Rodion Lukach

UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF NEW YORK
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IN RE Chapter 13
RODION LUKACH, Case No. 805-89014-478
Debtor.
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MEMORANDUM DECISION
A p p e a r a n c e:
The Law Offices of Avrum J. Rosen
Attorneys for Rodion Lukach
By: Fred S. Kantrow, Esq.
38 New Street
Huntington, NY 11743
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1The Debtor’s petition was filed prior to the effective date of the Bankruptcy Abuse Prevention and Consumer
Protection Act of 2005 (BAPCPA). Therefore, former § 362(h) applies in this matter. This subsection has been
amended by BAPCPA and is now found in subsection (k). The other provisions of the Bankruptcy Code which are
applicable to this matter were unchanged by BAPCPA.
1
This matter is before the Court pursuant to a motion made by Rodion Lukach (the
“Debtor”) seeking the imposition of sanctions against JP Morgan Chase Bank (“Chase”) for
violating the automatic stay pursuant to former 11 U.S.C. § 362(h). For the reasons set forth1
herein, the Debtor’s motion is granted. The following constitutes the Court’s findings of fact
and conclusions of law pursuant to Fed. R. Bankr. P. 7052.
FACTS
The Debtor filed a petition for relief under Chapter 13 of the Bankruptcy Code on
October 14, 2005. The Debtor’s case had been assigned to former Chief Judge Melanie L.
Cyganowski and the Court has jurisdiction over this matter. The Debtor was a former employee
and officer of Business Applications Outsourcing Technology (“Baotech”), a computer
consulting company. In his employment capacity at Baotech, the Debtor assisted Baotech in
obtaining credit from various lending institutions including, but not limited to, Chase and Bank
One. Chase acquired Bank One and its credit card accounts in mid-2004. Although Baotech
was the primary obligor on these obligations, the Debtor agreed to guarantee a number of these
obligations. As a result, some of the debts listed on the Debtor’s schedules were the primary
obligations of Baotech.
Included on the Debtor’s Schedule F were debts owed to Chase as follows:
1) Last Four Digits of Account No.: 5713
Description: Chase overdraft line of credit (previously a Bank One account which had been
acquired by Chase) (Baotech is listed as co-debtor)
Amount: $26,366.23
Address of creditor listed in petition:
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528 South Main Street, Akron OH 44301
2) Last Four Digits of Account No.: 4001
Description: small business unsecured loan
Amount: $26,366.23 (listed as contingent, unliquidated and disputed) (previously a Bank One
account which had been acquired by Chase) (Baotech is listed as co-debtor)
Address of creditor listed in petition:
528 South Main Street, Akron OH 44301
3) Last Four Digits of Account No.: 4683
Description: business installment loan
Amount: $20,220.81 (listed as contingent, unliquidated and disputed) (Baotech is listed as
co-debtor)
Address of creditor listed in petition:
P.O. Box 15902, Wilmington, DE 19850
4) Last Four Digits of Account No.: 7360
Description: credit card
Amount: 15,721.03 (listed as contingent, unliquidated and disputed) (Baotech is listed as
co-debtor)
Address of creditor listed in petition:
528 South Main Street, Akron OH 44301
5) Last Four Digits of Account No.: 2560
Description: credit card
Amount: $5,198.51
Address of creditor listed in petition:
P.O. Box 15902, Wilmington, DE 19850
Pursuant to Court notice, creditors listed on the Debtor’s petition received notice of the
filing and notice that the last date to file proofs of claim in the Debtor’s case was April 12, 2006.
The Court notice regarding the Debtor’s petition and the bar date for filing proofs of claim states
that in order to receive payment under the Debtor’s plan, the creditor must file a proof of claim,
even if the claim is listed on the petition. This notice was served on Chase at P.O. Box 15902,
Wilmington, DE, 19850-5902 and on Chase at 528 South Main Street, Akron, OH 44311-1058.
The Wilmington, DE address listed by the Debtor on the schedules to the petition and used by
the Court for its notices is the address specified by Chase for receipt of all notices in bankruptcy
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cases in this District pursuant to Fed. R. Bankr. P. 2002(g). There is no evidence that any of the
Court notices sent to Chase were returned for any reason.
The only claims filed relating to debts owed to Chase in the Debtor’s case were claim
numbers seven, eight and ten. Claim number seven was filed on February 8, 2006 by eCAST
Settlement Corp. (“eCAST”) with respect to the Chase account number ending in 7360. Claim
number eight was filed on February 8, 2006 by Resurgent Capital Services with respect to the
Chase account number ending in 2560. Claim number ten was filed on July 6, 2006 by eCAST
as an amendment to claim number seven. The Debtor filed a motion seeking to expunge claim
number seven. Counsel to eCAST filed an objection to the motion seeking to expunge claim
number seven, and after several hearings, eCAST withdrew its opposition to the Debtor’s
motion. By order dated August 22, 2006, claim number seven was expunged.
As a result, no claims were filed with respect to the following three Chase accounts listed
on the Debtor’s petition: 1) account number ending in 4001 (“Account 4001"), 2) account
number ending in 4683 (“Account 4683") and 3) account number ending in 5713 (“Account
5713") (collectively, the “Outstanding Chase Accounts”). Baotech is listed as a co-debtor with
respect to each of the Outstanding Chase Accounts.
The Debtor proposed a plan to pay his creditors, and on November 1, 2005, all creditors
listed on the Debtor’s schedules received notice of the hearing on confirmation of the Debtor’s
plan scheduled for March 23, 2006. Chase was served with notice of the hearing on
confirmation at the same addresses that they received notice of filing of the petition and the bar
date for filing proofs of claim. Thereafter, the Debtor filed an amended plan on August 23, 2006
(the “Plan”). Pursuant to the Plan, all unsecured creditors with timely filed allowed proofs of
claim were to receive payment in full without interest. Since Chase had not filed any claims in
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the Debtor’s case, Chase was not entitled to payment under the Plan with respect to the
Outstanding Chase Accounts. By order dated September 29, 2006, the Plan was confirmed
without objection. On January 8, 2007, the Debtor’s case was reassigned to Hon. Dorothy
Eisenberg.
Despite the fact that Chase received notice of the filing of the Debtor’s petition, the bar
date for filing proofs of claim and the hearing on confirmation of the Plan, Chase did not
participate in the Debtor’s case with respect to the Outstanding Chase Accounts. Post-petition,
Chase sent notices to the Debtor at his home address regarding outstanding pre-petition amounts
due on the Outstanding Chase Accounts as follows:
Account 4001:
date of notice - 12/29/05
amount past due - $1,1019.44
date of notice - 1/30/06
amount past due - $1,099.95
date of notice - 5/30/06
amount past due - $1,265.53
Account 4683:
date of notice - 10/28/05
amount past due - $770.76
date of notice - 11/28/05
amount past due - $762.78
date of notice - 12/28/05
amount past due - $765.05
date of notice - 1/28/06
amount past due - $766.15
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date of notice – 2/28/06
amount past due - $762.50
date of notice - 5/27/06
amount past due - $756.81
Account 5713:
date of notice - 12/1/05
amount past due - $951.63
date of notice - 1/31/06
amount past due - $943.27
date of notice - 5/31/06
amount past due - $919.16
On April 24, 2006, the Debtor met with his attorney to discuss the notices sent by Chase,
and after reviewing these notices along with the petition, counsel to the Debtor determined that
Chase was attempting to collect on the Chase Outstanding Accounts. On April 24, 2006 and
June 21, 2006, counsel to the Debtor contacted Chase by letter at the address listed in the notices
mailed by Chase (P.O. Box 901008, Ft.Worth, TX, 76101-2008) and made a reference to
Account 4001. In these two letters, counsel to the Debtor notified Chase of the Debtor’s pending
bankruptcy case and corresponding bankruptcy case number, and advised Chase to discontinue
taking collection actions with respect to that account. Thereafter, Chase continued to send
collection notices to the Debtor on this account on October 30, 2006, November 29, 2006 and
December 29, 2006. By letter dated March 29, 2007, Chase mailed another notice to the Debtor
regarding this account. This time, Chase’s mailing address was listed on the notice as P.O. Box
4661, Houston, TX 77210-4661, instead of the Ft. Worth, Texas address previously listed.
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On April 24, 2006, counsel to the Debtor also sent a letter to Chase with respect to
Account 4683. Pursuant to the letter, counsel to the Debtor advised Chase that the Debtor had
filed a petition in bankruptcy, provided the bankruptcy case number, and advised that Chase
should cease its collection efforts on that account. This letter was sent to Chase at the
Wilmington, DE address Chase has specified for receipt of notices in bankruptcy cases in this
District. After receiving another collection letter from Chase on this account dated May 27,
2006, counsel to the Debtor sent a follow-up letter to Chase dated June 21, 2006 directing Chase
to cease its collection efforts.
By letter dated June 21, 2006, counsel to the Debtor contacted Chase with respect to
Chase Account 5713, advised Chase that the Debtor had filed a petition in bankruptcy, and
directed Chase to cease its collection efforts. Counsel to the Debtor sent this letter to Chase at
528 S. Main Street, Akron OH 44301. This was one of the addresses listed for Chase on the
Debtor’s petition. Counsel to the Debtor represented that he used this address because the post-
petition notices sent by Chase on these accounts had no return address on them. With respect to
Chase Account 5713, the Debtor received another delinquency notice on July 31, 2006, one
month after the Debtor’s counsel had sent the latest letter advising Chase to discontinue making
collection efforts on this account.
On February 27, 2007, counsel to the Debtor filed the Motion, seeking the imposition of
sanctions against Chase pursuant to former 11 U.S.C. § 362(h) based on the actions it took
against the Debtor post-petition. The Motion was served on Chase by regular mail at the Ft.
Worth, TX address and the Akron, OH address. There is no evidence that the Motion papers
sent to Chase were returned for any reason. Chase failed to file a response or appear at the
hearing scheduled for March 13, 2007. The Court heard the Motion, and determined that Chase
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had violated the automatic stay, and scheduled a hearing to determine the amount of sanctions, if
any, to be awarded in favor of the Debtor against Chase.
Counsel to the Debtor settled a proposed order providing that the Motion was granted in
part, and that a hearing on the amount of sanctions to be awarded was scheduled for April 12,
2007 at 11:00 a.m. Chase was served with the proposed order at the Fort Worth, TX address
and at the Akron, OH address by certified mail. Both of the certified mail return receipts reflect
parties signed for and accepted the envelopes containing the proposed order. Once again, Chase
failed to appear at the hearing to determine the proper amount of sanctions, if any, to be assessed
against Chase. At the hearing held on April 12, 2007, the Court took testimony from the Debtor,
who testified regarding Chase’s repeated mailings to the Debtor post petition. The Court
examined the original letters sent by Chase post petition on the Outstanding Chase Accounts,
and the matter was marked submitted. After the hearing, counsel to the Debtor provided the
Court with detailed time records and expenses, and an affidavit setting forth a description of
work performed relating to the Motion. In sum, counsel to the Debtor seeks entry of an order
awarding counsel fees in the amount of $3,700.00, expenses in the amount of $12.98, and
punitive damages in the amount of $5,000.00 for each violation of the automatic stay.
DISCUSSION
Section 362(a) of the Bankruptcy Code provides an automatic stay of litigation, lien
enforcement and other actions that are attempts to collect pre-petition debts. Section 362(a) (6)
of the Bankruptcy Code expressly stays any action to collect, assess or recover a pre-petition
debt from a debtor. In enacting § 362, Congress clearly understood the essential nature of this
provision:
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The automatic stay is one of the fundamental debtor protections
provided by the bankruptcy laws. It gives the debtor a breathing
spell from his creditors. It stops all collection efforts, all
harassment, and all foreclosure actions. It permits the debtor to
attempt a repayment or reorganization plan, or simply to be
relieved of the financial pressures that drove him into bankruptcy.
H.R. Rep. No. 595, 95 Cong., 1 Sess. 340-342 (1977); S. Rep. No. 989, 95 Cong.2dth st th
Sess.54-44 (1978); reprinted in 1978 U.S. Code Cong. & Admin. News 5787 at 5840 and 6296-
97. To act in violation of the automatic stay is to undermine the cornerstone of the bankruptcy
process. It is clear that Chase violated this provision as to each of the Outstanding Chase
Accounts by virtue of the numerous letters sent to the Debtor post-petition. Chase did so despite
having been served with notice of the petition at the address chosen by Chase in this District.
Chase had notice, and therefore, actual knowledge, of the Debtor’s petition, the bar date, and the
hearing on confirmation of the Plan. In re Robinson, 228 B.R. 75, 84 (Bankr. E.D.N.Y. 1995)
(receipt of notice of the bankruptcy sent by the clerk of the court is sufficient for a court to find
that a creditor has actual knowledge of the bankruptcy filing). Chase continued to act in
violation of the automatic stay after receiving such notices from the Court, and after receiving
several letters from counsel to the Debtor advising Chase that the Debtor filed a bankruptcy
petition.
Chase had an obligation under § 362 of the Bankruptcy Code to take the appropriate
action to discontinue its collection efforts against a debtor. In re Wright, 328 B.R. 660, 663
(Bankr. E.D.N.Y. 2005) (citing Sucre v. MIC Leasing Corp. (In re Sucre), 226 B.R. 340, 347
(Bankr. S.D.N.Y. 1998)). Chase’s failure to do so was in clear violation of the automatic stay,
which violation continued well after the Debtor’s petition was filed, and after the Debtor’s
counsel sent several letters to Chase pointing out the existence of the automatic stay.
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Former § 362(h) of the Bankruptcy Code provides:
(h) An individual injured by any willful violation of a stay ... shall recover actual
damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover
punitive damages.
11 U.S.C. § 362(h) (emphasis added).
Any deliberate act taken by a creditor that violates the automatic stay may be subject to
an award of actual damages. There is no requirement that the creditor acted maliciously or in
bad faith. In re Robinson, 228 B.R. at 80-81, citing Crysen/Montenay Energy Co. v. Esselen
Associates, Inc. (In re Crysen/Montenay Energy Co.), 902 F.2d 1098, 1105 (2d Cir. 1990). The
words “shall recover” indicate that Congress intended that the award of actual damages, costs
and attorney's fees be mandatory upon a finding of a willful violation of the stay. In re Taylor,
884 F.2d 478, 483 (9 Cir. 1989); In re Sansone, 99 B.R. 981, 987 (Bankr. C.D. Cal. 1989).th
In assessing damages, the Court may award attorneys’ fees pursuant to former § 362(h)
of the Bankruptcy Code even if that is the only harm suffered by the Debtor. In re Robinson,
228 B.R. at 85 (citing In re Sumpter, 171 B.R. 835, 845 (Bankr. N.D. Ill. 1994) and Bank of
Boston v. Baker (In re Baker), 140 B.R. 88, 90 (D. Vt. 1992)). In this case, counsel to the
Debtor seeks an award of $3,700.00 for legal fees incurred in connection with the prosecution of
this matter, plus $12.98 in expenses.
Courts fixing an award under this provision of the Bankruptcy Code are to consider
whether the fees requested are reasonable and necessary. In re Wright, 328 B.R. at 664. The
reasonableness of the request is considered to ensure that attorneys do not incur large legal fees
with the intention of shifting the responsibility for payment of the fees to their adversaries. In Re
Robinson, 228 B.R. at 85 (citing Price v. Pediatric Academic Assoc., Inc., 175 B.R. 219, 221
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(S.D. Ohio 1995), on remand, In re Price, 179 B.R. 70 (Bankr. S.D. Ohio 1995)). The Court has
reviewed the fees requested by counsel to the Debtor, including the itemized statement of work
performed in connection with the Motion. Fred Kantrow, Esq., an associate at the law firm of
Avrum J. Rosen, Esq., handled this matter at an hourly rate of $250.00. A total of 14.8 hours
were spent by Mr. Kantrow on this matter, and the time entries appear to be appropriate given
the nature of the issues raised by Chase’s actions. The expenses total $12.98 for postage and
service charges. The Court finds that the fees and expenses requested are reasonable and
appropriate given the time spent on this matter. It does not appear that unnecessary costs were
incurred in connection with the Motion. Counsel to the Debtor attempted to settle the matter
before bringing on the Motion, and only sought the Court’s intervention after Chase continued to
ignore counsel’s letters.
The Court may also award punitive damages where appropriate. Some courts use the
following factors to make such determination:
1) the nature of the party’s conduct;
2) the party’s ability to pay damages;
3) the motive of the party; and
4) any provocation by the debtor.
In re Diviney, 211 B.R. 951, 968 (Bankr. N.D. Okla. 1997) (citing In re B. Cohen & Sons
Caterers, Inc., 108 B.R. 482, 487088 (E.D. Pa. 1989) (other citations omitted)). Other courts
require a finding that the party acted “with actual knowledge that [the party] was violating the
federally protected right or with reckless disregard of whether he was doing so.” In re Diviney,
211 B.R. at 968 (citing In re Fry, 122 B.R. 427, 431 (Bankr. N.D. Okla. 1990) (other citations
omitted)). Under either test, the actions of Chase justify an award of punitive damages. Chase
is a giant in the credit industry, and had ample notice of the Debtor’s petition. Chase has
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specifically provided an address for notice in all bankruptcy cases in this District, and received
notice of this case. Although Chase initially appeared to be acting carelessly in connection with
the Debtor’s case, Chase continued its collection efforts after receiving the letters from counsel
to the Debtor. It was Chase’s decision to ignore the automatic stay imposed by § 362 of the
Bankruptcy Code and to continue to contact the Debtor, even after receiving letters from the
Debtor’s counsel directing Chase to cease violating the automatic stay. Chase’s actions in this
case, coupled with its failure to appear at either of the hearings before the Court, justifies the
imposition of sanctions in this matter.
In considering the appropriate amount of punitive damages to assess against Chase, the
Court notes that the purpose of awarding punitive damages is to deter Chase and other lenders
of the same type from engaging in conduct which violates the automatic stay. In re Kaiser, 158
B.R. 808 (Bankr. D. Neb.1993). The Court is also mindful of the fact that although the notices
sent by Chase are not so egregious as to warrant the imposition of an overly large punitive
damage award, the notices constitute willful violations of the automatic stay, and they have
caused the Debtor to incur additional expenses and personal distress. The Court finds that
punitive damages in the amount of $5,000.00 are appropriate, and in the event Chase takes any
further actions to collect from the Debtor with respect to the Outstanding Chase Accounts, Chase
shall be sanctioned at $2,500.00 per each occurrence.
CONCLUSION
1. The Court has jurisdiction over this matter pursuant to 28 U.S. C. § 1334(a) and (b).
This Motion is a core proceeding under 28 U.S.C. § 157(b)(2)(A) and (O).
2. Chase had notice of the Debtor’s bankruptcy filing.
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3. Chase acted in violation of the automatic stay when it failed to cease collection efforts
against the Debtor as to the Outstanding Chase Accounts, which were listed on the Debtor’s
schedules. Chase continued to act in violation of the automatic stay even after receiving letters
from counsel to the Debtor advising Chase of the Debtor’s petition. Therefore, its actions were
willful.
4. Pursuant to former 11 U.S.C. § 362(h), an award of actual damages in the amount of
$3,700.00 in fees and $12.98 in expenses is appropriate and reasonable.
5. Chase’s conduct warrants the imposition of punitive damages in the amount of
$5,000.00. Should Chase attempt to collect from the Debtor on the Outstanding Chase Accounts
after entry of an order regarding this memorandum decision, Chase shall be liable for payment to
the Debtor the sum of $2,500.00 per each occurrence.
Settle an order in accordance with this decision on Chase at the addresses listed on the
Debtor’s petition and the addresses on the letters sent by Chase to the Debtor post-petition.
Dated: Central Islip, New York
May 8, 2007 By: /s/ Dorothy Eisenberg__
Dorothy Eisenberg
United States Bankruptcy Judge
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