I hereby nominate Judge Christopher Klein for Super Judge.  This is my brief of the 109 page Memorandum.

Sundquist v. Bank of America (In re Sundquist) 566 B.R. 563, 14-02278 CN (Bkrtcy, E. D. Cal. May, 2017) Klein, J.

Issue:   Given that Bank of America violated the automatic stay, what is the proper amount of damages under section 362(k)?

Holding:   Actual damages of $1,074,000 plus $5 million of punitive damages, further punitive damages awarded of $40 million payable to two consumer organizations and five law schools.

Judge Christopher Klein

The debtors here had attempted unsuccessfully prepetition to do loan mods with Bank of America.  They finally filed chapter 13 to stop the foreclosure sale.  Notwithstanding that it had notice, the bank conducted the foreclosure sale the next day anyway.  “Bank of America committed at least six further automatic stay violations by the end of August 2010 as it bulled forward.”  This included bringing an unlawful detainer.  About the same time, a different department of the bank recognized the error and notified the foreclosure company.  But upon receiving the three day notice, the debtors panicked and immediately moved.  “Although Bank of America knew on August 20, 2010, and beyond cavil by September 7, 2010, that the foreclosure would be rescinded, it did not withdraw the unlawful detainer action or tell the Sundquists the action would be dismissed.”  Six months later, the bank finally rescinded the foreclosure sale but did not tell the debtors nor their counsel.  The debtors learned about the rescission a month or two later and asked for the keys back.  The bank gave them the keys.  When they moved back into the property, the tress were dead, appliances gone, the place was ransacked, and the HOA had assessed a $20,000 penalty for not taking care of the place.  The bank not only refused to pay for the damages but demanded that the debtors pay the mortgage for the time when it owned the property. That’s why people wanting to buy a home, should consider take the precautions so this don’t happen to them as well.

The debtors finally sued the bank in state court.  The state court eventually said that the violation of the stay claims had to be litigated in federal court.  So the debtors filed an action in federal court which was then referred to the bankruptcy court.   During the litigation, the debtors complained to the federal Consumer Financial Protection Bureau.  “The Bank of America response to CFPB is noteworthy for two false statements made by the Office of the Bank of America CEO and President.  It falsely asserts that there was no foreclosure of the Sundquist residence.  And, it falsely asserts that the Sundquists are not in active litigation with Bank of America.  Both statements were materially false.”

Judge Klein then walked through the types of damages available for violation of the automatic stay.  “Actual damages under § 362(k)(1) include both physical damages and economic damages.”  “Emotional distress damages are also commonly the subject of awards of actual damages.”  “Attorneys’ fees and costs are a mandatory component of the § 362(k)(1) remedy.”  Punitive damages are awarded in “appropriate circumstances.”  He writes that the “thin-skull” doctrine works.

Judge Klein then walked through the evidence he received.  He found “Renée Sundquist to be an exceptionally credible witness.  She displayed considerable courage in revealing her very private journal and exposing herself to cross-examination and public exposure of her all-too-human traits.”  Note: there are many references in the footnotes to her diary.  He also commented that the debtor’s attorney could have done a better job establishing the specifics of the damages.

Finally, he made very painstaking efforts to compute the damages for each of many different aspects of the actual damages.  For example, he awarded $401,511 for lost income of wife, $91,351 for lost income of husband, $24,000 for lost property, $83,200 for alternate housing, $24,000 for the HOA damages, and $62,268 for attorneys fees.  He awarded $300,000 of emotional distress damages.  Total actual damages were $1,074,000.

For punitive damages Judge Klein said, “To award punitive damages measured by a conventional multiplier of three to six times of the Sundquist compensatory damages would be laughed off in Bank of America’s boardroom as a mere ‘cost of doing business’ payable out of the petty cash account.”

He noted however that punitive damages should not result generally in a huge windfall to the plaintiffs.  “To let a defendant escape well-deserved punitive damages that are needed to vindicate the societal interests served by the law authorizing the award merely because a plaintiff would be receiving too much money is not a satisfactory answer.”  “A solution based on common sense is to direct to a public purpose the portion of legitimate punitive damages that exceed what private victims ought to be allowed to retain — the societal interest component of punitive damages.”  “It is noteworthy that the language of the statute does not prohibit a court from putting strings on what may be done with a portion of the amount awarded.”

So Judge Klein awarded $45 million in punitive damages.  He permitted the debtors to keep $5 million but ordered them to give the rest (after taxes) to seven different entities including five local California law schools.  He dictated that if Bank of America were to donate $30 million to the same organizations, he would limit the punitive damages to $5 million paid to the debtors.  Two additional comments re punitive damages are worth note.  He ordered the funds to “be used [by the corporate recipients] only for education in consumer law and delivery of legal services in matters of consumer law.”  He also commented, “It is the intention of this court that the six designated entities shall have standing to participate in requests for post-trial relief in this court and to participate in any appeal from the judgment in this adversary proceeding.”
Finally, Judge Klein declared the debtors’ mortgage “reinstated” and fixed the amount owing.  He then said

“Bank of America will be enjoined from requiring payments from the Sundquists (who may make voluntary payments), and enjoined from declaring a default, until 60 days after Bank of America pays the Sundquists the full amount of the actual and punitive damages here awarded.”

Note:  Bank of America of course immediately appealed to the BAP, docket number  17-1103.  On April 27, 2017, it gave notice that it had posted a $57 million appeal bond.   The two bankruptcy organizations and the law schools have each filed a “Notice of Appearance”  On May 9, 2017, each of the school and organizations filed a Motion to Intervene which is set for hearing on June 6, 2017.  The bank’s opening brief is due on June 2, 2017.  As of May 29, 2017, there is no extension of that due date.