Paugh v. Graham (In re Paugh)

1

IN RE: LESTER O. PAUGH, JR. Debtor.

LESTER O. PAUGH, JR. Plaintiff, v. RUTH E. GRAHAM, Defendant.

No. 1:21-bk-00673

Adversary No. 1:22-ap-00006

United States Bankruptcy Court, N.D. West Virginia

April 19, 2023

Chapter 7

MEMORANDUM OPINION

David L. Bissett, United States Bankruptcy Judge

On February 6, 2023, the court granted summary judgment as to liability in favor of Lester O. Paugh, Jr. (the "Plaintiff" or "Paugh") in the above-referenced adversary proceeding and determined that Ruth E. Graham (the "Defendant") willfully violated the automatic stay that arose in the Plaintiff's Chapter 7 bankruptcy case. To assess the extent of damages available under 11 U.S.C. § 362(k)(1), the court required Plaintiff's counsel, Thomas E. McIntire ("McIntire"), to file a motion in that regard and provided the Defendant with an opportunity to respond. For the reasons set forth herein, the court concludes that the Plaintiff is entitled to an award of damages in the amount of $13,025.72.

I. BACKGROUND

On February 6, 2023, the court entered a memorandum opinion granting the Plaintiff's motion for summary judgment. It found that the Defendant willfully violated the stay under § 362(k)(1). Consistent with the court's order, in that regard a preliminary hearing was held on February 14 2023, at which the court requested that the Plaintiff timely file a written motion for damages and provided opportunity for the Defendant to respond.

Ultimately the Plaintiff seeks thirty-eight (38) hours billed at $375 per hour and alleges overall damages of $14,454.19 (i.e., $14,250 in reasonable attorney fees plus $204.19 in advanced costs).^[1] Other than attorney fees and advanced costs, no other damages are requested. Notably, however, the Plaintiff seeks damages in his complaint of $2,173.91 for wages garnished in willful violation of the stay, as outlined in the order granting summary judgment.^[2] Of relevance, the Plaintiff's attorney fee (and, in some instances, advanced cost) descriptions include ministerial work for sending affidavits; making copies; transcribing/revising a transcript; efforts in the Circuit Court of Preston County, West Virginia; matters regarding a different adversary proceeding (i.e., the Defendant's adversarial proceeding against the Plaintiff to determine nondischargeability of her claim); and efforts coupling attempted resolution(s) for this adversary proceeding and the nondischargeability proceeding filed by the Defendant in this action. In further support, the exhibits include the Plaintiff's Bankruptcy Fee Agreement which, in relevant part, contains the following "[attorney fee] of $375 per hour along with $175 per hour for all paralegal services and $50 per hour for work completed by the staff." In response, the Defendant apologizes for her actions in willful violation of the stay but asserts that she should not have to pay any (requested) damages.^[3]

II. ANALYSIS

The Plaintiff seeks $14,250 in attorney's fees incurred in connection with the filing and prosecution of his § 362(k)(1) claim. Additionally, his complaint alleged $2,173.91 for garnished wages in willful violation of the stay. In support of the fee request, the Plaintiff provides contemporaneous time records that show the total expenditure of thirty-eight (38) hours compensated at his customary hourly rate of $375. Additionally, he requests $204.19 in advanced costs. In reply, the Defendant asserts she should not have to pay damages despite the court's determination that she willfully violated the stay.

Section 362(k)(1) provides, in relevant part, "an individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damages." 11 U.S.C. § 362(k)(1). The lodestar method (which defines reasonable hours expended times a reasonable rate) is "appropriate to employ . . . to determine a reasonable fee award for successfully prosecuting a § 362(k) claim." In re Imperial Petroleum Recovery Corp., No. 13-30466, 2021 WL 3668382, at *5 (Bankr.S.D.Tex. Aug. 18, 2021), aff'd, No. AP 14-03375, 2022 WL 2806456 (S.D. Tex. July 18, 2022). In fact, "[c]ourts frequently apply the standards used in determining the reasonableness of compensation under § 330 in determining what fees and costs are reasonable and necessary in the prosecution of a § 362(k) cause of action . . .." In re Voll, 512 B.R. 132, 141 (Bankr. N.D.N.Y. 2014).^[4] Discretion remains with the court to eliminate unrelated or excessive fees. See, e.g., America's Servicing Co. v. Schwartz-Tallard (In re Schwartz-Tallard), 803 F.3d 1095, 1101 (9th Cir. 2015) (en banc) (holding that "[o]nly an award of fees reasonably incurred is mandated by the statute; courts awarding fees under § 362(k) thus retain the discretion to eliminate unnecessary or plainly excessive fees. Sound exercise of this discretion ... provide[s] a sufficient check on any abuses that might otherwise arise.").

The Fourth Circuit endorses a three-part standard for use in calculating attorney's fees under the lodestar approach:

[f]irst, the court must determine the lodestar figure by multiplying the number of reasonable hours expended times a reasonable rate. To ascertain what is reasonable in terms of hours expended and the rate charged, the court is bound to apply the factors set forth in Johnson v. Georgia Highway Express Inc., 488 F.2d 714, 717-19 (5th Cir. 1974).^[5] Next, the court must subtract fees for hours spent on unsuccessful claims unrelated to successful ones. Finally, the court should award some percentage of the remaining amount, depending on the degree of success enjoyed by the plaintiff.

In re Lumber Liquidators Chinese-Manufactured Flooring Prod. Mktg., Sales Pracs. & Prod. Liab. Litig., 27 F.4th 291, 303 (4th Cir. 2022) (citing McAfee v. Boczar, 738 F.3d 81, 88 (4th Cir. 2013)). The "twelve-factor analysis of [Johnson] is appropriate to determine attorney[] fee awards in bankruptcy[,]" Harman v. Levin, 772 F.2d 1150, 1152 (4th Cir. 1985), and "[it is] properly employed in the determination of a reasonable attorney's fee under 11 U.S.C. § 330[.]" Harman v. Levin, 772 F.2d at 1151; see also, 11 U.S.C. § 330(a)(2) ("the court may, on its own motion . . . award compensation that is less than the amount of compensation that is requested."). Therefore, the court's review of attorney compensation under § 362(k)(1) similarly parallels its review under § 330. 11 U.S.C. §§ 362(k)(1), 330.

Having determined that a willful violation of the stay occurred, and that the Plaintiff was injured, the court evaluates the presented actual damages regarding the requested attorney's fees and advanced costs. The plain language of § 362(k)(1) expressly states that attorney's fees are actual damages. See also, In re Repine, 536 F.3d 512, 522 (5th Cir. 2008) ("[I]t is proper to award attorney's fees that were incurred prosecuting a section 362(k) claim."); In re Duby, 451 B.R. 664 (B.A.P. 1st Cir. 2011), aff'd, No. 11-9006, 2012 WL 12552111 (1st Cir. Apr. 17, 2012) (holding that attorneys' fees incurred as a result of pursuing an automatic stay violation action are recoverable under § 362(k)(1)). Considering the lodestar method, the court concludes that $375 is a reasonable hourly rate for McIntire^[6] based upon the following:

• The pertinent issue presented in this adversary proceeding was neither novel nor complex: the complaint asserted a cause of action under Section 362;

• No unusual skill was required to prosecute the Plaintiff's adversary proceeding. The motion did not provide damages of lost opportunity costs because of pursuing this adversary proceeding;

• McIntire's expectation at the outset of the litigation was to halt the Defendant's conduct that was ultimately determined in willful violation of the stay;

• Additionally, the court is aware of the McIntire's efforts to settle the matter. Because of the circumstances, the court finds he adequately proceeded in accordance with this court's orders throughout the pendency of the case;

• There was no showing that there were any time limitations imposed by Paugh or that circumstances compelled higher than average fees in connection with this adversary proceeding;

• McIntire has practiced bankruptcy for many years in this district; • There was no evidence indicating that the pertinent issue involved in this adversary proceeding as undesirable within the bankruptcy bar of the Northern District of West Virginia;

• The extent of McIntire's relationship with Paugh appears limited to the course of his Chapter 7 case and this adversary proceeding.

Nonetheless, the court will exercise its discretion to eliminate unrelated or excessive fees under § 362(k). In re Schwartz-Tallard, 803 F.3d 1095. Specifically, the court will reduce or eliminate amounts that specifically include work which a paralegal or office secretary typically performs; efforts coupling attempted resolution(s) for the above-adversary proceeding and a different adversary proceeding; efforts involving the Circuit Court of Preston County; and matters regarding a different adversary proceeding.

In that regard, the court finds the following fees and costs unrelated, thus, not compensable: efforts involving the Circuit Court of Preston County and matters regarding a different adversary proceeding. Specifically, the entries with the following descriptions and related times^[7]:

03/21/22

prepare affidavit in support of TRO for Paugh's signature 0.1

03/31/22

prepared Paugh's motion for temporary restraining order and preliminary 1.5 injunction to be filed in the Circuit Court of Preston County, West Virginia, in an attempt to stop the wage garnishment

06/07/22

received notice from the...