In re Withington

654 B.R. 173

IN RE: Matthew WITHINGTON and Martha Cobo, Debtors.

Case No. 20-15425-PDR

United States Bankruptcy Court, S.D. Florida, Fort Lauderdale Division

Filed September 11, 2023

Signed September 8, 2023

Adisley M. Cortez Rodriguez, DOJ-Ust, Miami, FL, for U.S. Trustee.

Chad T. Van Horn, Ft. Lauderdale, FL, for Debtors.

Order Granting, in Part, Debtors' Motion for Additional Sanctions and Punitive Damages For Non-compliance With Court Orders

Peter D. Russin, Judge

THIS MATTER came before the Court for an evidentiary hearing on June 20, 2023, at 10:00 a.m., on the Debtors' Motion for Additional Sanctions and Punitive Damages for Non-Compliance with Court Orders dated (i) April 5, 2022 and (ii) October 4, 2022.¹ Twice this Court has found Citibank, N.A. in violation of the automatic stay. Twice this Court has ordered Citibank to cease its collection efforts, which have included inaccurately reporting its debt to the credit reporting agencies. Twice this Court has ordered Citibank to pay damages for the harm its stay violation has caused. Twice Citibank has disregarded this Court's orders. For the reasons that follow, this Court will now award the Debtors $52,031.71 in compensatory damages and $175,607.02 in punitive damages to compensate them for the harm Citibank's willful stay violations have caused and to deter Citibank from violating the automatic stay in the future.

I. Findings of Fact

Prepetition, the Debtors had a Citicard credit card. When they filed for chapter 11 bankruptcy, the Debtors scheduled a $29,376 unsecured debt owed on the credit card.² In their chapter 11 plan, which they served on "Citicards Cbna," the Debtors proposed to pay the Citicard debt by paying $10,017.21 over 20 quarterly payments of $500.86.³ The Debtors served their plan on "Citicards Cbna" by U.S. mail at P.O. Box 6217, Sioux Falls, SD 57117-6217.⁴

Two ballots accepting the plan were filed on behalf of Citibank, N.A.⁵ The ballots were signed by Benjamin Rippe.⁶ Underneath his signature, was a stamped signature block indicating Mr. Rippe worked for Citibank, N.A. On the ballots, the name of the creditor was listed as "Citibank,"⁷ which presumably issued the Debtors' Citicard credit card.⁸

On November 23, 2020, the Court confirmed the Debtors' plan.⁹ After making their initial plan payment, the Debtors filed a motion to administratively close their case,¹⁰ which the Court granted on December 22, 2020.¹¹ The confirmation order, which the Debtors served on Citibank at the same address as the plan and disclosure statement,¹² provides that so long as the Debtors complied with the confirmation order and made all their plan payments, the automatic stay continued to remain in effect even after the case was administratively closed.¹³

Three months after the case was administratively closed, the Debtors received an invoice on their Citicard account.¹⁴ Although the invoice reflected the Debtors' $500.86 plan payment, it claimed the balance due on the account was $28,956.52.¹⁵ The invoice, which enclosed a payment coupon, demanded a minimum payment of $28,956.52 by March 3, 2021.¹⁶

It appears Citibank also reported to the credit reporting agencies that the Debtors' Citicard account was delinquent.¹⁷ The Debtors notified Citibank that it was incorrectly reporting the debt with the credit reporting agencies.¹⁸ But Citibank took no action to correct how the Citicard debt was reported.

In July 2021, the Debtors had their case reopened and then moved to enforce the confirmation order and impose sanctions against Citibank ("Motion for Sanctions").¹⁹ In their Motion for Sanctions, the Debtors alleged that the automatic stay remained in effect after their case had been administratively closed, and that Citibank had violated the automatic stay by (1) sending the invoice demanding payment; and (2) incorrectly reporting the debt as delinquent to the credit reporting agencies.²⁰ As sanctions, the Debtors sought their actual damages (the attorney's fees and costs incurred bringing their motion, as well as any U.S. Trustee fees they incurred reopening their case) and punitive damages.²¹

The Court set the Motion for Sanctions for an evidentiary hearing on February 3, 2022.²² The Debtors served a copy of their Motion for Sanctions by certified mail on Rohan Weerasinghe, Esq., as Secretary and General Counsel for Citibank, N.A.²³ They also served notice of the February 3 hearing by U.S. mail on Brent McIntosh, as Citibank's General Counsel and Corporate Secretary.²⁴ Citibank, however, failed to appear at the February 3 evidentiary hearing.

Following the February 3 evidentiary hearing, the Court entered an order granting, in part, the Debtors' motion for sanctions on April 5, 2022 (the "April 5 Order").²⁵ In the April 5 Order, the Court found that Citibank willfully violated the automatic stay.²⁶ The Court awarded the Debtors $3,500 in attorney's fees and $500 in costs, which the Court ordered Citibank to pay within 30 days.²⁷ The Court also directed Citibank to "cease all activities associated with recovering prepetition debts from the Debtors," warning Citibank that it may be liable for punitive damages if it continued to violate the confirmation order or the automatic stay.²⁸

The Debtors sent a copy of the April 5 Order by U.S. mail to Mr. Weerasinghe as Secretary and General Counsel for Citibank.²⁹ Citibank, however, failed to pay the $4,000 within 30 days. Worse, it continued to report the debt as delinquent with the credit reporting agencies. On July 5, 2022, the Debtors notified the Court that Citibank had failed to comply with its April 5 Order.³⁰

Two weeks later, the Debtors moved for sanctions against Citibank based on its failure to comply with the Court's April 5 Order ("Second Motion for Sanctions").³¹ According to the motion, the Debtors were unable to reclose their bankruptcy case because Citibank failed to pay the $4,000 due under the April 5 Order, causing the Debtors to incur additional U.S. Trustee fees, as well as additional attorney's fees and costs preparing and filing postconfirmation quarterly reports.³² The Debtors again asked the Court to award them actual damages ($11,350 in attorney's fees and costs) and punitive damages ($25,000).³³

The Court set the Debtors' Second Motion for Sanctions for an evidentiary hearing on September 28, 2022.³⁴ The Debtors served the Second Motion for Sanctions and the notice of the September 28 evidentiary hearing by certified mail on Mr. Weerasinghe, as Citibank's Secretary and General Counsel.³⁵ Once again, Citibank failed to appear at the hearing on the sanctions motion.

Following the evidentiary hearing, the Court entered an order granting, in part, the Debtors' Second Motion for Sanctions on October 4, 2022 ("October 4 Order").³⁶ The Court's October 4 Order directed Citibank to (1) update its credit reporting to all three credit reporting agencies to reflect that the Debtors' accounts were included in a chapter 11 bankruptcy; and (2) provide the Debtors proof it had done so.³⁷

Moreover, the October 4 Order awarded the Debtors an additional $3,437.50 in fees incurred prosecuting its original Motion for Sanctions and $9,780 in fees and costs incurred enforcing the April 5 Order and prosecuting its Second Motion for Sanctions.³⁸ The Court also awarded the Debtors $25,000 in punitive damages.³⁹ Thus, the Court directed Citibank to pay the Debtors $42,217.50 (the $4,000 awarded under the April 5 Order and the $38,217.50 awarded under the October 4 Order) within 30 days.⁴⁰

The Debtors served a copy of the October 4 Order by U.S. mail on Mr. Weerasinghe as Secretary and General Counsel for Citibank.⁴¹ Yet again, Citibank failed to comply with this Court's order.

So, on February 24, 2023, the Debtors moved for additional sanctions and punitive damages ("Third Motion for Sanctions").⁴² The Debtors allege they "are beginning to feel hopeless" because even though "[t]hey have worked hard for almost three years to make all their Plan payments," Citibank is still standing in the way of their fresh start.⁴³

The Debtors allege that because Citibank continues to incorrectly report the Citicard debt to the credit reporting agencies, the rent on their apartment has gone up; their car insurance has gone up; they cannot get a car loan; they cannot get a credit card; and they cannot seek new professional opportunities because they cannot afford to travel.⁴⁴ They also say they are suffering physical manifestations from the stress this situation is causing, which has forced them to seek medical treatment.⁴⁵

The Court scheduled an evidentiary hearing on the Debtors' Third Motion for Sanctions for June 20, 2023.⁴⁶ The Debtors served a copy of their Third Motion for Sanctions and notice of the June 20 evidentiary hearing by certified mail on Brent McIntosh, as Secretary and General Counsel for Citibank.⁴⁷ Citibank failed to appear yet again.

At the June 20, 2023 evidentiary hearing on the Debtors' Third Motion for Sanctions, the Debtors proffered their written testimony and testified.⁴⁸ The Debtors also presented documentary evidence in support of their claims, including excerpts from their credit reports showing that Citibank continues to inaccurately report the Citicard account, which continues to negatively impact their credit scores;⁴⁹ documents showing that the Debtors' credit card applications have been denied;⁵⁰ lease extensions showing that the Debtors' rent has increased;⁵¹ bank statements showing that the Debtors have paid monthly credit monitoring charges;⁵² documents showing that the Debtors' car insurance rates have increased;⁵³ statements showing that the Debtors have paid U.S. Trustee fees;⁵⁴ statements showing the attorney's fees the Debtors have incurred;⁵⁵ a summary of the treatment by the Debtors' doctor; and receipts for expenses incurred for medical treatment, travel, and lodging.⁵⁶

In all, the Debtors put on evidence of $80,478.80 in actual damages:

 Damages Amount Out-of-Pocket Expenses   Medical

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