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In re Lansaw

United States Court of Appeals, Third Circuit

April 10, 2017

IN RE: GARTH F. LANSAW, d/b/a Forever Young Childcare DEBORAH LANSAW, Debtors

          Argued December 5, 2016

         On Appeal from the United States District Court for the Western District of Pennsylvania (W.D. Pa. No. 2-15-cv-00404) District Judge: Honorable David S. Cercone

          Jeffrey M. Robinson, Esq. [ARGUED] Robinson Law Group Counsel for Appellant

          Warner Mariani, Esq. [ARGUED] Warner Mariani, LLC Counsel for Appellees

          Before: FISHER, [*] KRAUSE and MELLOY, [**] Circuit Judges.


          MELLOY, Circuit Judge.

         The filing of a bankruptcy petition operates as an automatic stay of debt collection activities outside of bankruptcy proceedings. 11 U.S.C. § 362(a). If "an individual [is] injured by any willful violation of [the] stay, " that individual "shall recover actual damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damages." Id. § 362(k)(1). In the present case, Frank Zokaites committed several willful violations of the automatic stay arising from Garth and Deborah Lansaw's bankruptcy petition. Because of these violations, the Bankruptcy Court awarded the Lansaws emotional-distress damages as well as punitive damages under § 362(k)(1). The District Court affirmed the awards, and Zokaites now appeals. We conclude that § 362(k)(1) authorizes the award of emotional-distress damages and that the Lansaws presented sufficient evidence to support such an award. We also conclude that the Lansaws were properly awarded punitive damages. Accordingly, we will affirm.



         The Lansaws operated a daycare in a space leased from Zokaites.[1] Over the course of several years, the relationship between the Lansaws and Zokaites devolved into various disputes. The present dispute arose after the Lansaws entered into a new lease with a different landlord, but before they vacated Zokaites's property. When Zokaites learned of the new lease, he served the Lansaws with a Notice for Distraint, claiming a lien against the Lansaws' personal property for unpaid rent. The following day, August 16, 2006, the Lansaws filed for bankruptcy, [2] thereby triggering the automatic stay under 11 U.S.C. § 362(a). Zokaites's attorney was notified of the bankruptcy filing by a letter dated August 17, 2006.

         Zokaites, nevertheless, violated the automatic stay in three separate incidents. First, on August 21, 2006, Zokaites and his attorney visited the Lansaws' daycare during business hours to take photographs of the Lansaws' personal property. Although Mrs. Lansaw initially denied Zokaites entry, Zokaites entered the daycare by following a daycare parent inside. Zokaites then entered Mrs. Lansaw's office and backed her against the wall, getting so close that she could feel his breath. During the incident, Zokaites asked Mrs. Lansaw three times in quick succession, "Do you want to hit me?"

         Second, on Sunday, August 27, 2006, Zokaites visited the daycare after business hours and, this time, used his key to enter the building. He observed that the Lansaws had removed some personal property and plumbing fixtures from the space. Zokaites then padlocked and chained the doors. Mrs. Lansaw's mother, who had arrived to clean the daycare, attempted to stop Zokaites and called the police. A police officer, as well as the Lansaws, arrived at the daycare shortly thereafter. Zokaites suggested that Mrs. Lansaw inform the daycare parents that the daycare would not be open the next day. At the request of a police officer, he allowed Mrs. Lansaw to reenter the daycare and obtain the parents' contact information. Zokaites, however, insisted that Mrs. Lansaw be escorted in and out of the property by the officer.

         After the Lansaws returned home, they received a call from their attorney informing them that Zokaites had left a proposed "interim standstill agreement" in the door of the daycare. It stated that Zokaites would not unchain the daycare doors unless (1) Mrs. Lansaw's mother agreed that she had not been assaulted by Zokaites, (2) the Lansaws reaffirmed their lease with Zokaites, and (3) the Lansaws ceased removing property from the daycare. The Lansaws informed their attorney that the agreement was not acceptable. They then returned to the daycare, removed the chains themselves, and decided to sleep in the building to prevent Zokaites from chaining the door again. Later that night, Zokaites also returned to the daycare. Before the Lansaws could reach the door, Zokaites removed Mrs. Lansaw's keys that had been hanging from the inside keyhole and locked the door from the outside. Zokaites left with the keys, which included personal keys in addition to the daycare keys, and returned to his vehicle. The Lansaws called the police once more.

         Finally, on August 28, 2006, Zokaites directed his attorney to send a letter to the Lansaws' new landlord. The letter demanded that the new landlord terminate the Lansaws' new lease and stated that, if the lease was not terminated, Zokaites would file a complaint. A draft of that complaint was included with the letter. Zokaites's attorney also admitted having multiple phone calls with the new landlord in an attempt to have the new lease terminated.


         For reasons that are unclear, the procedural history of the present action is somewhat complex and spans two separate adversary proceedings. The Lansaws first initiated an adversary proceeding in August 2006 to enjoin Zokaites from committing further violations of the stay. In the same proceeding, they also sought punitive damages, attorney fees, and other relief. After a trial, the Bankruptcy Court entered a December 2006 order finding that Zokaites had violated the stay and granting the Lansaws' request for an injunction. Although the Bankruptcy Court heard testimony related to emotional distress, it did not make a ruling on damages or attorney fees in its memorandum opinion. See Lansaw v. Zokaites (In re Lansaw) ("Lansaw I"), 358 B.R. 666, 672, 675 (Bankr. W.D. Pa. 2006).

         The Lansaws again raised the issue of damages before the Bankruptcy Court in February 2007. This time, they did so in a counterclaim to Zokaites's proof of claim in the main bankruptcy case. This counterclaim for damages, however, also went unresolved. Approximately five years later, in December 2012, the main bankruptcy case was reassigned to the Honorable Thomas P. Agresti. After a status conference revealed that the counterclaim for damages was yet to be settled, the Bankruptcy Court determined that the best way to resolve the issue was to initiate a new adversary proceeding. [3]

         The new adversary proceeding, now before us in the present case, was tried in August 2014. At the outset of the trial, the Bankruptcy Court noted it was "building on" what the previous judge had already found in 2006, namely, that Zokaites had willfully violated the automatic stay. Lansaw II, 2015 WL 224093, at *3. The previous judge, however, had not made "definitive findings with regard to certain details of those violations, " so the Bankruptcy Court again heard testimony regarding the violations. Id. at *13.

         The Lansaws also presented evidence of emotional distress, which the Bankruptcy Court summarized as follows:

The only evidence that the [Lansaws] presented as to emotional stress was their own testimony, though that was often compelling. Mrs. Lansaw testified that she continues to have nightmares about Zokaites entering the building and taking her business away. After these experiences she sometimes wakes up screaming and crying. She stated that when she is out in public and happens to see someone who looks like Zokaites she can experience moments of "sheer fear." She testified that she has lost trust in others and this has affected her relationship with friends. She is taking prescription medication for depression and an ulcer, conditions which she attributes to stress from Zokaites, beginning with [an incident prior to the stay violations] and continuing thereafter. She felt physically threatened when Zokaites entered her office on August 21, 2006, and backed her up to a wall. Mrs. Lansaw acknowledged that she has not sought psychological counseling, but said she is considering doing so.
Mr. Lansaw testified about the effects on his wife that he has observed. He said that she has changed markedly since the incidents involving Zokaites. She just goes to work and comes home, rarely going out in public, avoiding human contact, and not enjoying life. He testified to similar effects on himself, stating that he has become very withdrawn and has a fear of making new friendships. He testified that he has only one friend who understands what he has gone through and he has no one else to talk to about it.

Id. at *7-8 (citations omitted). The Bankruptcy Court found this testimony credible and also noted that it was consistent with the previous judge's 2006 decision. The 2006 decision states that "Mrs. Lansaw was in tears in her various appearances before the Court and ...

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