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Case 08-04000-dml Doc 116 Filed 02/09/10 Entered 02/09/10 14:25:44 Desc ..... for Identifying the Existence of an Implied Right ... Order; (2) that, before the Court could award attorneys' fees ... of the McClure's bankruptcy filings when he attempted to collect on ..... It is beyond cavil that the time and money spent in prose-.
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Adversary No. 08-04000-dml IN THE

UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS _________ DANNY JOE MCCLURE and KIMBERLY DESKINS MCCLURE, Plaintiffs, v. BANK OF AMERICA, CREDITORS FINANCIAL GROUP, LLC, AND PETER REBELO, Defendants. _________ On Motion for Reconsideration to the United States Bankruptcy Court for the Northern District of Texas

_________ BRIEF OF AMICUS CURIAE

_________

NANCY B. RAPOPORT William S. Boyd School of Law University of Nevada, Las Vegas 4505 S. Maryland Parkway Box 451003 Las Vegas, NV 89154-1003 (713) 202-1881 Amicus Curiae

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TABLE OF CONTENTS Page TABLE OF AUTHORITIES ......................................

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STATEMENT OF INTEREST OF AMICUS CURIAE.................................................................

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STATEMENT OF THE CASE ...................................

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SUMMARY OF ARGUMENT ..................................

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ARGUMENT ..............................................................

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I. THE COURT’S FINDINGS THAT BOA AND CFG HAD WILLFULLY VIOLATED THE DISCHARGE ORDER ARE SUPPORTED BY THE EVIDENCE AND ARE THEREFORE NOT MANIFEST ERRORS OF FACT OR LAW ....................................................

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II. THE COURT’S FINDING THAT THE McCLURES SUSTAINED $2,500 IN ACTUAL DAMAGES IS NOT A MANIFEST ERROR OF FACT OR LAW................................

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III. THE APPROPRIATE TEST FOR REASONABLENESS OF AN AWARD OF ATTORNEYS’ FEES IS WHETHER THE ATTORNEY SEEKING FEES TAILORED HIS WORK TO EFFECTUATE THE REPRESENTATION OF HIS CLIENT’S NEEDS, NOT WHETHER THE FEES DISPORPOTIONATELY EXCEED ACTUAL DAMAGES ...........................................................

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IV. THE COURT HAD THE JURISDICTION AND THE POWER TO AWARD SANCTIONS ........................................................

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iii TABLE OF CONTENTS—Continued Page V. THE COURT’S FINDINGS AS TO BOA’S AND CFG’S JOINT AND SEVERAL LIABILITY IS SUPPORTED BY THE EVIDENCE AND BY POLICY CONSIDERATIONS AND ARE THEREFORE NOT MANIFEST ERRORS OF FACT OR LAW ....................................................

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CONCLUSION ...........................................................

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CERTIFICATE OF SERVICE ...................................

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TABLE OF AUTHORITIES Page Cases: Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308 (2007) .................................................................. 17 Cadles Grassy Meadows II, L.L.C. v. Gervin (In re Gervin), 300 Fed Appx. 293 (5th Cir. 2008).............. 12, 13 Templet v. Hydrochem, Inc. 367 F.3d 473 (5th Cir. 2004) .............................................................................. 4 Ins. Co. of North Am. v. NGC Settlement Trust & Asbestos Claims Mgmt. Corp. (Matter of National Gypsum Co.), 118 F.3d 1056, 1063 (5th Cir. 1997) ........................................................................... 14 Transco Leasing Corp. v. United States, 896 F.2d 1435 (5th Cir. 1990) ............................................................ 17 Campbell v. Reed, 2008 WL 2548124 (N.D. Tex. 2008).................................................................................... 17 McClure v. Bank of America, et al. (In re McClure), 2009 WL 4263365 (Bankr. N.D. Tex. 2009) ............................................................................ passim Williams v. Williams (In re Williams), 368 B.R. 744 (Bankr. N.D. Ind. 2007) ............................................... 12 Mooney v. Green Tree Servicing Corp. (In re Mooney), 340 B.R. 351 (Bankr. E.D. Tex. 2006) ............... 13 In re Teraforce Technology Corp., 347 B.R. 838 (Bankr. N.D. Tex. 2006)...................................................... 11

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v TABLE OF AUTHORITIES—Continued Page In re Perviz, 302 B.R. 357 (Bankr. N.D. Ohio 2003) ..................................................................................... 8 Atkins v. United States (In re Atkins), 279 B.R. 639 (Bankr. N.D.N.Y. 2002) ................................................ 8 In re Faust, 270 B.R. 310 (Bankr. M.D. Ga. 1998)...................................................................................... 8 Summers v. Tice, 33 Cal. 2d 80 (1948) .............................. 17 Statutory authority: FED’L R. CIV. P. 52 ............................................................... 4 FED’L R. BANKR. P. 7052 ..................................................... 4 FED’L R. BANKR. P. 9023 ..................................................... 4 FED’L R. BANKR. P. 9024 ..................................................... 4 N.D. TEX. LOCAL RULE LR 83.8(e)..................................... 11 TEX. DISC. R. PROF’L CONDUCT R. 1.01.............................. 11 TEX. DISC. R. PROF’L CONDUCT R. 1.04........................ 11, 12

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vi TABLE OF AUTHORITIES—Continued Page Treatises and Articles: CHARLES ALAN WRIGHT, ARTHUR R. MILLER, & MARY KAY KANE, 11A FED. PRAC. & PROC. CIV. § 2960 (2d ed. 2009)...................................................... 14, 16 7A FED. PROC., L. ED. § 17:2 (August 2009) ...................... 15 BANKR. L. MANUAL § 8A:2 (5th ed. 2009) ........................... 9 Rosemary E. Williams, Proof of Contempt for Violation of Bankruptcy Discharge Injunction (11 U.S.C.A. § 524(a)(2)) by Individual Debtor, 107 AM. JUR. PROOF OF FACTS 3D 97 § 40 ................... 10, 11 Robert P. Wasson, Jr., Remedying Violations of the Discharge Injunction under Bankruptcy Code § 524, Federal Non-Bankruptcy Law, and State Law Comports with Congressional Intent, Federalism, and Supreme Court Jurisprudence for Identifying the Existence of an Implied Right of Action, 20 BANKR. DEV. J. 77 (2003) ....................... 12, 13

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Adversary No. 08-04000-dml IN THE

UNITED STATES BANKRUPTCY COURT FOR THE NORTHERN DISTRICT OF TEXAS _________ DANNY JOE MCCLURE and KIMBERLY DESKINS MCCLURE, Plaintiffs, v.

BANK OF AMERICA, CREDITORS FINANCIAL GROUP, LLC, and PETER REBELO, Defendants. _________ On Motion for Reconsideration to the United States Bankruptcy Court for the Northern District of Texas

_________ BRIEF OF AMICUS CURIAE

_________

STATEMENT OF INTEREST OF AMICUS CURIAE Nancy B. Rapoport is a law professor whose research focuses on issues of bankruptcy law and ethics. This brief is filed pursuant to that certain Order entered on January 13, 2010, Docket No. 114, requesting that the undersigned submit an amicus brief.

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2 STATEMENT OF THE CASE1 On July 18, 2007, Danny Joe and Kimberly McClure (the “McClures”) filed a chapter 7 petition, commencing Case No. 07-43036 in this Court. Among the debts listed in their case were certain individual obligations as well as businessrelated obligations of Qualico (a business that the McClures substantially owned) all owed to Bank of America (“BoA”). Qualico also filed a chapter 7 petition at the same time that the McClures filed their chapter 7 petition. The McClures received their discharge pursuant to 11 U.S.C. §727 on November 15, 2007,2 and the BoA debts were not excepted from the discharge. Two of the BoA debts, with account numbers ending in 3299 and 2099, were listed on the McClures’ Schedule F as personal guarantees of Qualico’s debt. Based on what appears to be human error, BoA referred these two accounts to Creditors Financial Group (“CFG”) for collection, notwithstanding the Discharge Order’s scope. CFG assigned account number 3299 to Craig Osborne and account number 2099 to Craig Rebelo. Both Mr. Osborne and Mr. Rebelo contacted Mr. McClure in an attempt to collect these discharged debts. In a Memorandum Opinion signed on November 23, 2009, the Court found that BoA and CFG had willfully violated the Discharge Order; that the McClures had incurred $2,500 in actual damages; that the McClures should be compensated for their reasonable attorneys’ fees of $82,339.14; and that BoA’s and CFG’s violation of the Discharge Order warranted sanctions in the amounts of $100,000 for BoA and $50,000 for CFG, which could each be mooted if the respective

1 All facts described in this Statement of the Case are taken from the Court’s Memorandum Opinion signed on November 23, 2009. 2 Order Discharging Debtor(s), Case No. 07-43036, Docket No. 23, dated November 15, 2007 [hereinafter “Discharge Order”].

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3 defendants presented evidence that they had adopted new procedures to avoid future violations.3 After the entry of the Memorandum Order, BoA filed Defendant Bank of America's Motion to Alter or Amend Findings, to Alter or Amend the Judgment, or, in the Alternative, for a New Trial and Brief in Support and CFG filed Creditors Financial Group, LLC’s Motion for Reconsideration and Brief in Support (together, the "Motions"). The McClures filed responses to the Motions (together, the "Responses"). BoA and CFG then each filed a reply (together, the "Replies"). The Motions raise the following issues: (1) that the actions of BoA and CFG were not willful violations of the Discharge Order; (2) that, before the Court could award attorneys’ fees to the McClures, the McClures should have proven—but did not prove—that they had sustained actual damages for the collection actions; (3) that the award of attorneys’ fees was excessive; (4) that the Court had no jurisdiction to impose sanctions; and (5) that neither BoA or CFG is responsible for the other’s conduct. SUMMARY OF ARGUMENT The Court had ample evidence that both BoA and CFG had willfully violated the Discharge Order. Even though the McClures’ proof of actual damages was not artful, the Court’s finding of actual damages does not present a manifest error of law or fact. The Court correctly applied the appropriate test in finding reasonable attorneys’ fees, even though those fees were significantly higher than the plaintiffs’ actual damages. The Court had jurisdiction to award sanctions against BoA and CFG. The Court’s finding of joint 3

The Court further found that Mr. Rebelo had no personal knowledge of the McClure’s bankruptcy filings when he attempted to collect on account number 2099, and that therefore he did not knowingly violate the Discharge Order. Thus, the Court found that Mr. Rebelo was not liable for civil contempt sanctions. Mr. Rebelo’s actions are not in question under the Motion for Reconsideration.

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4 and several liability of BoA and CFG was supported both by the evidence and by policy considerations. ARGUMENT I. THE COURT’S FINDINGS THAT BOA AND CFG HAD WILLFULLY VIOLATED THE DISCHARGE ORDER ARE SUPPORTED BY THE EVIDENCE AND ARE THEREFORE NOT MANIFEST ERRORS OF FACT OR LAW. A motion for reconsideration4 is “an extraordinary remedy that should be used sparingly.” Templet v. Hydrochem, Inc. 367 F.3d 473, 478-479 (5th Cir. 2004). As the Fifth Circuit has explained, “[S]uch a motion is not the proper vehicle for rehashing evidence, legal theories, or arguments that could have been offered or raised before the entry of judgment.” Id. at 479 (citation omitted). Instead, such a motion should serve only “‘to correct manifest errors of law or fact or to present newly discovered evidence.’” Id. (quoting Waltman v. Int'l Paper Co., 875 F.2d 468, 473 (5th Cir.1989)). Based on the testimony presented at trial, the Court found that “[t]here is no question that each of the Defendants violated the discharge injunction. BOA violated the discharge injunction when it referred the two accounts to CFG for collection. . . . CFG violated the discharge injunction when Rebelo and Osborne contacted McClure attempting to collect on the two accounts.” McClure v. Bank of America, et al. (In re McClure), 2009 WL 4263365, *2 (Bankr. N.D. Tex. 2009) (citation omitted) [hereinafter Mem. Op.]. As the Court 4 See FED’L R. BANKR. P. 9023 (motions for new trials); Id. R. 9024 (relief from judgment or order). There is no “motion for reconsideration” under the Federal Rules, so most courts construe such motions under Rule 9023 (akin to FED’L R. CIV. P. 59) and Rule 9024 (akin to FED’L R. CIV. P. 60). BoA also has moved under FED’L R. CIV. P. 52 (and, presumably, its bankruptcy analogy of FED’L R. BANKR. P. 7052). See Defendant Bank of America’s Reply to Plaintiff’s [sic] Response to Its Motion to Alter or Amend Findings, etc., at 2-3 [hereinafter BoA Reply Brief].

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5 correctly observed, the issue in this case is not whether the defendants violated the Discharge Order;5 it is whether the defendants violated the Discharge Order knowingly. Id. BoA’s actual knowledge is obvious. The McClures scheduled their BoA debts in their bankruptcies; BoA received notice of the bankruptcies; BoA had notice of the Discharge Order. Human error caused BoA to forward the two accounts to CFG. Although human error may be understandable—all humans make mistakes—a creditor with actual knowledge of a bankruptcy discharge cannot escape that knowledge by the inadvertent mistake of one of its employees. To allow human error to excuse the violation of a known discharge order would create too facile an excuse for all such violations, leading to temptations for manipulation and abuse of any such safe harbor. Every creditor could claim the human error excuse, and no discharge order would have any force. Human error may go to the issue of damages, but it does not go to the issue of knowledge. CFG’s knowledge of the Discharge Order is a more difficult issue. Given the data available to CFG, the normal “bankruptcy scrub” that CFG would perform before attempting to collect a BoA debt would not have indicated that the McClures had filed for bankruptcy protection or received a 5

BoA’s argument that it did not violate the Discharge Order, see Defendant Bank of America’s Motion to Alter or Amend Findings, to Alter or Amend the Judgment, or, in the Alternative, for a New Trial and Brief in Support [hereinafter BoA New Trial Motion], makes no sense. It knew of the bankruptcy discharge. It forwarded the accounts to CFG as part of a larger forwarding of accounts for collections. Therefore, it violated the Discharge Order. In fact, BoA’s allegation that “referring the accounts to CFG under the terms of a contract which required CFG to conduct a bankruptcy scrub and to confirm that a bankruptcy had not been filed before taking any collection action on the accounts was not a violation of § 524(a)(2),” BoA New Trial Motion at 9, ignores the point that, had BoA not forwarded these two accounts in the first place, CFG would have not been able to try to collect on them. BoA cannot hide behind CFG, shouldering CFG with the entire blame, because BoA put the whole chain of events in motion.

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6 discharge. Mem. Op. at *3. For account 3299, there was no easy way to determine that Mr. McClure, who was an owner of Qualico, had received a bankruptcy discharge.6 Account 2099 is a different matter: Mr. McClure was listed as a coobligor, but Mr. Rebelo only performed a bankruptcy scrub on Qualico, not on McClure. Based on the way that CFG stored information on these two accounts, Mr. Rebelo would not have had actual knowledge that Mr. McClure had notified another CFG collection agent about the McClure and Qualico bankruptcies. But the fact that CFG’s storage of data regarding these two accounts was flawed—CFG had no way of transmitting information about a bankruptcy issue on one account to any other related accounts—is no excuse.7 CFG is experienced enough in the world of collections8 to have anticipated that the collection of a business organization’s accounts might trigger a collection of a guarantor’s obligation9 as well.10 To have developed a data storage 6 For

this reason, the Court found that CFG’s original collection efforts on account 3299 did not violate the Discharge Order. Mem. Op. at *4. 7

CFG’s argument in its Reply Brief in Support of Creditors Financial Group, LLC’s Motion for Reconsideration [hereinafter CFG Reply Brief]—that the Plaintiffs improperly sued CFG for violating Qualico’s discharge—is disingenuous. The Court didn’t sanction CFG for Mr. Osborne’s actions, but for CFG’s inability to use information that Mr. Osborne learned to prevent Mr. Rebelo from violating the Discharge Order. Mem. Op. at 8-9. Nor did the Court find that Mr. Rebelo knowingly violated the Discharge Order. It was CFG’s violation, through failing to coordinate the information that its collections agents gathered, that was the impetus for the sanction. Id. 8

Although CFG’s website is “temporarily offline,” http://www.creditorsfinancialgroup.com/, another link refers to CFG having had “70 years management experience.” http://www.creditorsfinancialgroup.com/siteimg/swf/it.swf. To the extent that CFG has been in business as a collections agent for more than a few months, it should have known that collecting a debt might trigger a guarantor’s obligations. 9 CFG argues that Mr. Rebelo was attempting to collect a debt from the primary debtor, Qualico, just like Mr. Osborne had been attempting on

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7 system that prevents one CFG employee from automatically flagging any related accounts is CFG’s fault, not the McClures.11 The Court correctly observed that “CFG simply cannot contend that it did not knowingly violate the discharge injunction because its left hand did not know what its right hand was doing.” Mem. Op. at 4. In essence, CFG was correctly charged with a willful violation of the Discharge Order not because of what its collections employees knew (or did not know), but because of how its internal data systems worked (or did not work).12 Like the flaw in BoA’s argument (human error as an excuse for forwarding accounts for account 3299: “The fact that McClures' name was specifically mentioned on the account information is not materially different from Osborne performing an Accurint search and discovering McClure to be the owner of Qualico.” Creditors Financial Group, LLC's Motion for Reconsideration and Brief in Support at 6 [hereinafter Mot. Recon.]. But there is a difference. Mr. McClure was a guarantor of Qualico’s debt. Qualico had been liquidated. It is reasonable for the Court to have assumed that the phone calls to Mr. McClure—as guarantor of the Qualico debt for account 2099—were an action to collect a discharged debt. 10

Contrary to CFG’s assertion that linking a primary obligor and a guarantor is “untenable in today's business world,” Mot. Recon. at 7, it is reasonable to assume that debt collectors have knowledge that debts sometimes come with guarantees. 11 CFG

argues, in its Reply Brief, that any knowledge of the McClures’ bankruptcy is irrelevant to its actions to collect on Qualico’s debt. GFG Reply Brief at ¶ 6. Once Qualico was liquidated, however, the only possible way to collect on Qualico’s debt was to collect from Qualico’s guarantor, Mr. McClure. 12

Although CFG contends that changing its data system would “place an unreasonable burden on CFG and other collection companies,” CFG Reply Brief at ¶ 6, that argument fails to take into account that violating discharge orders place unreasonable burdens on discharged debtors. Companies can spread the costs of updating their systems to comply with the Bankruptcy Code across several clients. Discharged debtors who have to bear the burden of wrongful collections actions cannot similarly spread those costs. As between the two possibilities—spreading costs of compliance across several clients versus an inability to spread the costs of wrongful collections borne by a single debtor—collections companies are in a better position to bear the costs.

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8 collection), CFG’s flaw is that its argument, too, creates the same facile excuse for debt collectors. Blaming a data system that does not share appropriate information among accounts as an excuse for violating a discharge order would, taken to its logical conclusion, create an incentive to continue to compartmentalize such information. To protect debtors, exactly the opposite incentive—fixing the “data gap”— should apply. Therefore, the Court’s findings that both BoA and CFG had willfully violated the Discharge Order do not present manifest errors of fact or law. II. THE COURT’S FINDING THAT THE McCLURES SUSTAINED $2,500 IN ACTUAL DAMAGES IS NOT A MANIFEST ERROR OF FACT OR LAW. Had the McClures’ evidence regarding emotional distress met their burden of proof, the Court could have chosen to allow damages based on emotional distress.13 Instead, the Court awarded $2,500 in actual damages for prosecuting the violation of the Discharge Order: The McClures have, however, expended substantial time and effort in prosecuting this lawsuit. Without the willingness of aggrieved debtors to prosecute violations of the discharge 13

See, e.g., Atkins v. United States (In re Atkins), 279 B.R. 639 (Bankr. N.D.N.Y. 2002) (court awards actual damages for emotional distress due to violations of discharge injunction); In re Perviz, 302 B.R. 357, 371 (Bankr. N.D. Ohio 2003) (“when a ‘willful’ violation of the discharge injunction is at issue, damages for mental/emotional distress may be awarded, despite the absence of any demonstrable out-of-pocket losses, if two conditions are met: (1) the debtor clearly suffered some appreciable emotional/mental harm; and (2) the actions giving rise to the emotional/mental distress were severe in nature.”) (citations omitted); In re Faust, 270 B.R. 310, 317 (Bankr. M.D. Ga. 1998) (Although plaintiff did not prove any actual monetary damages, court was persuaded by her testimony that she suffered emotional distress, in that she was “worried and upset for a few days”; therefore court awarded damages for emotional distress).

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9 injunction of section 524(a)(2), such violations would go unchecked by the court. . . . If violations of the discharge injunction go unpunished, creditors will lack the necessary incentive to avoid violating the law, and an underlying purpose of the Code will be undermined. In order to ensure that debtors are not hesitant to prosecute violations of the discharge injunction, they should be awarded actual damages to compensate them for the time and effort they expend in the process. In this case, the court awards the McClures $2,500 in actual damages [based on a calculation that the McClures had spent about 25 hours each in trial, trial preparation, depositions, and consultation with their lawyers, valuing their time at a rate of $50 per hour] for the time and effort they expended in prosecuting this adversary proceeding, for which BOA and CFG will be jointly and severally liable. Mem. Op. at 5 & 7 n.26. It is beyond cavil that the time and money spent in prosecuting a violation of a discharge injunction are actual damages for that violation, if the violation is proven at trial. See, e.g., BANKR. L. MANUAL § 8A:2 n.13 (5th ed. 2009) (“The majority of courts addressing the issue have held that there is no private right of action for violating the discharge injunction and that a monetary award may be granted only through the court's contempt powers.”). But for the violation of the injunction, the McClures would not have had to seek legal redress. Therefore, the Court’s finding does not present a manifest error of fact or law.

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10 III. THE APPROPRIATE TEST FOR REASONABLENESS OF AN AWARD OF ATTORNEYS’ FEES IS WHETHER THE ATTORNEY SEEKING FEES TAILORED HIS WORK TO EFFECTUATE THE REPRESENTATION OF HIS CLIENT’S NEEDS, NOT WHETHER THE FEES DISPORPOTIONATELY EXCEED ACTUAL DAMAGES. BoA and CRG both argue that the low level of actual damages precludes an award of approximately $80,000 in attorneys’ fees. Mot. Recon. at 13; BoA New Trial Mot. at 14-15. Although the relationship of attorneys’ fees to actual damages can give a court guidance as to the fees’ reasonableness, the relationship between actual damages and attorneys’ fees is not the appropriate test. If it were, then any plaintiffs who had suffered low actual damages would be unlikely to find counsel to represent them. But for pro bono cases, what lawyer would willingly agree to take on a plaintiff’s vindication of rights knowing that the cutoff for fees would likely not compensate the lawyer fairly for her work? The better approach is to ensure that the attorney who vindicates a client’s rights recovers reasonable fees: fees that were necessary to represent the client competently and fairly. “Where contempt has been shown by a moving party, the bankruptcy court commonly is asked to award, at a minimum, the moving party's attorney’s fees and costs. This implements the general policy of the Bankruptcy Code. The purpose of the discharge in bankruptcy is to give the debtor a fresh financial start, and the purpose of a monetary award is to compensate the debtor for impairment of that fresh start.” Rosemary E. Williams, Proof of Contempt for Violation of Bankruptcy Discharge Injunction (11 U.S.C.A. § 524(a)(2)) by Individual Debtor, 107 AM. JUR. PROOF OF FACTS 3D 97 §

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11 40 (footnote omitted). Under the Texas ethics rules,14 the McClures’ attorneys’ fees must comply with TEX. DISC. RULE PROF’L CONDUCT 1.0415 to be compensable.

14 Courts in the Northern District of Texas apply the Texas Disciplinary Rules of Professional Conduct. See N.D. TEX. LOCAL RULE LR 83.8(e); see also TEX. DISC. R. PROF’L CONDUCT R. 1.01 (Competent & Diligent Representation); id. R. 1.04 (Fees); In re Teraforce Technology Corp., 347 B.R. 838 (Bankr. N.D. Tex. 2006) (applying lodestone test and factors stated in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974)). 15

According to R. 1.04: (a) A lawyer shall not enter into an arrangement for, charge, or collect an illegal fee or unconscionable fee. A fee is unconscionable if a competent lawyer could not form a reasonable belief that the fee is reasonable. (b) Factors that may be considered in determining the reasonableness of a fee include, but not to the exclusion of other relevant factors, the following: (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly; (2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer; (3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered. ....

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12 In the Mem. Op., the Court reviewed the evidence regarding the attorneys’ fees closely and actually reduced the award on the grounds that certain of those fees were not reasonable. Mem. Op. at *6. “What constitutes a reasonable attorney fee is a matter committed to the court's discretion.” Williams v. Williams (In re Williams), 368 B.R. 744, 746 (Bankr. N.D. Ind. 2007). The Court’s decision regarding the amount of attorneys’ fees does not present a manifest error of fact or law. IV. THE COURT HAD THE JURISDICTION AND THE POWER TO AWARD SANCTIONS. The sanctions that the Court awarded are in the nature of civil contempt sanctions; as such, the Court had a clear right to award those sanctions. See, e.g., Cadles Grassy Meadows II, L.L.C. v. Gervin (In re Gervin), 300 Fed Appx. 293, 298 (5th Cir. 2008) (“A proceeding to enforce a discharge injunction is a core proceeding under section 157(b)(2)(O) of title 28[;] [b]ankruptcy courts have jurisdiction over such cases and may even reopen a closed case to ensure that the purpose of its discharge order is not undermined.”) (footnotes omitted); see also id. at 300-01 (“Pursuant to the Bankruptcy Code’s civil contempt power, bankruptcy courts may award damages[;] . . . ‘[T]he party seeking an order of contempt need only establish by clear and convincing evidence: (1) that a court order was in effect; (2) that the order required certain conduct by the respondent; and (3) that the respondent failed to comply with the court’s order.’”) (footnote and citation omitted).16 (d) A fee may be contingent on the outcome of the matter for which the service is rendered, except in a matter in which a contingent fee is prohibited by paragraph (e) [criminal cases] or other law. . . . TEX. DISC. R PROF’L CONDUCT R. 1.04 (amended March 1, 2005). 16 See

Robert P. Wasson, Jr., Remedying Violations of the Discharge Injunction under Bankruptcy Code § 524, Federal Non-Bankruptcy Law, and State Law Comports with Congressional Intent, Federalism, and

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13 The Gervin case is particularly instructive here. Although the Fifth Circuit reversed the bankruptcy court’s contempt finding and sanctions based on the particular facts of the case, it nonetheless clearly stated: In a federal question action, attorney's fees and costs are appropriately awarded where a federal statute provides for recovery of attorney's fees. The bankruptcy court awarded attorney's fees under 11 U.S.C. § 524. Section 524 in conjunction with 11 U.S.C. § 362(k) supplemented the contempt power, and provided a statutory basis for an award of attorney's fees. Section 362(k)(1) provides that “an individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys' fees, and, in appropriate circumstances, may recover punitive damages.” Gervin, 300 Fed Appx. at 301 (footnotes omitted). Sanctions for violation of the Order, therefore, are within the Court’s power. See, e.g., Mooney v. Green Tree Servicing Corp. (In re Mooney), 340 B.R. 351, 361-62 (Bankr. E.D. Tex. 2006) (“To limit the Debtor to compensatory damages in this context would send a clear and damaging signal to Green Tree and other institutional creditors who are routinely involved in bankruptcy cases that its attorneys and other agents are free to ignore a discharge injunction, and that one may avoid significant legal liability for such illicit activity by quickly retreating and paying only a nominal amount of attorney’s fees if its illegal acts are actually exposed, thereby making the attendant risks of such conduct palatable.”).17 Supreme Court Jurisprudence for Identifying the Existence of an Implied Right of Action, 20 BANKR. DEV. J. 77 (2003). 17 See

also Ins. Co. of North Am. v. NGC Settlement Trust & Asbestos Claims Mgmt. Corp. (Matter of National Gypsum Co.), 118 F.3d 1056, 1063 (5th Cir. 1997) (“The discharge injunction granted by section 524(a)

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14 Moreover, although both BoA and CFG characterize the Court’s Order as a criminal contempt order, BoA New Trial Motion at 19-20; Mot. Recon. at 18-19, that characterization is incorrect. The line between civil contempt and criminal contempt may be thin, but there is a distinction.18 The classic explanation is that “in a proceeding for criminal contempt, the sentence is punitive and for the vindication of the court’s authority, while, in a proceeding for civil contempt, the objective is to force the contemnor to comply with an order of the court or to compensate the complainant for losses sustained, and the punishment is thus remedial and for the benefit of the complainant.” 7A FED. PROC., L. ED. § 17:2

is a substantive right conferred by the Bankruptcy Code, often enforced by a motion for contempt . . . .”) (citation omitted). 18 A leading treatise explains the difference between the two types of contempt as follows:

In general, then, it may be said that a contempt of court for which punishment is inflicted for the primary purpose of vindicating public authority is denominated criminal. Those in which the ultimate object of the punishment is the enforcement of the rights and remedies of a litigant are civil contempts. The relief granted in civil contempt proceedings, therefore, is compensatory or conditional. It often takes the form of a fine in the amount of the damage sustained by plaintiff and an award of costs and attorney’s fees. . . . Punishment for criminal contempt on the other hand is unconditional; it penalizes yesterday’s defiance rather than seeking to coerce tomorrow's compliance. It cannot be ended or shortened by any act by defendant. When a fine is imposed on someone who has been adjudged guilty of contempt, partly as compensation to the complainant and partly as punishment, the criminal feature of the order is dominant and fixes its character for purposes of appellate review. CHARLES ALAN WRIGHT, ARTHUR R. MILLER, & MARY KAY KANE, 11A FED. PRAC. & PROC. CIV. § 2960 (2d ed. 2009) (footnotes omitted) [hereinafter WRIGHT, MILLER & KANE].

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15 (August 2009) (footnote omitted) [hereinafter 7A FED. PROC.]. In this case, the Court ordered the following: (1) actual damages in the amount of $2,500, to compensate the McClures for the time and effort that they spent in dealing with the defendants’ violation of the Discharge Order; (2) attorneys’ fees in the amount of $79,839.14, to compensate the McClures for the reasonable legal costs incurred in enforcing the Discharge Order; and (3) sanctions for violation of the Discharge Order “in order to deter BOA and CFG from violating any discharge injunction in the future.”19 Mem. Op. at 11-15. All three of these award components lie in the nature of civil contempt. The first two were designed “to force the contemnor to comply with an order of the court or to compensate the complainant for losses sustained, and the punishment is thus remedial and for the benefit of the complainant,” 7A FED. PROC., supra. The third component, like any other classic civil contempt order, gave the defendants the “keys to [their] prison.”20 Therefore, the Mem. Op.’s award 19 With

respect to the sanctions portion, the Mem. Op. provided:

The court hereby sanctions BOA in the amount of $100,000, payable to the registry of the court, and sanctions CFG in the amount of $50,000, also payable to the registry of the court. Each sanction will be suspended and need not be paid if, within 90 days of the entry of this memorandum opinion, by affidavit either the President or General Counsel of each company submits to the court new procedures his or her company has adopted to prevent future violations of any discharge injunction. Mem. Op. at 14-15 (footnote omitted). 20

Since any incarceration ordered in a civil contempt proceeding is intended to force defendant into doing

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16 of all three components was well within the Court’s jurisdiction and power and thus does not present a manifest error of fact or law. V. THE COURT’S FINDINGS AS TO BOA’S AND CFG’S JOINT AND SEVERAL LIABILITY IS SUPPORTED BY THE EVIDENCE AND BY POLICY CONSIDERATIONS AND ARE THEREFORE NOT MANIFEST ERRORS OF FACT OR LAW. In placing the blame for the violations of the Discharge Order at each other’s feet, BoA and CFG are, in essence, denying the interaction between their actions. It is true that, had BoA caught its human error and not forwarded the two accounts to CFG, then CFG could not have compounded the error by designing internal systems that did not notify related accounts of a bankruptcy filing and later discharge. But BoA did forward the two accounts, and CFG did not create an

what he was ordered to do, defendant can secure his discharge by so acting. Thus, in a famous phrase, the contemnor carries the “keys to his prison.” WRIGHT, MILLER & KANE, supra n.18. BoA contends that the Mem. Op. does not provide the “keys to the prison”: [T]here is no “key” in this case. Full compliance with the discharge injunction as to the Plaintiffs in the future is insufficient to avoid the fine; the actions suggested by the order for avoiding the fine - establish procedures that to the Court's satisfaction are sufficient to avoid violations of any future discharge order - do not provide a specific, identifiable act which would allow BOA to avoid the sanctions. There is no act that guarantees BOA the rescission of the fine. BoA Reply Brief at 5. This argument is spurious. BoA (and CFG) know exactly what they have to do: they have to come up with systems that prevent them from collecting on discharged debts. For example, BoA could modify its coding to prevent certain accounts from being forwarded to CFG. CFG could modify its coding to allow for more obvious notice of related party bankruptcies.

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17 internal system to catch related accounts. Both of these two actors caused the harm to the McClures. In many ways, the situation before the Court is similar to the traditional joint-and-several liability case of Summers v. Tice, 33 Cal. 2d 80, 88 (1948) (“If defendants are independent tortfeasors and thus each liable for the damage caused by him alone, and, at least, where the matter of apportionment is incapable of proof, the innocent wronged party should not be deprived of his right to redress. The wrongdoers should be left to work out between themselves any apportionment.”). In Summers v. Tice, the California Supreme Court shifted the burden of proving which of two defendants had shot the plaintiff to the defendants after the plaintiff had established that “independent acts of negligence were simultaneously committed by two or more tortfeasors.” Transco Leasing Corp. v. United States, 896 F.2d 1435, 1446-47 (5th Cir. 1990) (explaining the rule in Summers v. Tice while holding that, even assuming that the rule was recognized in Texas, the rule did not apply to the instant case); see also Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 324 n.5 (2007) (citing the principle of Summers v. Tice and indicating that the alternative liability theory in Summers v. Tice is generally accepted), Campbell v. Reed, 2008 WL 2548124, *2 (N.D. Tex. 2008) (citing Landers v. East Texas Salt Water Disposal Co., 151 Tex. 251, 248 S.W.2d 731 (Tex. 1952)) for the proposition that joint and several liability is appropriate in situations in which the “injury was indivisible and could not be traced to a sole source”). Here, the McClures’ injury was caused by the indivisible actions of BoA and CFG. Moreover, a failure to hold BoA and CFG jointly and severally liable would create an incentive for either of the defendants to stick their heads in the ground, ostrich-like, and refuse to tighten up their internal policies. Had the Court allowed BoA and CFG to avoid liability by blaming each other, neither entity would have the appropriate incentive to

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18 reform. As among BoA, CFG, and the McClures, surely the debtors who accurately listed the two accounts in Schedule F should not suffer. CONCLUSION For the foregoing reasons, the Memorandum Opinion below should stand. Respectfully submitted,

NANCY B. RAPOPORT William S. Boyd School of Law University of Nevada, Las Vegas 4505 S. Maryland Parkway Box 451003 Las Vegas, NV 89154-1003 (713) 202-1881 Amicus Curiae February 9, 2010 Certificate of Service On February 9, 2010, I electronically submitted the foregoing document with the clerk of court for the U.S. Bankruptcy Court, Northern District of Texas, using the electronic case filing system of the court. I hereby certify that I have served

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19 all counsel of record electronically through the electronic case filing system.

Nancy B. Rapoport

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