United States District Court, S.D. Indiana, Indianapolis Division
ORDER ON BANKRUPTCY APPEAL
EVANS BARKER, JUDGE
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.
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.
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.
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.
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.
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.
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.
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.
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.
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