In re Prusan

495 B.R. 203, 2010 WL 813778, 2010 Bankr. LEXIS 699
CourtUnited States Bankruptcy Court, E.D. New York
DecidedMarch 2, 2010
DocketNo. 09-49716-CEC
StatusPublished
Cited by16 cases

This text of 495 B.R. 203 (In re Prusan) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Prusan, 495 B.R. 203, 2010 WL 813778, 2010 Bankr. LEXIS 699 (N.Y. 2010).

Opinion

CARLA E. CRAIG, Chief Judge.

This matter comes before the Court on the motion of Jeffrey S. Prusan (the “Debtor”) for sanctions against Ira and Barbara Goldberg (together, the “Goldbergs”) and Jonathan Goodgold, Esq. (together with the Goldbergs, the “Respondents”) pursuant to § 362(k)1 of the Bankruptcy Code for the willful violation of the automatic stay imposed by § 362(a). The Respondents oppose the Debtor’s motion. For the following reasons, the Debt- or’s motion is denied.

Jurisdiction

This Court has jurisdiction over this core proceeding under 28 U.S.C. §§ 1334(b) and 157(b)(2)(A), and the Eastern District of New York standing order of reference dated August 28, 1986. This decision constitutes the Court’s findings of fact and conclusions of law to the extent [206]*206required by Federal Rule of Bankruptcy Procedure 7052.

Background

The following facts are undisputed.

On November 3, 2009, the Debtor filed a voluntary petition for relief under chapter 7 of the Bankruptcy Code. On Schedule F, the Debtor listed the Goldbergs as unsecured creditors holding a disputed claim, described as “judgment” for $675,000. On the Statement of Financial Affairs, the Debtor listed an action (the “State Court Action”) brought against him by the Goldbergs in the Superior Court of New Jersey (the “N.J. State Court”), stating that the action was resolved by “settlement agreement.”

The Debtor filed for bankruptcy on the date that he was scheduled to appear at a deposition in connection with the State Court Action. (Opp’n Ex. O.) On November 2, 2009, the day before the deposition, the Debtor’s counsel notified Goodgold, the Goldberg’s attorney in the State Court Action, that the Debtor “is filing bankruptcy” and will not attend the deposition. (Opp’n Ex. P.) Two days later, on November 4, 2009, the Debtor’s counsel provided Goodgold with a copy of the Debtor’s petition. The petition did not contain a times-tamp or other indication that it had been filed with the court. On that same date, Goodgold, as counsel to the Goldbergs, sent a letter to the N.J. State Court stating:

Late on November 2, 2009, a fax came in from [Debtor’s counsel] stating that Mr. Prusan will not attend the deposition because he “is filing bankruptcy.” ... I highlight the word “filing” because that is not what Mr. Prusan testified to Your Honor on October 20, 2009. He specifically stated he hired an attorney and filed for bankruptcy protection, but could not and did not provide any proof of same.... This morning we just received a copy of the Bankruptcy petition, which is dated November 3, 2009, further showing that Mr. Prusan’s testimony was a deliberate lie to avoid being deposed and/or arrested.... While we are under the impression that Mr. Pru-san’s bankruptcy petition may have already been filed, we are uncertain and do not have any proof of same.

(Opp’n Ex. R at 1-2.) Based upon the Debtor’s alleged misrepresentation, Good-gold requested that the N.J. State Court “entertain or sua sponte order a contempt hearing.” (Opp’n Ex. R at 2.)

The N.J. State Court contacted Good-gold the following week to schedule a hearing with respect to the issues raised in the letter. Goodgold informed the N.J. State Court that the Debtor filed for bankruptcy and that the matter could not proceed.

On November 12, 2009, the Debtor filed this motion alleging that, by sending the letter, the Goldbergs and Goodgold sought to collect a pre-petition debt after he had filed for bankruptcy protection. The Debtor argues that this letter violated the automatic stay imposed by § 362(a), and seeks the imposition of sanctions, and an award of punitive damages in the amount of $5,000, plus attorneys’ fees and costs totaling $3,000.

Discussion

The automatic stay is triggered the instant a bankruptcy petition is filed. 11 U.S.C. § 362. Among the actions stayed are:

the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the [bankruptcy] case ..., or to recover a claim against the debtor that arose before the commencement of the case [207]*207under this title; ... [and] any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the [bankruptcy] case....

11 U.S.C. § 362(a)(1),(6). While a party’s knowledge of the filing is “immaterial to a determination of whether the stay was violated,” it is relevant to whether the violation was willful. Siskin v. Complete Aircraft Servs., Inc. (In re Siskin), 231 B.R. 514, 517 (Bankr.E.D.N.Y.1999). “Pre-filing contact between a creditor and a debt- or indicating that a bankruptcy may be filed has not been deemed sufficient to constitute actual notice for purposes of establishing a willful violation because,’ ... it must be emphasized that it is the filing of a petition and not the debtor’s intent to file which invokes the automatic stay.’ ” In re Flack, 239 B.R. 155, 163 (Bankr. S.D.Ohio 1999) (quoting In re Bragg, 56 B.R. 46, 49 (Bankr.M.D.Ala.1985)).

If a violation was willful, an individual debtor may seek relief pursuant to § 362(k), which provides that “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).2 This section was enacted “[t]o preserve the integrity of the automatic stay provisions and to protect consumer debtors and creditors.” Flack, 239 B.R. at 162.

The Respondents argue that they did not have actual knowledge of the bankruptcy filing because counsel’s letter only stated that the Debtor “is filing bankruptcy,” and because the petition provided to them did not contain any proof that it was filed. Additionally, the Respondents argue that § 362(k) permits an award of punitive damages only in situations where the Debtor has been injured by the violation, and that the Debtor was not injured by the letter. Respondents contend, therefore, that no punitive damages are recoverable.

The Debtor argues that the Respondents knew, or should have known, of the bankruptcy filing, and that they willfully violated the automatic stay by sending the letter to the N.J. State Court. The Debt- or contends that he can obtain punitive damages and attorneys’ fees pursuant to § 362(k) by virtue of the violation, without suffering other damages. To find otherwise, he argues, would have the effect of giving “permission” for violations that do not cause damages. (Tr.3 at 14-15.)

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Dwain W. Tate - Adversary Proceeding
District of Columbia, 2020
Grinspan v. Grinspan (In re Grinspan)
597 B.R. 725 (E.D. New York, 2019)
In re Jean-Francois
532 B.R. 449 (E.D. New York, 2015)
In re Hall
518 B.R. 202 (N.D. New York, 2014)
In re Voll
512 B.R. 132 (N.D. New York, 2014)
In re Ampal-American Israel Corp.
502 B.R. 361 (S.D. New York, 2013)
Dean v. Carr (In re Dean)
490 B.R. 662 (M.D. Pennsylvania, 2013)
In re Seaton
462 B.R. 582 (E.D. Virginia, 2011)
Malicki v. Bernstein (In Re Bernstein)
447 B.R. 684 (D. Connecticut, 2011)
In Re Ebadi
448 B.R. 308 (E.D. New York, 2011)
In Re Miller
447 B.R. 425 (E.D. Pennsylvania, 2011)
In Re Beebe
435 B.R. 95 (N.D. New York, 2010)

Cite This Page — Counsel Stack

Bluebook (online)
495 B.R. 203, 2010 WL 813778, 2010 Bankr. LEXIS 699, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-prusan-nyeb-2010.