Rebelo from violating the Discharge Order. Nor did the Court find that Mr. Rebelo knowingly violated the Discharge Order. Rebelo was attempting to collect a debt from the primary debtor, Qualico, just like Mr. In essence, CFG was correctly charged with a willful violation of the Discharge Order not because of what its collections employees knew or did not know , but because of how its internal data systems worked or did not work.
But there is a difference. Qualico had been liquidated. It is reasonable for the Court to have assumed that the phone calls to Mr. McClure—as guarantor of the Qualico debt for account —were an action to collect a discharged debt.
Companies can spread the costs of updating their systems to comply with the Bankruptcy Code across several clients. Discharged debtors who have to bear the burden of wrongful collections actions cannot similarly spread those costs. As between the two possibilities—spreading costs of compliance across several clients versus an inability to spread the costs of wrongful collections borne by a single debtor—collections companies are in a better position to bear the costs.
Blaming a data system that does not share appropriate information among accounts as an excuse for violating a discharge order would, taken to its logical conclusion, create an incentive to continue to compartmentalize such information.
Without the willingness of aggrieved debtors to prosecute violations of the discharge 13 See, e. If viola- tions of the discharge injunction go unpunished, creditors will lack the necessary incentive to avoid violating the law, and an underlying pur- pose of the Code will be undermined.
In order to ensure that debtors are not hesitant to prose- cute violations of the discharge injunction, they should be awarded actual damages to compen- sate them for the time and effort they expend in the process.
It is beyond cavil that the time and money spent in prose- cuting a violation of a discharge injunction are actual dam- ages for that violation, if the violation is proven at trial.
See, e. But for the violation of the injunction, the McClures would not have had to seek legal redress. If it were, then any plaintiffs who had suffered low actual damages would be unlikely to find counsel to represent them. This implements the general policy of the Bankruptcy Code. The purpose of the discharge in bankruptcy is to give the debtor a fresh financial start, and the purpose of a monetary award is to compensate the debtor for impairment of that fresh start.
See N. Georgia Highway Express, Inc. A fee is unconscionable if a competent lawyer could not form a reasonable belief that the fee is reasonable.
The sanctions that the Court awarded are in the nature of civil contempt sanctions; as such, the Court had a clear right to award those sanctions. The bankruptcy court awarded at- torney's fees under 11 U.
Section in conjunction with 11 U. Green Tree Servic- ing Corp. The line between civil contempt and criminal contempt may be thin, but there is a distinction. Those in which the ultimate object of the punishment is the enforcement of the rights and reme- dies of a litigant are civil contempts.
The relief granted in civil contempt proceedings, therefore, is compensa- tory or conditional. It cannot be ended or shortened by any act by defendant.
When a fine is im- posed on someone who has been adjudged guilty of contempt, partly as compensation to the complainant and partly as punishment, the criminal feature of the or- der is dominant and fixes its character for purposes of appellate review.
All three of these award components lie in the nature of civil contempt. Each sanction will be suspended and need not be paid if, within 90 days of the entry of this memorandum opinion, by affidavit either the Presi- dent or General Counsel of each company submits to the court new procedures his or her company has adopted to prevent future violations of any discharge in- junction.
It is true that, had BoA caught its human error and not forwarded the two accounts to CFG, then CFG could not have compounded the error by designing internal systems that did not notify related accounts of a bankruptcy filing and later discharge.
But BoA did forward the two accounts, and CFG did not create an what he was ordered to do, defendant can secure his discharge by so acting. BoA contends that the Mem. Full compliance with the discharge injunction as to the Plaintiffs in the future is insufficient to avoid the fine; the actions suggested by the order for avoiding the fine - establish procedures that to the Court's satisfaction are sufficient to avoid violations of any future discharge order - do not pro- vide a specific, identifiable act which would allow BOA to avoid the sanctions.
There is no act that guar- antees BOA the rescission of the fine. BoA Reply Brief at 5. This argument is spurious. BoA and CFG know exactly what they have to do: they have to come up with systems that prevent them from collecting on discharged debts.
CFG could modify its coding to allow for more obvious notice of related party bankruptcies. Both of these two actors caused the harm to the McClures. In many ways, the situation before the Court is similar to the traditional joint-and-several liability case of Summers v. The wrongdoers should be left to work out between themselves any apportionment.
In Summers v. Tice while holding that, even assuming that the rule was recognized in Texas, the rule did not apply to the instant case ; see also Tellabs, Inc. Tice and indicating that the alternative liability theory in Summers v. Tice is generally accepted , Campbell v. Moreover, a failure to hold BoA and CFG jointly and sev- erally liable would create an incentive for either of the defendants to stick their heads in the ground, ostrich-like, and refuse to tighten up their internal policies.
Bankruptcy Court, Northern District of Texas, using the electronic case filing system of the court. Nancy B. United States In re Atkins , B.
Tice, 33 Cal. Wasson, Jr. Rapoport is a law professor whose research fo- cuses on issues of bankruptcy law and ethics. This brief is filed pursuant to that certain Order entered on January 13, , Docket No. Qualico also filed a chapter 7 petition at the same time that the McClures filed their chapter 7 petition.
The McClures received their discharge pursuant to 11 U. Both Mr. Osborne and Mr. Rebelo contacted Mr. McClure in an attempt to collect these discharged debts. The McClures filed responses to the Motions together, the "Responses". Thus, the Court found that Mr. Rebelo was not liable for civil contempt sanctions. Int'l Paper Co. CFG violated the discharge injunction when Rebelo and Osborne contacted McClure attempting to collect on the two accounts.
Although human error may be understand- able—all humans make mistakes—a creditor with actual knowledge of a bankruptcy discharge cannot escape that knowledge by the inadvertent mistake of one of its employ- ees. To allow human error to excuse the violation of a known discharge order would create too facile an excuse for all such violations, leading to temptations for manipulation and abuse of any such safe harbor. Every creditor could claim the human error excuse, and no discharge order would have any force.
Human error may go to the issue of dam- ages, but it does not go to the issue of knowledge. It knew of the bankruptcy discharge. It forwarded the accounts to CFG as part of a larger forwarding of accounts for collections. Therefore, it violated the Discharge Order. For account , there was no easy way to determine that Mr. McClure, who was an owner of Qualico, had received a bankruptcy discharge. McClure was listed as a co- obligor, but Mr. Rebelo only performed a bankruptcy scrub on Qualico, not on McClure.
Based on the way that CFG stored information on these two accounts, Mr. Rebelo would not have had actual knowledge that Mr. Osborne learned to prevent Mr. Rebelo from violating the Discharge Order. Nor did the Court find that Mr. Rebelo knowingly violated the Discharge Order. Rebelo was attempting to collect a debt from the primary debtor, Qualico, just like Mr. In essence, CFG was correctly charged with a willful violation of the Discharge Order not because of what its collections employees knew or did not know , but because of how its internal data systems worked or did not work.
But there is a difference. Qualico had been liquidated. It is reasonable for the Court to have assumed that the phone calls to Mr. McClure—as guarantor of the Qualico debt for account —were an action to collect a discharged debt. Companies can spread the costs of updating their systems to comply with the Bankruptcy Code across several clients. Discharged debtors who have to bear the burden of wrongful collections actions cannot similarly spread those costs.
As between the two possibilities—spreading costs of compliance across several clients versus an inability to spread the costs of wrongful collections borne by a single debtor—collections companies are in a better position to bear the costs. Blaming a data system that does not share appropriate information among accounts as an excuse for violating a discharge order would, taken to its logical conclusion, create an incentive to continue to compartmentalize such information.
Without the willingness of aggrieved debtors to prosecute violations of the discharge 13 See, e. If viola- tions of the discharge injunction go unpunished, creditors will lack the necessary incentive to avoid violating the law, and an underlying pur- pose of the Code will be undermined.
In order to ensure that debtors are not hesitant to prose- cute violations of the discharge injunction, they should be awarded actual damages to compen- sate them for the time and effort they expend in the process. It is beyond cavil that the time and money spent in prose- cuting a violation of a discharge injunction are actual dam- ages for that violation, if the violation is proven at trial.
See, e. But for the violation of the injunction, the McClures would not have had to seek legal redress. If it were, then any plaintiffs who had suffered low actual damages would be unlikely to find counsel to represent them.
This implements the general policy of the Bankruptcy Code. The purpose of the discharge in bankruptcy is to give the debtor a fresh financial start, and the purpose of a monetary award is to compensate the debtor for impairment of that fresh start.
See N. Georgia Highway Express, Inc.
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