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  • Ninth Circuit Holds That Debtor May Recover Attorneys’ Fees Incurred Prosecuting Action for Damages Relating to Violation of Automatic Stay

    The Ninth Circuit has overruled its own relatively recent decision and has held that a debtor who sues for damages to redress a violation of the automatic stay may recover the reasonable fees it incurs prosecuting the action, even after the stay violation is cured. The Bankruptcy Code’s automatic stay provision, section 362, includes this fee recovery clause: “[A]n individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys’ fees . . . .” 11 U.S.C. § 362(k). The Ninth Circuit, in contrast to every other court to consider the issue, held in 2010 that section 362(k) allows a debtor to recover only those fees incurred to end the stay violation itself, not the fees incurred to prosecute an action for damages. See Sternberg v. Johnston, 595 F.3d 937 (9th Cir. 2010). In a decision issued last week, the Ninth Circuit overruled its own Sternberg decision and held that a debtor may recover the reasonable fees it incurs prosecuting a damages action relating to a stay violation. See In re Schwartz-Tallard, Case No. 12-60052 (9th Cir. Oct. 14, 2015).