Bankruptcy: Ninth Circuit Clarifies Scope Of Attorney’s Fees Recoverable For Enforcing Automatic Stay

Fees Are Not Recoverable For Prosecuting Stay “Damages” Claims Unconnected to Actual Enforcement of Stay Violation.

     For you bankruptcy practitioners, we have a recent case of interest about the attorney’s fees recoverable in enforcing the automatic stay. Do they extent to subsequent “damages” claims in a bankruptcy adversary proceeding apart from actions that actually resulted in remedying a stay violation? The Ninth Circuit has weighed in on this issue.

     In Sternberg v. Johnston, Case Nos. 07-16870 & 08-15721 (9^th Cir. Oct. 1, 2009) (for publication), the Ninth Circuit held that attorney’s fees are only awardable for those segments of proceedings associated with remedying the stay violation, not subsequent litigation segments associated with efforts to collect damages for stay violations.

     The Ninth Circuit, in doing so, did depart from cryptic language to the contrary in Young v. Repine, 536 F.3d 512, 522 (5^th Cir. 2008). “We do not create a circuit split lightly. But the above-quoted [cursory] language is all the court said on the issue. Without more, we are hard-pressed to find this decision persuasive.”