David Brian Derringer

UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
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06/10/06
David Brian Derringer
04-17330
Order Granting in Part, Denying in Part [9-1] Motion For Order to Show Cause
why Creditor Keleher and McLeod and Attorney Sean Olivas should not be held in
contempt of court for violation of the automatic stay. by David Brian Derringer
.
Received on: 2005-02-15 14:24:48.000
2005-02-15 00:00:00.000
2005-02-16 00:00:00.000
Patti Hennessy
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UNITED STATES BANKRUPTCY COURT
DISTRICT OF NEW MEXICO
In re: DAVID DERRINGER, No. 13-04-17330 MA
Debtor.
ORDER GRANTING, IN PART, and DENYING, IN PART,
DEBTOR DAVID DERRINGER’S MOTION FOR ORDER TO SHOW CAUSE
AND FOR EXTREME SANCTIONS TO BE ASSESSED AGAINST CREDITOR
KELEHER AND McLEOD AND ATTORNEY SEAN OLIVAS
AND REQUEST FOR RELIEF
THIS MATTER is before the Court on the Debtor David Derringer’s Motion for Order to
Show Cause and for Extreme Sanctions to be Assessed Against Creditor Keleher and McLeod and
Attorney Sean Olivas and Request for Relief (“Motion”). The Motion seeks damages pursuant to 11
U.S.C. § 362(h) against Keleher & McLeod, P.A., attorney Sean Olivas, Judge Thomas G. Fitch,
Judge Cynthia A. Fry, Judge Lynn Pickard, and Judge A. Joseph Alarid for alleged willful violations of
the automatic stay imposed by 11 U.S.C. § 362. The Court held a final hearing on the Motion on
January 31, 2005, after which the Court took the matter under advisement.
After considering the Motion and the evidence presented at the final hearing, the Court finds
that Keleher & McLeod, P.A. and attorney Sean Olivas violated the automatic stay warranting both
actual and punitive damages in accordance with 11 U.S.C. § 362(h). In reaching this determination,
the Court FINDS:
1. Debtor filed his voluntary petition under Chapter 13 of the Bankruptcy Code on October 6,
2004.
2. Prior to the filing of his bankruptcy petition, Debtor initiated three lawsuits in the United
States District Court for the District of New Mexico identified as Case Number CIV-02-0974, Case
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Number CIV-03-0804, and Case Number CIV-03-0149. Judge Fitch is a named defendant in all
three cases. Judge Fry, Judge Pickard, and Judge Alarid are named defendants in Case Number
CIV-03-0804.
3. The Motion seeks damages against Keleher & McLeod, P.A., attorney Sean Olivas, Judge
Fitch, Judge Fry, Judge Pickard, and Judge Alarid pursuant to 11 U.S.C. § 362(h) for actions taken in
connection with these three federal proceedings.
4. Debtor listed Keleher & McLeod, P.A., as a creditor on his bankruptcy statements and
schedules, and both Keleher & McLeod, P.A. and Sean Olivas are listed on the Debtor’s mailing list.
Judge Fry, Judge Pickard, and Judge Alarid are not listed on the Debtor’s mailing list. Judge Fitch is
listed on the mailing list, but the address for Judge Fitch contained in the mailing list is care of attorneys
Keleher & McLeod, P.A. and attorney Sean Olivas.
5. On October 8, 2004, the Office of the Clerk sent notice of Debtor’s bankruptcy filing to all
creditors and parties on the mailing list. (See Docket # 3).
6. On or about October 18, 2004, Judge Fitch, by and through his attorneys of record,
Keleher & McLeod, P.A. (Sean Olivas), filed two documents in Case Number CIV-03-0149: 1)
Defendant Judge Fitch’s Notice of Completion of Briefing on Plaintiffs’ Motion for Reconsideration of
Memorandum Opinion and Order of March 29, 2004 Pursuant to Rules 59 & 60 and Request for
New Trial; and 2) Defendant Judge Fitch’s Notice of Completion of Briefing on Motion for Award of
Attorneys’ Fees and Memorandum in Support Thereof. (Exhibit A).
7. On October 20, 2004, Judge Fitch, by and through his attorneys of record, Keleher &
McLeod, P.A. (Sean Olivas) filed two documents in Case Number CIV-02-0974: 1) Reply in Support
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of Judge Thomas Fitch’s Brief and Evidence on Reasonable Attorneys’ Fees; and 2) Notice of
Completion of Briefing on Judge Thomas Fitch’s Brief and Evidence on Reasonable Attorneys’ Fees.
(Exhibit B).
8. On October 20, 2004, Judge Fitch, Judge Fry, Judge Pickard, and Judge Alarid, by and
through their attorneys of record, Keleher & McLeod, P.A. (Sean Olivas) filed two documents in Case
Number CIV-03-0804: 1) Reply in Support of Judges’ Brief and Evidence on Reasonable Attorneys’
Fees; and 2) Notice of Completion of Briefing on Judges’ Brief and Evidence on Reasonable
Attorneys’ Fees. (Exhibit C).
9. Keleher & McLeod, P.A. and Sean Olivas had notice of the Debtor’s bankruptcy filing as
of the date they submitted the documents for filing in Case Numbers CIV 02-0974, CIV-03-0149, and
CIV-03–0804.
10. There is no evidence that Judge Fitch, Judge Fry, Judge Pickard, or Judge Alarid received
notice of Debtor’s bankruptcy prior to the filing of these documents.
11. Debtor sent a letter to Sean Olivas on October 23, 2004 notifying Mr. Olivas of the
bankruptcy filing and the imposition of the automatic stay. (Exhibit D).
12. There is no evidence that Keleher & McLeod, P.A., Sean Olivas, Judge Fitch, Judge Fry,
Judge Pickard, or Judge Alarid took any action against Debtor or any property of the Debtor, or filed
any documents in any of the three federal proceedings subsequent to October 23, 2004.
DISCUSSION
Upon the filing of a bankruptcy proceeding, the automatic stay imposed by 11 U.S.C. § 362
operates to stay the continuation of any proceeding against the debtor or to recover a claim against the
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debtor that arose prior to the commencement of the bankruptcy proceeding. 11 U.S.C. § 362(a)(1).
"The purpose of the automatic stay provided by 11 U.S.C. § 362 is to protect the debtor and his
creditors by allowing the debtor to organize his affairs, and by ensuring that the bankruptcy procedure
may operate to provide an orderly resolution of all claims ." Pursifull v. Eakin, 814 F.2d 1501, 1504
(10th Cir. 1987). If a creditor takes action against the debtor in an attempt to collect on a pre-petition
claim in violation of the automatic stay, the debtor is entitled to recover damages. Pursuant to 11
U.S.C. § 362(h),
[a]n 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(h).
An act taken in violation of the automatic stay is “willful” if the act was taken with knowledge that the
automatic stay was in place and the act was intentional; specific intent to violate the automatic stay is
not necessary for the act to be considered “willful” within the meaning of 11 U.S.C. § 362(h). Diviney
v. NationsBank of Texas, N.A. (In re Diviney), 225, B.R. 762, 774 (10th Cir. BAP 1998) (citations
omitted).
Debtor bears the burden of showing a willful violation of the automatic stay. In re Georgetown
Steel Co., LLC, 318 B.R. 313, 334 (Bankr.D.S.C. 2004) (“Debtor bears the burden of proof on this
issue [stay violation] and must prove the stay violation by clear and convincing evidence.”) (citations
omitted). There is no evidence that Judge Fitch, Judge Fry, Judge Pickard or Judge Alarid had
knowledge of the Debtor’s bankruptcy at the time documents were filed in the three federal
proceedings. Judge Fry, Judge Pickard and Judge Alarid were not listed in the Debtor’s statements or
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schedules or on the mailing list. Judge Fitch was listed on the mailing list, but addressed care of
Keleher & McLeod, P.A. The documents were filed in the three federal proceedings by Keleher &
McLeod, P.A. and Sean Olivas on behalf of their clients. Debtor asserts that because the rules of
professionalism obligate attorneys to keep their clients informed, Keleher & McLeod, P.A., and Sean
Olivas must have informed their clients, Judge Fitch, Judge Pickard, Judge Fry, and Judge Alarid, of the
filing of the Debtor’s bankruptcy proceeding and the existence of the automatic stay. This assertion
falls short of the required proof of knowledge of the automatic stay on the part of Judge Fitch, Judge
Pickard, Judge Fry, and Judge Alarid for the Debtor to sustain a claim for violation of the automatic
stay against these parties within the meaning of 11 U.S.C. § 362(h).
Keleher & McLeod, P.A. and Sean Olivas assert that because the three federal proceedings
were initiated by the Debtor against Judge Fitch, Judge Pickard, Judge Fry, and Judge Alarid, the
documents filed in the three proceedings cannot, as a matter of law, constitute actions taken against the
Debtor in violation of the automatic stay, citing Maritime Electric Co., Inc. v. United Jersey Bank,
959 F.2d 1194 (3rd Cir. 1991). In Maritime Electric, the Third Circuit examined the clear language of
11 U.S.C. § 362(a), which stays proceedings against a debtor, to conclude that cases brought by a
debtor are not subject to the automatic stay. Id. at 1204 (citations omitted). The Third Circuit
reasoned further that “[w]hether a specific judicial proceeding falls within the scope of the automatic
stay must be determined by looking at the proceeding ‘at its inception.’” Id. (quoting Assoc. of St.
Croix Condominium Owners v. St. Croix Hotel Corp., 682 F.2d 446, 449 (3rd Cir. 1982)).
However, counterclaims brought by defendants to an action initiated by the debtor are subject to the
automatic stay because they constitute proceedings against the debtor. Id. at 1205.
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1The one exception is Defendant Judge Fitch’s Notice of Completion of Briefing on Plaintiff’s
Motion for Reconsideration of Memorandum Opinion and Order of March 29, 2004, Pursuant to
Rules 59 & 60 and Request for New Trial, filed in Case No. CIV 03-0149. Exhibit A. This document
was filed as a result of Debtor’s motion for reconsideration filed in that proceeding, and as such, was
not subject to the automatic stay. See In re Merrick, 175 B.R. 333, 337-338 (9th Cir. BAP 1994)
(“an equitable principle of fairness requires a defendant to be allowed to defend himself from the attack
without imposing on him a[n] . . . impediment . . . . The automatic stay should not tie the hands of a
defendant while the plaintiff debtor is given free rein to litigate.”).
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In In re Way, 229 B.R. 11 (9th Cir. BAP 1998), a case with facts remarkably similar to the
facts in this proceeding, the Ninth Circuit Bankruptcy Appellate Panel held that post-petition actions
taken by defendants to dismiss a state court proceeding initiated by the debtor did not violate the
automatic stay, even though the original motion to dismiss filed by the defendants contained a request
for attorneys’ fees and costs incurred in defending the proceeding. The Ninth Circuit Bankruptcy
Appellate Panel agreed that the request for attorneys’ fees included as part of the underlying motion did
not constitute a counterclaim against the debtor which would subject the action to the automatic stay.
Id. at 14. This Court disagrees.
The documents filed by Keleher & McLeod, P.A. and Sean Olivas in the federal proceedings
are the result of the Tenth Circuit’s ruling that the parties were entitled to an award of attorneys’ fees in
defending the appeals.1 See Exhibit A, B, and C. By filing reply briefs on the reasonableness of fees
and notices of completion of the briefing on that issue, the parties were attempting to collect on a pre-
petition obligation (the Tenth Circuit’s pre-petition award of attorneys’ fees) of the Debtor. The
documents are not “ministerial acts” because they seek an award of attorneys’ fees against the Debtor.
Filing the documents in the federal proceedings constituted the “continuation . . . of . . . [a] proceeding
against the debtor . . . to recover a claim against the debtor that arose before the commencement of the
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2Attorneys can be held liable for violation of the automatic stay for actions taken on behalf of
their creditor-clients. See In re Johnson, 253 B.R. 857, 861 (Bankr. E.D.Ohio 2000) (“Courts have
imposed joint and several liability against creditors and their counsel for willful stay violations.”) (citing
In re Baker, 183 B.R. 30, 33 (Bankr.D.R.I. 1995); In re Stainton, 139 B.R. 232, 234 (9th Cir. BAP
1992); and In re Zick, 123 B.R. 825, 828 (Bankr. E.D.Wis. 1990)).
7
[bankruptcy] case.” 11 U.S.C. § 362(a)(1). Keleher & McLeod, P.A. and Sean Olivas filed these
documents post-petition, even though they had notice of the Debtor’s pending bankruptcy proceeding.
The Court, therefore, concludes that by filing the documents in the federal proceedings, Keleher &
McLeod, P.A. and Sean Olivas violated the automatic stay within the meaning of 11 U.S.C. § 362(h).2
Having found a willful violation of the automatic stay, the Court must award actual damages.
See In re Gagliardi, 290 B.R. 808, 819 (Bankr.D.Colo. 2003) (“Once a court finds a violation of the
stay to be willful, Section 362(h) makes the award of damages for injuries mandatory.”) (citations
omitted). Debtor bears the burden of proving actual damages. Id. Based on Debtor’s testimony, the
Court finds that Debtor incurred a total of $340.00 in actual damages to reimburse him for expenses
incurred traveling from Quemado to the University of New Mexico Law Library to complete his legal
research, drafting his motions, and sending facsimiles.
In addition to actual damages, a Debtor may be entitled to punitive damages for willful violation
of the automatic stay in “appropriate circumstances.” As noted by the Bankruptcy Court in In re
Ratliff, 318 B.R. 579, 583 (Bankr. E.D.Okla. 2004), there are two standards for determining whether
punitive damages are appropriate. One standard awards punitive damages if the party “‘acted with
actual knowledge that he was violating a federal protected right or with reckless disregard of whether
he was doing so.’” Id. (quoting Diviney, 225 B.R. at 776 (citing Fry v. Today’s Homes Inc., (In re
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Fry), 122, B.R. 427, 431 (Bankr.N.D.Okla. 1990)). Under the second standard, the Court considers
the following factors in determining whether, and to what extent, to award punitive damages: “‘(1) the
nature of the defendant’s conduct; (2) the defendant’s ability to pay; (3) the motives of the defendant;
and (4) any provocation by the debtor.’” Id. (quoting Diviney, 225 B.R. at 777).
In light of these standards, the Court finds that punitive damages should be awarded. Keleher
& McLeod, P.A. and Sean Olivas knew that the Debtor had filed for bankruptcy and knew of the
existence of the automatic stay, yet they still filed the documents in the federal proceedings without first
seeking relief from the automatic stay. They have an ability to pay, and should be sanctioned to deter
behavior of this kind in the future. Accordingly, the Court concludes that an award of punitive damages
in the total amount of $1,000.00 should be imposed against Keleher & McLeod, P.A. and Sean
Olivas, jointly and severally.
WHEREFORE, IT IS HEREBY ORDERED, that the Motion is GRANTED, in part, and
DENIED, in part. As to Judge Fitch, Judge Fry, Judge Pickard, and Judge Alarid, the Motion is
DENIED. As to Keleher & McLeod, P.A., and Sean Olivas, the Motion is GRANTED, in part.
ORDERED FURTHER, that actual damages in the amount of $340.00 are awarded in favor of
Debtor and against Keleher & McLeod, P.A., and Sean Olivas, jointly and severally.
ORDERED FURTHER, that punitive damages in the amount of $1,000.00 are awarded in
favor of Debtor and against Keleher & McLeod, P.A. and Sean Olivas, jointly and severally.
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ORDERED FINALLY, that the damages awarded by this Order be paid to the Debtor within
twenty-five days of the date of entry of this Order.
____________________________________
MARK B. McFEELEY
United States Bankruptcy Court
I certify that on the date shown on the attached
document verification, a true and correct copy of
the foregoing was either electronically transmitted,
faxed, delivered or mailed to the listed counsel
and/or parties.
David Derringer, pro se
Box 157
Quemado, NM 87829
Mariposa Sivage
Sean Olivas
Keleher & McLeod, P.A.
PO Box AA
Albuquerque, NM 87103
________________________________
Patti G. Hennessy
Law Clerk
(505) 348-2545
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