Jonathan Hunsaker v. United States , 902 F.3d 963 ( 2018 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
JONATHAN ELDON HUNSAKER; No. 16-35991
CHERYL LYNN HUNSAKER,
Plaintiffs-Appellants, D.C. No.
6:16-cv-00386-
v. MC
UNITED STATES OF AMERICA,
Defendant-Appellee. OPINION
Appeal from the United States District Court
for the District of Oregon
Michael J. McShane, District Judge, Presiding
Argued and Submitted May 15, 2018
Portland, Oregon
Filed August 30, 2018
Before: M. Margaret McKeown and Richard A. Paez,
Circuit Judges, and Cynthia A. Bashant, * District Judge.
Opinion by Judge Bashant
*
The Honorable Cynthia A. Bashant, United States District Judge
for the Southern District of California, sitting by designation.
2 HUNSAKER V. UNITED STATES
SUMMARY **
Bankruptcy
The panel reversed the district court’s judgment
reversing the bankruptcy court’s judgment awarding
damages to debtors for the Internal Revenue Service’s
violation of the Bankruptcy Code’s automatic stay.
The panel held that sovereign immunity does not
preclude an award of emotional distress damages against the
United States for willful violation of the automatic stay. In
11 U.S.C. § 106(a), Congress waived sovereign immunity
for a “money recovery” under certain bankruptcy provision,
including 11 U.S.C. § 362(k), which allows an individual to
recover “actual damages” for a willful violation of the
automatic stay. Disagreeing with the First Circuit, the panel
concluded that the bankruptcy court’s award of emotional
distress damages under § 362(k) was a “money recovery”
under § 106(a)’s waiver of sovereign immunity.
The panel remanded to the district court with instructions
to consider the government’s challenge to the merits of the
debtors’ claims.
**
This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
HUNSAKER V. UNITED STATES 3
COUNSEL
Douglas D. Geyser (argued) and Daniel L. Geyser, Stris &
Maher LLP, Los Angeles, California; Keith D. Karnes,
Karnes Law Offices P.C., Salem, Oregon; for Plaintiffs-
Appellants.
Paul Andrew Allulis (argued) and Thomas J. Clark,
Attorneys; David A. Hubbert, Acting Assistant Attorney
General; Tax Division, United States Department of Justice,
Washington, D.C.; for Defendant-Appellee.
Tara Twomey, National Consumer Bankruptcy Rights
Center, San Jose, California, for Amici Curiae National
Association of Consumer Bankruptcy Attorneys and
National Consumer Bankruptcy Rights Center.
OPINION
BASHANT, District Judge:
We must determine whether sovereign immunity
precludes an award of emotional distress damages against
the United States for willful violation of the Bankruptcy
Code’s automatic stay. The answer turns on the interplay
between two Bankruptcy Code statutes: 11 U.S.C. §§ 106(a)
(“Section 106(a)”) and 362(k) (“Section 362(k)”). In
Section 106(a), Congress waived sovereign immunity for a
“money recovery” under certain bankruptcy provisions,
including Section 362(k). Section 362(k) in turn allows an
individual to recover “actual damages” for a willful violation
of the Bankruptcy Code’s automatic stay.
4 HUNSAKER V. UNITED STATES
After Jonathan and Cheryl Hunsaker filed for
bankruptcy, the Internal Revenue Service (“IRS”) violated
the automatic stay by sending the couple collection notices.
The bankruptcy court awarded the Hunsakers damages
under Section 362(k) for their emotional distress, but the
district court reversed on sovereign immunity grounds.
Because Section 106(a) unambiguously waives sovereign
immunity for an award of emotional distress damages under
Section 362(k), we reverse and remand.
I.
The Hunsakers filed for relief under Chapter 13 of the
Bankruptcy Code. Despite being notified of the couple’s
bankruptcy, the IRS sent four notices to the Hunsakers
demanding payment and threatening imminent enforcement
action, including a levy on Social Security benefits. The
Hunsakers responded by bringing an adversary proceeding
against the United States in bankruptcy court seeking
damages for violation of the automatic stay under Section
362(k). The government conceded the IRS’s conduct
violated the stay.
At trial, the Hunsakers sought only damages for
emotional distress. The government argued sovereign
immunity bars this relief, but the bankruptcy court was
unconvinced. In reaching the merits, the court determined
that the IRS’s conduct exacerbated the stress of the
Hunsakers’ bankruptcy, causing them to suffer significant
emotional distress. As compensation, the court awarded the
Hunsakers $4,000 in damages.
In an appeal to the district court, the government again
invoked sovereign immunity. The government also
challenged the merits of the Hunsakers’ claims, arguing they
suffered insufficient emotional distress to warrant damages.
HUNSAKER V. UNITED STATES 5
The district court concluded Congress has not waived
sovereign immunity for emotional distress damages under
Section 362(k). The court therefore reversed the bankruptcy
court’s judgment and ordered the Hunsakers’ complaint to
be dismissed, without reaching the merits of their claims.
The Hunsakers appealed.
II.
We have jurisdiction under 28 U.S.C. § 158(d). We
review de novo questions of statutory interpretation and
sovereign immunity. See Zazzali v. United States (In re
DBSI, Inc.), 869 F.3d 1004, 1007 n.2 (9th Cir. 2017);
Montana v. Goldin (In re Pegasus Gold Corp.), 394 F.3d
1189, 1193 (9th Cir. 2005).
III.
“Sovereign immunity shields the United States from suit
absent a consent to be sued that is ‘unequivocally
expressed.’” United States v. Bormes, 568 U.S. 6, 9–10
(2012) (quoting United States v. Nordic Vill., Inc., 503 U.S.
30, 33–34 (1992)). “Congress has enacted several broad
waivers of the United States’ sovereign immunity.” Navajo
Nation v. Dep’t of the Interior, 876 F.3d 1144, 1168 (9th Cir.
2017).
The waiver at issue here, Section 106(a), applies to fifty-
nine provisions of the Bankruptcy Code. For these
enumerated provisions, Section 106(a) provides that
“sovereign immunity is abrogated as to a governmental unit
to the extent set forth in this section.” The extent of the
waiver relevant to this appeal is set forth in Section
106(a)(3), which authorizes a court to “issue against a
governmental unit an order, process, or judgment under such
sections . . . , including an order or judgment awarding a
6 HUNSAKER V. UNITED STATES
money recovery, but not including an award of punitive
damages.”
One of the waiver’s enumerated provisions, Section 362,
is the Bankruptcy Code’s automatic stay statute. When
debtors file for bankruptcy, Section 362 imposes an
automatic stay “to protect debtors from all collection efforts
while they attempt to regain their financial footing.”
Schwartz v. United States (In re Schwartz), 954 F.2d 569,
571 (9th Cir. 1992). Section 362(k) establishes
consequences for violating the stay: “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.” In Dawson v. Washington Mutual Bank,
F.A. (In re Dawson), 390 F.3d 1139, 1148 (9th Cir. 2004),
we held “actual damages” under Section 362(k) “include[s]
damages for emotional distress.” 1
Relying on Section 362(k) and Dawson, the bankruptcy
court awarded the Hunsakers emotional distress damages
against the government. Because Section 106(a)’s waiver of
sovereign immunity applies to Section 362(k), this appeal
turns on whether the bankruptcy court’s award falls within
the scope of the waiver. That is, we must resolve whether
an award of emotional distress damages is an “order or
judgment awarding a money recovery, but not including an
award of punitive damages.” See 11 U.S.C. § 106(a)(3).
1
When we decided Dawson, Section 362(k) was labeled Section
362(h). Congress redesignated the statute as Section 362(k) in 2005, but
the relevant text remains unchanged. See Bankruptcy Abuse Prevention
and Consumer Protection Act of 2005, Pub. L. No. 109-8, § 305(1)(B),
119 Stat. 23, 79.
HUNSAKER V. UNITED STATES 7
We conclude that it is. We first explain why the scope
of Section 106(a)’s waiver of sovereign immunity is
unambiguous and encompasses damages for emotional
distress under Section 362(k). We then address the
government’s alternative, implausible interpretation of the
waiver based on the term “money recovery” in Section
106(a)(3). Finally, we address our departure from the First
Circuit’s decision reaching the opposite result in an
analogous context.
A.
“To maintain a suit against the government for money
damages, ‘the waiver of sovereign immunity must extend
unambiguously to such monetary claims,’ thus foreclosing
an implied waiver.” Daniel v. Nat’l Park Serv., 891 F.3d
762, 768 (9th Cir. 2018) (quoting Lane v. Pena, 518 U.S.
187, 192 (1996)). “Ambiguity exists if there is a plausible
interpretation of the statute that would not authorize money
damages,” and we “construe any ambiguities in the scope of
a waiver in favor of the sovereign.” FAA v. Cooper, 566
U.S. 284, 290–91 (2012).
Although a waiver of sovereign immunity must be
unequivocally expressed, “Congress need not state its
intent” to waive the government’s immunity “in any
particular way” or “use magic words.” Cooper, 566 U.S. at
291. “The sovereign immunity canon is just that—a canon
of construction.” Richlin Sec. Serv. Co. v. Chertoff, 553 U.S.
571, 589 (2008). It is an interpretive tool that “does not
‘displac[e] the other traditional tools of statutory
construction.’” Cooper, 566 U.S. at 291 (alteration in
original) (quoting Chertoff, 553 U.S. at 589).
Our inquiry, then, is whether the scope of the waiver is
“clearly discernable from the statutory text in light of
8 HUNSAKER V. UNITED STATES
traditional interpretive tools.” Cooper, 566 U.S. at 291. If
it is not, we will adopt the interpretation of the waiver that is
most favorable to the government. Id.; see also In re DBSI,
869 F.3d at 1013 (“[W]here a plausible interpretation of a
provision that would preserve immunity is available, we
should adopt that interpretation and preserve the
government’s sovereign immunity.”).
Turning to our interpretive tools, “we start with the plain
meaning of the statute’s text.” Father M v. Various Tort
Claimants (In re Roman Catholic Archbishop of Portland in
Or.), 661 F.3d 417, 432 (9th Cir. 2011) (quoting United
States v. Wright, 625 F.3d 583, 591 (9th Cir. 2010)). “The
plainness or ambiguity of statutory language is determined
by reference to the language itself, the specific context in
which that language is used, and the broader context of the
statute as a whole.” Robinson v. Shell Oil Co., 519 U.S. 337,
341 (1997).
Section 106(a)’s text plainly waives sovereign immunity
for court-ordered monetary damages under the waiver’s
enumerated provisions, although the damages may not be
punitive. Under Section 106(a)(3), a court is authorized to
issue against the government an “order, process, or judgment
under” the provisions identified in Section 106(a)(1),
“including an order or judgment awarding a money
recovery, but not including an award of punitive damages.”
The clause “including . . . a money recovery” expressly
broadens the waiver’s scope to encompass monetary
damages. The text then provides for one limitation: the
money recovery cannot “includ[e] an award of punitive
damages.” Thus, the statute’s text unambiguously waives
sovereign immunity for nonpunitive monetary damages
HUNSAKER V. UNITED STATES 9
under the waiver’s listed provisions. 2 And because Section
106(a)(3)’s language is unambiguous, the scope of the
waiver is “clearly discernable from the statutory text in light
of traditional interpretive tools.” See Cooper, 566 U.S. at
291.
In light of this unambiguous scope, Section 106(a)
waives sovereign immunity for emotional distress damages
under Section 362(k). Emotional distress damages are a
form of monetary relief—compensatory damages—but they
are not punitive. 3 We have already determined that damages
for emotional distress are recoverable as “actual damages”
under Section 362(k). Dawson, 390 F.3d at 1148. And,
given that Section 106(a) waives immunity for nonpunitive
monetary damages awarded under the statute’s enumerated
provisions, the bankruptcy court’s award falls within the
scope of the waiver. In other words, the court’s award is a
“judgment awarding a money recovery, but not including an
award of punitive damages.” See 11 U.S.C. § 106(a)(3).
Finally, because the scope of the waiver is unambiguous,
“judicial inquiry is complete,” and there is no need to look
beyond the plain meaning of Section 106(a). See Conn.
Nat’l Bank v. Germain, 503 U.S. 249, 254 (1992) (quoting
2
The Eleventh Circuit has adopted the same interpretation of the
scope of Section 106(a)’s sovereign immunity waiver. See Hardy v.
United States (In re Hardy), 97 F.3d 1384, 1390 (11th Cir. 1996).
3
These damages compensate for an actual injury: distress. “Distress
is a personal injury familiar to the law” that “include[s] mental suffering
or emotional anguish.” See Carey v. Piphus, 435 U.S. 247, 263–64, 264
n.20 (1978) (discussing the standard for awarding emotional distress
damages as compensatory damages under 42 U.S.C. § 1983). In
contrast, punitive damages “are not compensation for injury”; they are
instead awarded “to punish reprehensible conduct and to deter its future
occurrence.” Gertz v. Robert Welch, Inc., 418 U.S. 323, 350 (1974).
10 HUNSAKER V. UNITED STATES
Rubin v. United States, 449 U.S. 424, 430 (1981)). There is
also no need to subject Section 362(k) to the same scrutiny
as Section 106(a). Section 362(k) “is not a waiver of
sovereign immunity; it is a substantive provision” that
provides individuals relief for willful violations of the
Bankruptcy Code’s automatic stay. See Gomez-Perez v.
Potter, 553 U.S. 474, 491 (2008) (drawing this distinction
between an analogous pair of statutes in the Age
Discrimination in Employment Act of 1967). Because
Section 106(a) waives sovereign immunity for claims under
Section 362(k), the latter provision “need not . . . be
construed in the manner appropriate to waivers of sovereign
immunity.” See United States v. Mitchell, 463 U.S. 206,
218–19 (1983); accord Gomez-Perez, 553 U.S. at 491.
In sum, the Hunsakers may recover emotional distress
damages against the government under Section 362(k)
because Section 106(a)’s waiver of sovereign immunity
“extend[s] unambiguously to such monetary claims.” See
Daniel, 891 F.3d at 768 (quoting Lane, 518 U.S. at 192).
B.
The government argues for an alternative interpretation
of Section 106(a)’s waiver based on the term “money
recovery,” which appears only in Section 106(a)(3)’s clause
providing for “an order or judgment awarding a money
recovery, but not including an award of punitive damages.”
In the government’s view, “money recovery” can be
construed “to refer only to claims seeking to restore to the
bankruptcy estate sums of money unlawfully in the
possession of governmental entities—not to the broader
measure of damages.”
The government’s position is based on the Supreme
Court’s decision interpreting the prior version of Section 106
HUNSAKER V. UNITED STATES 11
in United States v. Nordic Village, Inc., 503 U.S. 30 (1992).
This prior version of Section 106 provided that a bankruptcy
provision containing the term “‘creditor,’ ‘entity,’ or
‘governmental unit’ applies to governmental units,” and a
court’s determination “of an issue arising under such a
provision binds governmental units.” 11 U.S.C. § 106(c)
(Supp. III 1979), amended by 11 U.S.C. § 106 (1994). The
Supreme Court considered whether this language waived
immunity for a trustee’s action to recover an unauthorized
payment made to the IRS after the debtor had filed for
bankruptcy. Nordic Vill., 503 U.S. at 31. The Court held the
statute did not waive sovereign immunity for the trustee’s
action because the statute’s text failed to unequivocally
subject the government to “claims for monetary relief.” Id.
at 39.
“Congress amended Section 106(a)(1) in 1994, at least
in part, as a response to Nordic Village.” In re DBSI, 869
F.3d at 1011 n.8 (citing H.R. Rep. 103-835, at 42 (1994)).
Using this backdrop as a springboard, the government argues
“money recovery” can be interpreted as only allowing for the
relief the Supreme Court held was unavailable in Nordic
Village—the recovery of money unlawfully in the
government’s possession.
We reject this interpretation because it is not plausible in
light of the statute’s text. In particular, Section 106(a)(3)’s
exclusion of punitive damages dispels the government’s
interpretation. In this provision, the phrase “judgment
awarding a money recovery” is immediately followed by the
carve-out “but not including an award of punitive damages.”
11 U.S.C. § 106(a)(3). If “money recovery” is limited,
however, to recovering “sums of money unlawfully in the
possession of governmental entities,” the punitive damages
carve-out is meaningless. Punitive damages are not “sums
12 HUNSAKER V. UNITED STATES
of money unlawfully in the possession of governmental
entities.”
Given that the government’s interpretation of “money
recovery” renders part of the statute meaningless, this
interpretation runs afoul of “one of the most basic
interpretive canons, that ‘[a] statute should be construed so
that effect is given to all its provisions, so that no part will
be inoperative or superfluous, void or insignificant[.]’” See
Corley v. United States, 556 U.S. 303, 314 (2009) (first
alteration in original) (quoting Hibbs v. Winn, 542 U.S. 88,
101 (2004)). For this reason, the government’s construction
of Section 106(a) is implausible. See Cooper, 566 U.S. at
290–91. And we cannot rely on an implausible construction
of the statute to preserve the government’s immunity. See
id.; see also In re DBSI, 869 F.3d at 1013. We instead afford
Section 106(a) its plain meaning: Congress has waived
sovereign immunity for nonpunitive monetary damages
under the waiver’s enumerated provisions, including Section
362(k).
C.
We recognize the First Circuit reached a different result
when construing the scope of Section 106(a)’s waiver in
United States v. Rivera Torres (In re Rivera Torres),
432 F.3d 20 (1st Cir. 2005). We briefly turn to the First
Circuit’s opinion and explain why we disagree with its
reasoning.
In Rivera Torres, the First Circuit analyzed whether
Section 106(a) waives sovereign immunity for emotional
distress damages awarded under a different provision
enumerated in the waiver: 11 U.S.C. § 105. 432 F.3d at 23.
In resolving this issue, the First Circuit adopted a “temporal
approach.” Id. at 25. This approach focuses on whether
HUNSAKER V. UNITED STATES 13
Congress understood emotional distress damages to be
available under Section 106(a)’s enumerated provisions at
the time of the 1994 amendment to the statute. Id. The First
Circuit reasoned that “congressional understanding” can be
evaluated by considering the “background law” at the time
of the amendment. See id. at 25–26.
After surveying the state of the law in 1994, the First
Circuit concluded that none of the relevant provisions
enumerated in Section 106(a)(1) “clearly established the
availability, even against private parties, of an award of
emotional distress damages in 1994 as a matter of
background law.” Rivera Torres, 432 F.3d at 29. Thus, the
First Circuit reasoned these enumerated sections “do not
provide a basis to find [a] clear waiver of sovereign
immunity as to emotional distress damages.” Id.
We decline to adopt the First Circuit’s temporal
approach to Section 106(a) for several reasons. First, the
plain language of the statute is dispositive. Because the
scope of Section 106(a)’s waiver is unambiguous, there is no
need to look beyond the statute’s text and ascertain whether
it was clearly established in 1994 that emotional distress
damages were recoverable under Section 362(k). See, e.g.,
Germain, 503 U.S. at 253–54 (“We have stated time and
again that courts must presume that a legislature says in a
statute what it means and means in a statute what it says
there.”).
Second, we disagree with the First Circuit’s
interpretation of Section 106(a)(5), which the First Circuit
relied upon to tether its temporal approach to the statute’s
text. Section 106(a)(5) provides: “Nothing in this section
shall create any substantive claim for relief or cause of action
not otherwise existing under this title, the Federal Rules of
Bankruptcy Procedure, or nonbankruptcy law.” In the First
14 HUNSAKER V. UNITED STATES
Circuit’s view, this text limits Section 106(a)’s waiver to
only those remedies that were available at the time of the
1994 amendment because the text “forbids the creation of
any substantive claim for relief ‘not otherwise existing under
this title, the Federal Rules of Bankruptcy, or non-
bankruptcy law.’” See Rivera Torres, 432 F.3d at 31
(quoting 11 U.S.C. § 106(a)(5)). And, based on Section
106(a)(5), the First Circuit reasoned that “Congress has
clearly endorsed a temporal approach.” Id. at 26.
We do not read the same temporal restriction into
Section 106(a)(5). Section 106(a)(5) only states that Section
106(a)—a provision waiving immunity for various
substantive provisions—does not itself create any new
causes of action or substantive claims for relief. See
Franklin Sav. Corp. v. United States (In re Franklin Sav.
Corp.), 385 F.3d 1279, 1286 (10th Cir. 2004) (“By its
express terms . . . Bankruptcy Code § 106 does not provide
a substantive or independent basis for asserting a claim
against the government.”). In other words, Section 106(a)(5)
confirms that a party bringing a claim against the
government “must demonstrate that a source outside of” the
waiver provision “entitles [it] to the relief sought.” See In re
Hardy, 97 F.3d at 1388. This section does not graft a
temporal restriction into the waiver’s scope.
Third, Section 362(k) predates the operative text of
Section 106(a). Although we interpreted Section 362(k) to
provide for emotional distress damages in Dawson in
2004—ten years after Congress enacted the relevant text in
Section 106(a)—Section 362(k) has always permitted
recovery of damages for emotional distress. See Rivers v.
Roadway Express, Inc., 511 U.S. 298, 312–13 (1994) (“A
judicial construction of a statute is an authoritative statement
HUNSAKER V. UNITED STATES 15
of what the statute meant before as well as after the decision
of the case giving rise to that construction.”).
For these reasons, we decline to adopt the First Circuit’s
temporal approach and rest our interpretation of Section
106(a) on the statute’s plain text.4
IV.
In sum, sovereign immunity does not preclude an award
of emotional distress damages against the United States for
willful violation of the Bankruptcy Code’s automatic stay.
The district court erred in ordering the bankruptcy court to
dismiss the Hunsakers’ complaint on sovereign immunity
grounds. Accordingly, we reverse the district court’s
judgment, and we remand to the district court with
instructions to consider the government’s challenge to the
merits of the Hunsakers’ claims. See, e.g., Mastro v. Rigby,
764 F.3d 1090, 1097 (9th Cir. 2014) (“When a district court
improperly dismisses a bankruptcy appeal without reaching
the merits, we generally reverse the district court’s dismissal
and remand for the district court’s consideration of the
appeal in the first instance.”).
REVERSED AND REMANDED.
4
We note that, even under a temporal approach, some bankruptcy
courts had awarded emotional distress damages for willful violations of
the automatic stay before the enactment of Section 106(a) in 1994. See
Brower Oil Co. v. Brannen (In re Brannen), Ch. 7 Case No. 89-60229,
Adv. No. 89-6011, 1990 WL 10007473, at *4 (Bankr. S.D. Ga. June 27,
1990); Wagner v. Ivory (In re Wagner), 74 B.R. 898, 905 (Bankr. E.D.
Pa. 1987); Mercer v. D.E.F., Inc. (In re Mercer), 48 B.R. 562, 565
(Bankr. D. Minn. 1985).