Cleary Gottlieb Wins Award of Punitive Damages for Violation of Automatic Stay

October 15, 2015

Cleary Gottlieb recently won a sanctions motion for violation of the automatic stay on behalf of a pro bono client, a pastor and Chapter 13 debtor, as a result of his eviction from a building where his church was located. After falling behind on mortgage payments, the debtor filed for bankruptcy, thereby staying a pending foreclosure proceeding. Despite receiving notice of the bankruptcy filing, the mortgage lender evicted the debtor and his wife from the church. During the course of the eviction, agents of the lender assaulted the debtor's wife.

The Honorable Carla Craig, Chief Judge of the U.S. Bankruptcy Court for the Eastern District of New York, held that the lender had willfully violated the automatic stay, and awarded the debtor $50,000 in punitive damages. Chief Judge Craig found that the lender had acted in bad faith by evicting the debtor and causing its agents to physically assault the debtor’s wife. Further, the judge found that the lender continued to violate the stay by failing to restore personal property in church space after the eviction, finding the lender's testimony “patently incredible.”

Following the lender's failure to pay the judgment, Cleary Gottlieb obtained an order compelling the lender's principals to make the payment, which resulted in prompt payment of the damages award.