Court Opinion

ID: 9520531
Source: CourtListenerOpinion
Date Created: 2023-08-07 01:42:19.834254+00
Date Added: 2024-06-11T12:46:23.403845
License: Public Domain

KLEIN, Bankruptcy Judge,
dissenting in part.
I join the majority opinion on all issues except the emotional distress damages. Moreover, I agree that emotional distress damages were intended by Congress to be available under § 362(h).
I do not agree, however, that either “significant economic loss” or “financial loss” caused by willful violation of the automatic stay must be demonstrated before emotional distress damages may be awarded and would affirm the $13,000 award without requiring further proceedings. Nor do I agree that there is a controlling Ninth Circuit standard for § 362(h) emotional distress damages, the Pershing Park Villas case being a diversity case applying state law providing a specialized rule for certain insurance law torts. Nor would I follow the Seventh Circuit’s rule in Aiello because its requirement of financial loss is based on flawed assumptions that ignore significant human elements present in § 362(h).
I submit that § 362(h) functions as a bankruptcy tort. The individual debtor has a legally protected interest in being free of acts that violate the automatic stay. The invasion of that interest warrants a remedy. The standard remedy available in all bankruptcy cases is contempt, which may be compensatory contempt. A special remedy, § 362(h), was created by Congress that is limited to individuals damaged by willful stay violations.
Congress tells us on the face of § 362(h) several important things about the remedy. First, “actual damages” are available. Second, “costs and attorneys’ fees” are included as an element of “actual damages.” Third, “punitive damages” may be awarded in “appropriate circumstances.”
Two questions relating to emotional distress are before us. First, whether emotional distress damages are a permitted form of § 362(h) “actual damages.” Second, what conditions must exist to warrant emotional distress damages under § 362(h).
The answers to those questions, in my view, are informed in significant respects by the tort damages model. By providing for “actual” and “punitive” damages in general terms, it follows that Congress was incorporating the well-established meanings of those terms, which are mainly tort damage concepts. Congress varied the tort model in one respect as to which it was, and had to be because it was varying the standard tort damages rule, specific: including costs and attorneys’ fees as an item of “actual” damages (“actual damages, including costs and attorneys’s fees”).
In effect, Congress created a federal tort out of willful stay violations against individuals, leaving the details regarding damages (save for the inclusion of costs and attorneys’ fees as an item of damages) to federal common law.
Federal common law relating to tort damages is generally informed by the Restatements. Emotional distress figures in basic tort law in two respects: as an independent basis for imposing tort Lability and as an element of damages for the *125invasion of some other legally-protected interest.
Imposing liability merely on account of infliction of emotional distress requires, as the majority notes, that the offending conduct have been “extreme and outrageous.” Restatement (2D) Of Torts § 46 (1977). In contrast, emotional distress caused by the invasion of some other legally-protected interest is merely what the Restatement terms “an additional, or ‘parasitic’ element of damages.” Id. § 47 cmt. b.
Emotional distress damage awards under § 362(h) fall into the latter damages category, the willful violation of the automatic stay being the invasion of the legally-protected interest. Up to this point, the majority and I are on common ground.
I part company with the majority on how one goes about determining how, and under what limits, § 362(h) emotional distress damages should be determined. The majority would require proof of a significant economic loss as prerequisite to an emotional distress award; I submit that emotional distress damages may stand alone.
Restatement § 905 (“Compensatory Damages for Nonpecuniary Harm”) and Restatement § 912 (“Certainty”) provide the guideposts.
The general rule is that compensatory damages may be awarded for emotional distress without proof of pecuniary loss to the plaintiff. Id. § 905. The rationale is that the principal harm for many torts— such as battery, assault, defamation, and malicious prosecution — is the “disagreeable emotion experienced by the plaintiff.” Id. § 905 cmt. c.11 The effect of automatic stay violations on individual consumers can be of the same nature and quality.
The basic measure of damages for emotional distress is fair compensation to reflect the duration of the harm to the feelings and the intensity of the distress based on all relevant circumstances, including sex, age, condition in life and any other fact indicating the susceptibility of the plaintiff to this type of harm. The limit is that the award cannot exceed what a “reasonable person could possibly estimate as fair compensation.” Id. § 905 cmt. i,12
*126Nor are emotional distress damages crippled by a rule of certainty. Rather, Restatement § 912 merely requires that there be proof of the amount of money representing adequate compensation with “as much certainty as the nature of the tort and the circumstances permit.” Id. § 912. The rationale is that there should be a balance between the interest of proof and the interest of providing a substantial remedy for an incontestable harm. Id. § 912 cmt. a.13 When it comes to emotional distress, certainty is impossible. Id. § 912 cmt. b.14 The best that can be done is to *127rely upon the reasonableness of the trier of fact.
There is no reason that the Restatement’s approach to determination of emotional distress damages should not pertain to § 362(h) emotional distress damages. The Restatement generally represents the mainstream view. The intent of Congress in providing for “actual damages,” without more specific direction (other than to make costs and attorneys’ fees compensable as damages), presumably would be to draw the rules from the mainstream of the law.
This analysis is supported by the fact that Congress chose to limit the § 362(h) remedy to “individual” human beings. Individuals have feelings. Moreover, individuals in bankruptcy are overwhelmingly persons of limited financial sophistication who have reached a last resort where Congress has assured them that the automatic stay will protect them for a while from the depredations of creditors. Those individuals are correspondingly vulnerable to a profound sense of betrayal and upset by invasions of the protection Congress has promised them.
It is for this reason that the requirement of the Seventh Circuit in Aiello that there be financial harm before emotional distress damages can be awarded runs counter to the intent of Congress expressed in the creation of the § 362(h) remedy for “individuals.” Moreover, the Seventh Circuit’s assertions (239 F.3d at 879) that the automatic stay is “financial in nature” and not intended to protect “peace of mind” and that the “Bankruptcy Code was not drafted with reference to the emotional incidents of bankruptcy” are belied by the legislative history of the Bankruptcy Code.
One important rationale for Congress enacting the automatic stay was unambiguously non-financial:
Frequently, a consumer debtor is severely harassed by his creditors when he fall behind in payments on loans. The harassment takes the form of abusive phone calls at all hours, including at work, threats of court action, attacks on the debtor’s reputation, and so on. The automatic stay at the commencement of the case takes the pressure off the debt- or.
H. Rep. No. 95-595, at 125-26 (1977), U.S.Code Cong. & Admin.News 1978, at 5963, 6086-87. These concerns are directed to “peace of mind” and to “emotional incidents of bankruptcy” that are more psychological than financial.
Similarly, Congress explained how creditors would exploit unfair psychological tactics by taking a security interest in all the debtor’s belongings (including family photographs and the family dog and other items of little or no real value) and then:
If the debtor encounters financial difficulty, creditors often use threats of repossession of all of the debtor’s household goods as a means of obtaining payment.
In fact, were the creditor to carry through on his threat and foreclose on the property, he would receive little, for household goods have little resale value. They are far more valuable to the creditor in the debtor’s hands, for they provide a credible basis for the threat, because replacements costs of the goods are generally high....
... Such security interests have too often been used by over-reaching creditors. The bill eliminates any unfair advantage creditors have.
Id. at 127, U.S.Code Cong. & Admin.News 1978, at 5963, 6088. These “emotional incidents of bankruptcy” were plainly prominent in the drafting of the Bankruptcy Code.
*128Nor is the concern, expressed by the majority and the Seventh Circuit, about potential for abuse of emotional distress damages well-founded. 239 F.3d at 880-81. The availability of such damages is not likely to increase the number of § 362(h) matters that are filed. Emotional distress is not a basis for § 362(h) liability. Rather, emotional damages do not come into play until after it has been demonstrated that there is § 362(h) liability for a willful violation of the automatic stay.
As to the Seventh Circuit’s sense that emotional distress is “so easy to manufacture,” the first part of the answer is that it is one thing to assert emotional distress, but it is quite another thing to persuade a bankruptcy judge to find that emotional distress existed. Second, the type of considerations that are articulated in the Restatement comments discussed above would operate to introduce rational analysis that bankruptcy judges can take into account.
The concern of the majority and the Seventh Circuit for potential abuse, then, boils down to a concern that bankruptcy judges, in their capacity as triers of fact on § 362(h) matters, would abuse their authority to assess damages based on the evidence before them. While I doubt that bankruptcy judges would ever establish a pattern of abusing their authority to award emotional distress damages, I am confident that the appellate process would correct abuses.
In short, the Seventh Circuit’s decision in Aiello is, with all respect, not a persuasive lead that we should follow.
Nor does the dictum in the Ninth Circuit’s decision in Pershing Park Villas control the analysis of § 362(h) emotional distress damages. That decision, rendered in a diversity case, merely holds that California law pertaining to the tort of an insurer’s bad faith refusal to defend requires a demonstration of significant economic loss. While I have no quarrel with the reasoning in that decision, I do not believe that it constitutes controlling authority for the federal law of damages question now before us.
The non-financial considerations that animated the initial enactment of the automatic stay and later addition of § 362(h) ought to be giving us great pause about engrafting threshold requirements of demonstrating financial loss or significant economic loss. Such requirements operate to limit the ability to remedy violations of the automatic stay and, correlatively, could embolden cynical creditors to terrorize debtors by way of stay violations in circumstances in which they are confident that their victims will not be able to show financial or significant economic loss. We should be reluctant to pull § 362(h)’s teeth.
In short, I would hold that emotional distress damages can be awarded under § 362(h) regardless of whether there is economic loss. The standards for awards should reflect the considerations articulated in the Restatement (2d) of Torts §§ 905 and 912. The ultimate limit is what “a reasonable person could possibly estimate as fair compensation.”
In this instance, although I wonder whether I would have awarded $13,000 on what strikes me on a sterile appellate record as flimsy evidence, I cannot say that the court’s findings were clearly erroneous or that the $13,000 emotional distress award was beyond what a reasonable person could possibly estimate as fair compensation for the creditor’s long-term obduracy in attempting to perpetuate the fruit of a violation of the automatic stay. Hence, I would affirm on all counts and, to that extent, DISSENT.

. The comment explains:
comment c. Emotional distress in general. The principal element of damages in actions for battery, assault or false imprisonment, as well as in actions for defamation, malicious prosecution and alienation of affections, is frequently the disagreeable emotion experienced by the plaintiff. In other cases, protection against disagreeable emotions not involving bodily pain is ordinarily given only in an action for infringement of some other interest. Thus one who insults or annoys another, thereby causing a third person to suffer fright or physical discomfort, is ordinarily not subject to liability to the third person unless bodily harm results. (See §§ 312 and 313). Whether there can be an action merely for harm to the feelings presents a question of the existence of the cause of action and is not a problem of the amount of damages.
Restatement (2D) Of Torts § 905 cmt. c.

. The comment explains:
comment i. Measure of recovery. The length of time during which pain or other harm to the feelings has been or probably will be experienced and the intensity of the distress are factors to be considered in assessing the amount of damages. In determining this, all relevant circumstances'are considered, including sex, age, condition in life and any other fact indicating the susceptibility of the injured person to this type of harm. As stated in § 910, damages include an amount for the harm suffered to the time of trial and in some cases for that estimated for the future. On mitigation of damages because of provocation by the plaintiff in cases of intended physical harm, see § 921.
As stated in § 912, Comment b, there is no rule of certainty with reference to the amount of recovery permitted for any particular type of emotional distress; the only limit is such an amount as a reasonable *126person could possibly estimate as fair compensation. Thus damages can be recovered for the feeling of mortification resulting from a scar or deformity produced by the defendant’s act or for the sorrow that a prospective mother would feel over the failure to have her child bom alive. Nevertheless, when there is a claim of an excessive or unusual emotional distress, the rules as to causation stated in §§ 435A, 435B and 917 and the rules as to proof of the existence of such a disturbance as stated in § 912, Comment a, are applicable. The extent and duration of emotional distress produced by the tortious conduct depend upon the sensitiveness of the injured person. The court, however, will not permit consideration of disturbances which, conceding full weight to individuality, are wholly abnormal and unreasonable. Thus, unless a recognizable mental disease results, there can be no recovery for a long-continued morbid propensity to fear death from rabies, if there is proof that the dog that bit the injured person was healthy, nor can there be recovery for the totally unfounded fear of a woman that an injury has prevented her from ever being able to have a child.
Restatement (2D) Of Torts § 905 cmt. i (emphasis supplied).

. The comment explains:
comment a.... It is desirable _ that responsibility for harm should not be imposed until it has been proved with reasonable certainty that the harm resulted from the wrongful conduct of the person charged. It is desirable, also, that there be definiteness of proof of the amount of damage as far as is reasonably possible. It is even more desirable, however, that an injured person not be deprived of substantial compensation merely because he cannot prove with complete certainty the extent of harm he has suffered. Particularly is this true in situations where there can not be any real equivalence between the harm and compensation in money, as in case of emotional disturbance, or where the harm is of such a nature as necessarily to prevent anything approximating accuracy of proof, as when anticipated profits of a business have been prevented. The requirements vary with the possibilities for making a reasonably exact estimate of the amount of harm measured in terms of money ....
Restatement (2D) Of Torts § 912 cmt. a (emphasis supplied).

. The comment explains:
b. Harm to body, feelings or reputation. For harm to body, feelings or reputation, compensatory damages reasonably proportioned to the intensity and duration of the harm can be awarded without proof of amount other than evidence of the nature of the harm. There is no direct correspondence between money and harm to the body, feelings or reputation. There is no market price for a scar or for loss of hearing since the damages are not measured by the amount for which one would be willing to suffer the harm. The discretion of the judge or jury determines the amount of recovery, the only standard being such, an amount as a reasonable person would estimate as fair compensation. In these cases the trier of fact can properly award substantial damages as compensation for harms that normally flow from the tortious injury even without specific proof of their existence, such as pain from a blow or humiliation from a scar. Evidence to prove that the harm is greater or less than that which ordinarily follows is admissible. The most that can be done is to note such factors as the intensity of the pain or humiliation, its actual or probable duration and the expect-able consequences. Since these factors are all indefinite (see § 905), it is impossible to require anything approximating certainty of amount even as to past harm. On the recovery for harm to feelings threatened from harm already caused by the tortious conduct there is even more indefiniteness.
*127Restatement (2D) Of Torts § 912 cmt. b (emphasis supplied).