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Phan v. Current Publishing, LLC

United States District Court, S.D. Indiana, Indianapolis Division

August 23, 2018

KHOA PHAN, Appellant,
v.
CURRENT PUBLISHING, LLC, Appellee.

          ORDER ON BANKRUPTCY APPEAL

          SARAH EVANS BARKER, JUDGE

         Appellant Khoa Phan (“Mr. Phan”) and Appellee Current Publishing, LLC (“Current Publishing”) have filed cross-appeals of an order of the Bankruptcy Court holding that Current Publishing willfully violated the automatic stay and discharge injunction and awarding Mr. Phan actual damages of $30.00 and attorney's fees of $3, 160.00, for a total of $3, 190.00. Both sides have appealed only the Bankruptcy Court's fee determination. For the following reasons, the Bankruptcy Court's judgment is AFFIRMED.

         Factual Background

         At all times relevant to this litigation, Mr. Phan owned and operated Inspirations Contemporary Furniture, a seller of high-end Scandinavian furniture. Mr. Phan advertised his business in a publication owned by Current Publishing. After falling behind on his payments to various creditors, including Current Publishing, Mr. Phan commenced a Chapter 13 bankruptcy proceeding on May 21, 2014. In November 2015, Mr. Phan converted his bankruptcy to a Chapter 7 bankruptcy, and, in December 2015, added Current Publishing as a creditor.

         On January 5, 2016, Current Publishing's President and Chief Executive Officer, Brian Kelly, sent an email to Mr. Phan asking if he would be “interested in trading for the balanced owed. It might be easier on all of us.” Pl.'s Exh. 6. On January 8, 2016, Mr. Phan emailed Current Publishing's Office and Accounts Receivables Manager, Raquel Dowley, and notified her of his bankruptcy filing, case number, and contact information for his attorney. Ms. Dowley then contacted the office of Mr. Phan's attorney and spoke with a staff member who apparently informed Ms. Dowley that there was a “waiting period” before any debt would be discharged during which time Mr. Phan would need to fulfill certain requirements before receiving a discharge. Based on this conversation, Ms. Dowley understood there to be a chance that Mr. Phan might not receive a discharge and so she maintained his account in “active status” in Current Publishing's billing software. As a result, Mr. Phan received automated billing statements from Current Publishing on January 29, 2016 and February 29, 2016, each showing an amount due of $2, 520.57.

         Mr. Phan did not make any payments or otherwise contact Current Publishing in response to these billing statements. He did, however, speak with his attorney about the statements, indicating that he did not want to pursue any adversary proceedings at that time because he had not suffered any financial damages. Mr. Phan's attorney agreed to waive his fees for meeting with Mr. Phan during this period.

         On March 9, 2016, the Bankruptcy Court issued an Order of Discharge, which discharged completely the debt Mr. Phan owed to Current Publishing. Ms. Dowley was notified of the discharge on March 17, 2016, and she immediately informed Mr. Kelly that, as a result of the discharge, she would write off Mr. Phan's unpaid balance. Later that day, despite having been notified that Mr. Phan's debt had been discharged, Mr. Kelly sent an email to Mr. Phan inquiring whether Mr. Phan would be interested “in trading for the balance you owe us.” Pl.'s Exh. F. Mr. Phan did not respond to Mr. Kelly's email communication nor did he make any payments or provide any goods or services to Current Publishing in response to Mr. Kelly's request.

         Following the March 17 email, Mr. Phan did not receive any additional communications or automated billing statements from Current Publishing. However, neither he nor his attorney was ever contacted by Current Publishing and provided assurance that the January and February billing statements and Mr. Kelly's email were sent in error and that there would be no further collection efforts.

         On March 24, 2016, Mr. Phan's attorney, John McManus, drafted and sent a demand letter to Current Publishing outlining the facts recounted above, stating that he believed Current Publishing's actions constituted a violation of the Bankruptcy Code, and offering to settle the matter for $10, 000.00, an offer that Mr. Phan later reduced to $5, 000.00. After receiving the demand letter, Ms. Dowley telephoned Mr. McManus's office and attempted to explain the “misunderstanding, ” but no one with settlement authority from Current Publishing contacted Mr. McManus at that time to discuss settlement.

         On May 23, 2016, this adversary proceeding was filed, seeking redress for Current Publishing's violation of both the automatic stay and the discharge injunction. On May 3, 2017, the Bankruptcy Court held a trial on the adversary complaint filed by Mr. Phan. At trial, Mr. Phan testified that Current Publishing's collection efforts after the discharge left him worried that he still owed the debt, but he did not claim any financial harm stemming from his mental distress. Beyond attorney's fees, the only financial damage suffered by Mr. Phan as a result of Current Publishing's actions was approximately $30.00 spent for gas traveling between his store and his attorney's office to address this matter.

         With regard to attorney's fees, Mr. McManus filed an affidavit the day before trial in which he averred that, as of May, 2017, he had expended 29 hours of time on Mr. Phan's case at an hourly rate of $395.00, totaling $11, 455.00 in attorney's fees, which he agreed to reduce to $8, 500.00. At trial, when asked by Current Publishing's counsel how much time he had spent on the case through March 24, 2016, the date on which the demand letter was sent, Mr. McManus testified that he had spent a total of approximately forty (40) minutes as of that date.

         On June 5, 2017, the Bankruptcy Court issued findings of fact and conclusions of law following the trial, determining that Current Publishing willfully violated the automatic stay and discharge injunction when it engaged in collection efforts despite having knowledge of Mr. Phan's bankruptcy filing and subsequent discharge. The Bankruptcy court awarded Mr. Phan $30.00 in actual damages and $3, 160.00 in attorney's fees (8 hours at $395.00 per hour) for a total award of $3, 190.00. Both parties filed notices of appeal of the Bankruptcy Court's judgment. The only issue on appeal is whether the Bankruptcy Court's fee determination was in error.

         Legal Analysis

         I. ...


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