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California Coast University v. Aleckna

United States District Court, M.D. Pennsylvania

August 28, 2019



          Robert D. Mariani United States District Judge

         I. Introduction

         This case comes before the Court on appeal from an opinion and judgment issued by Middle District of Pennsylvania Bankruptcy Court Judge Robert Opel on January 14, 2016. (Doc. 1-1, 1-2). Appellant, California Coast University, raises two issues on appeal. First, Appellant argues that the Bankruptcy Court erred when it ruled that the Appellant's violation of an automatic stay was willful. (Doc. 14, at 1). Second, Appellant argues that the Bankruptcy Court erred when it awarded Appellee the time lost from work to attend the trial in this mater as Appellee's only actual damages. (Id.) For the reasons that follow, the Court will affirm the Bankruptcy Court's order and remand the case in accordance with the Bankruptcy Court's order for a determination of attorneys' fees and costs.

         II. Factual Background and Procedural History

         Jamie Sue Aleckna, Appellee, was a student at California Coast University, Appellant, and completed her coursework in September 2009. (Doc. 5-5, at 147). During her time as a student, she failed to make tuition payments due to the Appellant in or about 2008. (Id. at 166). Pursuant to its protocol, Appellant put a financial hold on Appellee's account, however, Appellant did not pursue any collection efforts. (Id. at 156-57; 188). On June 1, 2012, Appellee and her husband filed for bankruptcy. (Id. at 151-52). Then, the Bankruptcy Court issued the statutorily-mandated automatic stay. (Id.) In her bankruptcy schedule, Appellee listed Appellant as an unsecured creditor with a disputed claim in the amount of $6, 300. (Id. at 152; Doc. 5-1, at 182). The debt was listed as disputed because Appellee was not sure if the debt was a student loan or dischargeable by the Bankruptcy Code. (Doc. 5-5, at 153).

         On July 6, 2012, Appellee contacted Appellant by phone to request a copy of her transcript. (Id.). Appellee was told by the Registrar, Angelina Cenina, that she could not obtain her transcripts because she owed tuition to the Appellant, there was no record of her bankruptcy, and that a request for an official transcript must be submitted in writing. (Id. at 188). Eventually, after involving her attorneys, Appellee provided the bankruptcy petition and schedules and requested the release of the transcript. (Doc. 7-4). Appellant mailed Appellee the transcripts, however, the transcripts did not list any date for graduation. (Doc. 7-5). Appellee, on August 7, 2012, called to inquire why the graduation date was missing and was told that she "did not technically graduate" because of the outstanding debt. (Doc. 5-5, at 142).

         Appellant then initiated the proceeding by filing an action to declare Appellee's tuition obligation as non-dischargeable. (Doc. 5, at 2). On September 7, 2012, Appellee filed a counterclaim, containing a count for violation of the automatic stay, and two counts for attorneys' fees and compensatory damages, punitive damages, costs and contempt of court (/of.). On February 5, 2014, Appellee sought leave of the court to amend her counterclaim, which the Bankruptcy Court granted (Id. at 11). On April 10, 2014, Appellee filed the amended counterclaim to allege that she had graduated and that she had been awarded a degree. (Id. at 12).

         On October 9, 2015, the Bankruptcy Court held a trial on the amended complaint and held that Appellant willfully violated the stay by failing to issue a transcript with a graduation date. (Doc. 1-2, at 11-13). On January 14, 2016, the Bankruptcy Court issued its decision, holding that Appellant "willfully violated" the automatic stay by withholding the transcript without a graduation date, and thus, Appellee was entitled to "actual damages." (Id. at 11). In his award, Judge Opel ordered Appellant to provide Appellee with a transcript that included a graduation date and issue a diploma. (Id.). In addition, Appellant was ordered to pay $230.16 in actual damages (based on eight hours leave time from her work in order to attend trial), plus attorneys' fees and costs. (Id. at 12). Based on Appellee's itemized statement, the attorneys' fees amounted to $100, 000 and $3, 927.12 in expenses, to which Appellants objected. [Id. at 13; Doc. 14 at 42).

         On January 28, 2016, Appellant filed this appeal. (Doc. 1). On January 29, 2016, Appellant complied with the Bankruptcy Court's order by changing the transcript to include a graduation date of January 29, 2016 and by issuing a diploma to Aleckna. (Doc. 14, at 4). The Court held oral argument on this appeal on August 20, 2019.

         III. Jurisdiction and Standard of Review

         The District Court has jurisdiction to hear this appeal from a Bankruptcy Court's final order pursuant to 28 U.S.C. § 158(a)(1). The Court reviews "the Bankruptcy Court's findings of fact for clear error and exercise[s] plenary review over questions of law." In re Hechinger Inv. Co. of Delaware, Inc., 489 F.3d 568, 573 (3d Cir. 2007). "A finding of fact is clearly erroneous only if it is 'completely devoid of minimum evidentiary support displaying some hue of credibility or bears no rational relationship to the supportive evidentiary data.'" Havens v. Mobex Network Servs., LLC, 820 F.3d 80, 92 (3d Cir. 2016) (quoting Berg Chilling Sys., Inc. v. Hull Corp., 369 F.3d 745, 754 (3d Cir. 2004)).

         IV. Analysis

         California Coast appeals the Bankruptcy Court's decision on two grounds. First, it argues that its violation of the automatic stay[1] could not be "willful" because the law governing whether withholding a complete transcript (with a graduation date) is unsettled. (Doc. 14, at 20-22). Second, it appeals on the grounds that actual damages awarded to Appellee for taking time off from work to attend trial were improperly awarded to her and "without any actual damages there can be no 'willful' violation of the automatic stay." (Doc. 14 at 45). The Court addresses each issue separately below.

         A. Willful Violation of Automatic Stay

          Section 362(k)(1) of the Bankruptcy Code provides for actual damages upon injury from a "willful violation" of an automatic stay. See 11 U.S.C. § 362(k)(1). The Third Circuit has held that:

A 'willful violation' does not require a specific intent to violate the automatic stay. Rather, the statute provides for damages upon a finding that the defendant knew of the automatic stay and that the defendant's actions which violated the stay were intentional.
Whether the party believes in good faith that it had a right to property is not relevant to whether the act was 'willful' or ...

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