).

    The Judicial Council of the Ninth Circuit has continued
the BAP’s service after the 1994 statutory modifications. See
Judicial Council of the Ninth Circuit, “Amended Order
Continuing the Bankruptcy Appellate Panel of the Ninth
Circuit” (effective November 18, 1988; as amended May 4,
2010). Under current Ninth Circuit BAP practice, seven
active bankruptcy judges from districts within the Ninth
Circuit are authorized to serve on the BAP. Each appeal is
38               IN RE: SCHWARTZ-TALLARD

heard by a panel of three judges, but no judge can hear an
appeal originating from his or her district. Bankruptcy
Appellate Panel of the Ninth Circuit Lit. Manual § III. An
appeal from the bankruptcy court automatically goes to the
BAP unless any party timely elects for the district court to
hear the appeal. 28 U.S.C. § 158(c)(1). In certain exceptional
bankruptcy cases filed after the Bankruptcy Abuse Prevention
and Consumer Protection Act of 2005, parties can bypass
both the BAP and district court and appeal directly to the
Court of Appeals. See In re Blausey, 552 F.3d 1124, 1129–30
(9th Cir. 2009). The BAP has jurisdiction over certain
interlocutory orders. 28 U.S.C. §§ 158(a)(2), (a)(3) & (c)(1).

                               C.

    Because the BAP is an Article I tribunal, we have
consistently recognized that its decisions cannot bind us, or
in fact any Article III court. In re Silverman, 616 F.3d 1001,
1005 n.1 (9th Cir. 2010) (“we treat the BAP’s decisions as
persuasive authority given its special expertise in bankruptcy
issues”) (emphasis added); In re Cardelucci, 285 F.3d 1231,
1234 (9th Cir. 2002) (“this Court is not bound by a [BAP]
decision”); Bank of Maui v. Estate Analysis, Inc., 904 F.2d
470, 472 (9th Cir. 1990) (stating that “it must be conceded
that BAP decisions cannot bind the district courts themselves.
As article III courts, the district courts must always be free to
decline to follow BAP decisions and to formulate their own
rules within their jurisdiction”). The BAP has also long
recognized that our decisions are binding on them, rather than
the other way around. See, e.g., In re Ball, 185 B.R. 595,
597–98 (B.A.P. 9th Cir. 1995) (“[w]e will not overrule our
prior rulings unless a Ninth Circuit Court of Appeals
decision, Supreme Court decision or subsequent legislation
has undermined those rulings”).
                IN RE: SCHWARTZ-TALLARD                      39

     Relatedly, we vacate any BAP decisions and judgments
based on reasoning that we have overruled or rejected. See,
e.g., In re Ransom, 302 F. App’x 567 (9th Cir. 2008) (“Under
[a Ninth Circuit case] which came down after the bankruptcy
appellate panel had ruled, the provisions of the confirmed
plan have preclusive effect. [The Ninth Circuit case] controls.
It expressly overruled the bankruptcy appellate panel decision
in this case. Accordingly, the judgment of the bankruptcy
appellate panel is vacated”) (citation omitted).

    This discussion of the BAP’s subordinate role is not
academic. The control we exercise over the BAP and its
decisions is necessary to justify the very existence of that
court. See, e.g, N. Pipeline, 458 U.S. at 87 (plurality); id. at
91 (Rehnquist, J., concurring). If an Article I tribunal were to
“exercise jurisdiction over all matters related to those arising
under the bankruptcy laws,” id. at 76 (plurality), or infringe
upon “essential attributes of the judicial power” without
sufficient scrutiny by an Article III court, id. at 86–87
(plurality), we would have to “emphatic[ally]” reassert “the
integrity of the system of separated powers and the role of the
Judiciary in that system” by striking down the offending
Article I tribunal, even if its infringements “may seem
innocuous at first blush” and only “chip away at the authority
of the Judicial Branch.” Stern v. Marshall, 131 S. Ct. 2594,
2620 (2011).

                              D.

    In 1998, the BAP issued its decision in In re Walsh,
which stated that “if appellate fees and costs are” not
awarded, “then the injured party is not made whole,” and thus
held that “[c]learly, fees and costs experienced by the injured
party in resisting the [stay] violator’s appeal are part of the
40              IN RE: SCHWARTZ-TALLARD

damages resulting directly from the stay violation” under the
predecessor to section 362(k)(1). 219 B.R. 873, 878 (B.A.P.
9th Cir. 1998). In Sternberg, we specifically rejected this
interpretation of the statute. 595 F.3d at 947 (“The
Bankruptcy Appellate Panel, for example, seems to view
‘actual damages’ as requiring an award that returns a debtor
to the position he was in before the stay violation occurred.
See Beard v. Walsh (In re Walsh), 219 B.R. 873, 878 (9th Cir.
BAP 1998) (rejecting an alternative reading of the statute
under which, according to the BAP, ‘the injured party is not
made whole’). . . . In contrast, we conclude that the plain
meaning of ‘actual damages’ points to a different result”)
(alterations omitted).

    In the present appeal, the BAP cited and relied on Walsh’s
precise holding, explaining that “Sternberg admittedly
rejected the BAP’s determination in Walsh that § 362(k)’s
predecessor, § 362(h), required an injured party to be made
whole. At the same time, Sternberg did not invalidate
Walsh’s finding that damages incurred on appeal are actual
damages directly resulting from the stay violation itself.”
Schwartz-Tallard, 473 B.R. at 350 n.12.

     In fact, we specifically overruled Walsh, even mentioning
it by name. Sternberg, 595 F.3d at 947. We also specifically
rejected the broader holding of Walsh that “actual damages”
required “an award that returns a debtor to the position he
was in before the stay violation occurred.” Id. The BAP was
flatly wrong.

                             E.

    The BAP’s citation to a precedent we specifically rejected
is not only unacceptable under our precedent and its own
                 IN RE: SCHWARTZ-TALLARD                      41

decisional law. Ransom, 302 F. App’x at 567; In re Ball,
185 B.R. at 597–98. The reliance on such precedent is an
attack on Article III of the Constitution. N. Pipeline, 458 U.S.
at 86–87 (plurality). For an Article I tribunal to rely on
precedent that we have expressly rejected may infringe upon
the “essential attributes of [our] judicial power.” Id.

    This constitutional concern is particularly evident in the
two classes of BAP decisions that we do not review on
appeal. As Judge Norris observed, we do not review the BAP
when the losing party does not appeal the adverse decision
from the panel, and when the BAP decides a non-final
bankruptcy order under its interlocutory jurisdiction. Burley,
738 F.2d at 989–93 (Norris, J., dissenting). If the BAP were
to deviate from our authoritative decisions, and instead were
to apply its own law in either of these two circumstances, it
would very likely trammel essential attributes of our judicial
power and thus violate the Constitution.

    First, not all BAP cases are appealed by the losing party.
Id. at 990–92 (Norris, J., dissenting). In those circumstances,
there is “no direct article III control over [the] individual
case[].” Id. at 992 (Norris, J., dissenting). If the BAP were not
to follow federal law as stated in our decisions, and if the
party subject to that decision were to lack the resources to
rectify the BAP’s error, that party would be bound
erroneously by an Article I tribunal.

     Second and more worrisome, the BAP has jurisdiction
over some interlocutory bankruptcy orders that we do not
have appellate jurisdiction to review. Id. at 992–93 (Norris,
J., dissenting); see also In re Lievsay, 118 F.3d 661, 663 (9th
Cir. 1997) (per curiam) (dismissing an appeal from a BAP
decision on an interlocutory order). If the BAP were to ignore
42              IN RE: SCHWARTZ-TALLARD

our precedent in such a case, the losing party would have no
recourse to rectify the error until the bankruptcy court issued
a final order, and could be bound for years by this improper
interpretation of federal law by an Article I tribunal. That, I
suggest, would clearly violate the separation of powers
doctrine by infringing upon our judicial power under Article
III.

    I do not contend that the BAP is consistently ignoring our
opinions, or that it has done so in a case we have not
reviewed. But all subordinate courts must follow the
authoritative decisions of higher courts. See, e.g., United
States v. McCalla, 545 F.3d 750, 753 (9th Cir. 2008) (stating
that to the extent the defendant seeks to “set aside or
disregard United States Supreme Court precedent, we simply
cannot accommodate him. As the Supreme Court has
expressly stated, ‘it is this Court’s prerogative alone to
overrule one of its precedents,’” citing State Oil Co. v. Khan,
522 U.S. 3, 20 (1997)). The BAP, which is a subordinate
tribunal created by Congress and authorized by our Judicial
Council of the Circuit, must be particularly careful to follow
our precedents, and must never ignore them in favor of its
own decisions, lest it infringe upon the essential attributes of
our judicial power, created by the higher law of the United
States Constitution. In such a case the correcting power
would be action by the Judicial Council of the Circuit.

                              V.

    The majority incorrectly holds that our decision in
Sternberg does not control this case. I am convinced to the
contrary. Even if the majority were correct, however, it cites
no persuasive basis for awarding attorneys’ fees to Schwartz-
Tallard.
                IN RE: SCHWARTZ-TALLARD                      43

    The BAP’s decision to ignore our binding precedent
raises serious threats to the separation of powers. The
majority, the BAP, and some out-of-circuit judges, cited at
Majority Op. at 9 n.2, fundamentally disagree with our
holding in Sternberg. If they are correct, the proper outlet for
review of our decision is our court en banc or the Supreme
Court. The BAP is a subordinate court, bound to follow our
decisions, and as a three-judge panel, we must follow prior
panel precedent, whether or not the decisions were decided
incorrectly or have been criticized by other courts. Miller v.
Gammie, 335 F.3d 889, 900 (9th Cir. 2003) (en banc). I
dissent.