                                                           FILED
                                                            JUN 26 2012
                                                        SUSAN M SPRAUL, CLERK
                                                          U.S. BKCY. APP. PANEL
 1                                                        OF THE NINTH CIRCUIT

 2
 3                   UNITED STATES BANKRUPTCY APPELLATE PANEL
 4                             OF THE NINTH CIRCUIT
 5   In re:                        )      BAP No.     NV-11-1681-KiPaD
                                   )
 6   BOBBY JOE WALLACE, FDBA B & M )      Bk. No.     10-24125-LBR
     Well Drillers, Inc., and      )
 7   BRIDGET JANINE WALLACE,       )
                                   )
 8                   Debtors.      )
                                   )
 9                                 )
     ABEL ROSALES; ROBERT PIKE;    )
10   GARY AARDEMA; AARDEMA &       )
     LONDON,                       )
11                                 )
                     Appellants,   )
12                                 )
     v.                            )      M E M O R A N D U M1
13                                 )
     BOBBY JOE WALLACE; BRIDGET    )
14   JANINE WALLACE,               )
                                   )
15                   Appellees.    )
     ______________________________)
16
                     Argued and Submitted on June 15, 2012,
17                             at Las Vegas, Nevada
18                            Filed - June 26, 2012
19                Appeal from the United States Bankruptcy Court
                            for the District of Nevada
20
              Honorable Linda B. Riegle, Bankruptcy Judge, Presiding
21
22   Appearances:     David Mincin, Esq. of McKnight & Hendrix, P.C.
                      argued for appellants, Abel Rosales, Robert Pike,
23                    Gary Aardema, and Aardema & London; Christopher
                      Burke, Esq. argued for appellees, Bobby Joe Wallace
24                    and Bridget Janine Wallace.
25
     Before: KIRSCHER, PAPPAS, and DUNN, Bankruptcy Judges.
26
27        1
             This disposition is not appropriate for publication.
     Although it may be cited for whatever persuasive value it may have
28   (see Fed. R. App. P. 32.1), it has no precedential value. See 9th
     Cir. BAP Rule 8013-1.
 1
          Appellants, Abel Rosales (“Rosales”), Robert Pike (“Pike”),
 2
     Gary Aardema (“Aardema”), and Aardema & London (collectively
 3
     “Appellants”), appeal an order from the bankruptcy court finding
 4
     them in contempt for violating the discharge injunction and
 5
     awarding debtors Bobby J. Wallace (“Wallace”) and Bridget J.
 6
     Wallace (collectively “Debtors”) $260.00 for the fee to reopen
 7
     their chapter 72 bankruptcy case, $1,400.00 for their attorney’s
 8
     fees, and $3,000.00 for punitive damages.   We AFFIRM the award for
 9
     the reopening fee and attorney’s fees.   However, because the
10
     bankruptcy court did not articulate sufficient findings to support
11
     the punitive damages award, we VACATE and REMAND that portion of
12
     the order to the bankruptcy court to make the required findings
13
     under Rule 7052.
14
                  I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
15
          Prior to filing for bankruptcy in Nevada in 2010, Wallace was
16
     a licensed contractor in the state of California.   In 2009,
17
     Rosales and Pike each entered into a contract with Wallace and his
18
     company, BJ’s Drilling & Pump Service, to drill and install a well
19
     at their respective properties in California.   Rosales and Pike
20
     claimed they were damaged by Wallace’s negligence in installing
21
     the wells.   Aardema is California counsel for Rosales and Pike.
22
     Rosales’ and Pike’s claims against Wallace’s surety bond were
23
     denied.   Appellants were in the process of preparing civil
24
     litigation against Wallace, his business, and the bonding company
25
     when they received notice of Debtors’ bankruptcy.
26
27        2
             Unless specified otherwise, all chapter and code
     references are to the Bankruptcy Code, 11 U.S.C. §§ 101-1532, and
28   the Federal Rules of Bankruptcy Procedure, Rules 1001-9037.

                                      -2-
 1        Debtors filed a chapter 7 bankruptcy case on July 29, 2010.
 2   They listed Appellants as unsecured creditors in their Schedule F.
 3   Debtors received their discharge on November 2, 2010.    Appellants
 4   do not dispute receiving notice of Debtors’ discharge.
 5        On November 3, 2010, the day after entry of the discharge
 6   order, Rosales and Pike moved for relief from stay in Debtors’
 7   case to pursue an action in state court against Wallace and his
 8   business (the “Stay Relief Motion”).   Aardema stated in his
 9   attached declaration that Wallace held a commercial general
10   liability insurance policy (“CGL policy”) with Colorado Casualty,
11   which was in effect at the time he performed the work for Rosales
12   and Pike.   Aardema asserted that Colorado Casualty would provide
13   Wallace a defense and indemnify him if his clients’ damages
14   resulted from a covered act under the policy.   Aardema further
15   stated that Wallace’s surety bond with Travelers Casualty & Surety
16   Co. of America (“Travelers”) might also be a source for proceeds
17   to compensate his clients.   Therefore, although the Stay Relief
18   Motion sought relief to pursue the state court action against
19   Wallace and his business, any recovery was to be limited to the
20   proceeds of Wallace’s CGL policy and/or surety bond.    Debtors did
21   not oppose the Stay Relief Motion.
22        After a hearing, the bankruptcy court entered an order
23   granting the Stay Relief Motion (the “Stay Relief Order”) on
24   January 4, 2011:
25        IT IS HEREBY ORDERED that the automatic stay is lifted so
          that Abel Rosales and Robert Pike may pursue litigation
26        in the Superior Court of California against the Debtor
          herein, with recovery limited to the extent of an
27        insurance   policy   with   Colorado   Casualty   and   a
          contractor’s bond issued by Travelers Casualty & Surety
28        Co. of America.

                                     -3-
 1   Debtors’ chapter 7 case was closed on January 20, 2011.
 2           On April 15, 2011, three months after obtaining the Stay
 3   Relief Order, Appellants filed their action against defendants
 4   Wallace, BJ’s Drilling & Pump Service, and Travelers in the
 5   California state court for negligence, breach of contract, breach
 6   of the covenant of good faith and fair dealing, and for payment on
 7   the Travelers bond (the “Complaint”).        The Complaint did not refer
 8   to Colorado Casualty or any CGL policy.       Moreover, the prayer for
 9   relief states, in part:
10           WHEREFORE, plaintiffs   pray    as   follows   against   all
             defendants:
11
             1.   For an award of general damages in an amount to be
12                proven at the time of trial;
             2.   For an award of special damages in an amount to be
13                proven at the time of trial:
             3.   For punitive and exemplary damages [.]
14
15   Wallace received the Complaint by mail on or about September 10,
16   2011.
17           On September 30, 2011, Debtors filed a motion to reopen their
18   chapter 7 case and to find Appellants in contempt for violating
19   the discharge injunction under § 105 (the “Contempt Motion”).
20   Debtors contended that despite Aardema’s representations in the
21   Stay Relief Motion to the contrary and the limiting language in
22   the Stay Relief Order, the Complaint wrongfully sought damages
23   against “all defendants,” including Wallace personally.3         Debtors
24   requested an order reopening their case to proceed with the
25   Contempt Motion and awarding sanctions of $260.00 for the
26
27           3
             Debtors also contended that the Stay Relief Motion was
     unnecessary because they had already received their discharge, and
28   thus no stay existed. See § 362(c)(2)(C).

                                       -4-
 1   reopening fee, $1,000.00 for attorney’s fees, actual damages (to
 2   be determined), and $5,000.00 for punitive damages.
 3        Appearing through Nevada counsel, Appellants filed an
 4   opposition to the Contempt Motion on October 20, 2011, contending
 5   the Complaint complied with the Stay Relief Order and that an
 6   action naming Wallace solely to establish his liability to collect
 7   on an insurance policy was not barred by the Code.    Appellants
 8   reiterated that it was not their intent to pursue Wallace
 9   individually and contended that offers to Debtors’ counsel to
10   stipulate that any recovery be limited to insurance and/or bond
11   proceeds had been unsuccessful.
12        In his declaration in support of the opposition, Aardema
13   stated that the Complaint had been prepared long before Debtors
14   filed their bankruptcy case, and that it was inadvertently not
15   amended after obtaining the Stay Relief Order to reflect that
16   recovery would be limited to the insurance proceeds only.
17   Attached to Aardema’s declaration were several documents
18   reflecting his discussions with Debtors’ counsel about the
19   Contempt Motion.   In a letter to Debtors’ counsel dated
20   October 10, 2011, Aardema stated that Wallace was named in the
21   Complaint only because California law prohibits suits against
22   insurance companies directly.   Aardema advised Debtors’ counsel
23   that he was willing to stipulate that his clients were pursuing
24   only the insurance policy if Debtors would withdraw the Contempt
25   Motion.   In a fax dated October 13, 2011, Debtors’ counsel told
26   Aardema that he was willing to withdraw the Contempt Motion if:
27   (1) Debtors were reimbursed the $260.00 fee to reopen their
28   bankruptcy case; and (2) counsel was reimbursed $500.00 for his

                                       -5-
 1   attorney’s fees incurred to date.      In other words, the matter
 2   could have been settled for $760.00.     Aardema found the proposal
 3   unacceptable and proceeded to file the opposition.
 4        In their reply, Debtors contended that Appellants’ subjective
 5   intent not to pursue Wallace personally for a discharged
 6   prepetition debt was irrelevant; their affirmative act of seeking
 7   judgment against Wallace personally for general, special, and
 8   punitive damages was the issue and what violated the discharge
 9   injunction.   Debtors further argued that Appellants could not rely
10   on the Stay Relief Motion for their actions because it was filed
11   after the discharge had been entered.4
12        The bankruptcy court held a hearing on the Contempt Motion on
13   November 3, 2011.   To explain why punitive damages were requested
14   in the Complaint, Appellants said the Complaint language was
15   “boilerplate,” but that they were happy to file an amended
16   complaint.    Hr’g Tr. (Nov. 3, 2011) 3:18-4:1.   While the court
17   acknowledged that Wallace had to be named in the Complaint to
18   trigger coverage by his insurer, it was concerned about why the
19   Complaint failed to specify that Rosales and Pike were seeking
20   damages against the insurance policy only.     Id. at 4:22-5:5.
21   Appellants had no answer other than that Aardema had subsequently
22
23        4
             Debtors filed a supplemental reply on November 1, 2011,
     contending that on October 29, 2011, Wallace was again served with
24   a summons and the exact same complaint filed by Appellants seeking
     to hold him personally liable. Although Wallace asserted that
25   this complaint was identical to the one previously served on him
     on September 10, Debtors attached only a copy of the summons. At
26   the hearing on the Contempt Motion, Appellants’ counsel explained
     that the Complaint was personally served on Wallace the second
27   time only because Wallace refused to sign for it the first time
     when Appellants had attempted to serve him by mail. Hr’g Tr.
28   (Nov. 3, 2011) 5:11-24.

                                      -6-
 1   offered to stipulate that fact with Debtors’ counsel.   Id. at
 2   5:6-10.
 3        The bankruptcy court disagreed with Appellants’ assertion
 4   that the Complaint was not an act to collect on a discharged debt:
 5        I mean the way the complaint is written it sure is. How do we
          know tomorrow that [Aardema is] not going to default against
 6        the Debtor, and more importantly, the State court if there’s no
          answer will probably enter judgment.
 7
 8   Id. at 6:9-12.   When asked again why punitive damages were
 9   requested in the Complaint, Appellants responded that, as Aardema
10   had explained in his declaration, it was a “boilerplate complaint”
11   prepared before the bankruptcy, to which the court replied:
12        What excuse is there for boilerplate complaints? I mean,
          that is one of the lamest excuses I’ve heard, that I
13        shouldn’t be liable because it’s a boilerplate complaint.
14   Id. at 6:20-7:5.   Appellants argued that even if the Stay Relief
15   Motion was procedurally incorrect, per In re Munoz and the Stay
16   Relief Order, they were free to pursue Wallace’s insurance
17   proceeds.   According to Appellants, they had not willfully
18   violated the discharge injunction, Debtors had not suffered any
19   damages, and therefore sanctions were not warranted.
20        After hearing further argument from the parties, the
21   bankruptcy court granted the Contempt Motion and announced its
22   findings from the bench:
23        I find it's a violation of the discharge injunction, and
          I'll explain as to exactly what it is a violation of,
24        what's not, but I'm going to award sanctions of
          attorney's fees of Mr. Burke for filing the motion,
25        appearing today and all work necessary to prepare the
          orders, plus the reopening fee. Plus I'm going to allow
26        $3,000 in punitive damages.
27        Now, it is not a violation of the contempt [sic]
          injunction or -- I don’t have a problem with the fact
28        that you did the lift of stay after the discharge was

                                     -7-
 1        entered. That to me is irrelevant to today’s discussion.
          I also don’t find a problem if you merely name the
 2        defendant under the status of the law.
 3        But what is a problem is the boilerplate nature: We sue
          the defendant. We don’t say in the complaint, when you
 4        obviously knew it was necessary, that you were not suing
          the defendant in his individual capacity, but only to
 5        recover damages against the insurance company on account
          of his acts.
 6
          And then on top of that to seek punitive damages is an
 7        absolute violation of stay [sic].      Of course it’s
          intentional.   You obviously knew you could only go
 8        against the insurance company because you filed the
          motion. And even if you don’t know, there’s no excuse.
 9
          The attorney -- I mean, the idea that it’s boilerplate,
10        . . . that’s just ridiculous. The attorney's not doing
          his job.
11
          . . . .
12
          Under Sternberg, because they have yet to amend the
13        complaint, Mr. Burke is entitled to fees not just for
          filing the motion to stop it, but it’s still continuing.
14        So that’s going -- he’s entitled to fees all the way
          through this process because they still haven’t fixed it.
15
16   Id. at 10:17-12:12.
17        On November 17, 2011, the bankruptcy court entered an order
18   granting the Contempt Motion and awarding Debtors $260.00 for the
19   reopening fee, $1,400.00 for their attorney’s fees, and $3,000.00
20   for punitive damages (the “Contempt Order”).   Appellants timely
21   appealed.
22                               II. JURISDICTION
23        The bankruptcy court had jurisdiction under 28 U.S.C.
24   §§ 157(b)(2)(O) and 1334.    We have jurisdiction under 28 U.S.C.
25   § 158.
26                                 III. ISSUES
27   1.   Did the bankruptcy court err when it determined that
28   Appellants willfully violated the discharge injunction?

                                       -8-
 1   2.   Did the bankruptcy court abuse its discretion in awarding
 2   Debtors sanctions?
 3                          IV. STANDARDS OF REVIEW
 4        The bankruptcy court's finding of a willful violation of
 5   § 524 is reviewed for clear error.     Sciarrino v. Mendoza, 201 B.R.
 6   541, 543 (E.D. Cal. 1996)(citing McHenry v. Key Bank (In re
 7   McHenry), 179 B.R. 165, 167 (9th Cir. BAP 1995)(reviewing a
 8   willful violation of the automatic stay).    A finding is clearly
 9   erroneous when it is illogical, implausible, or without support in
10   the record.   United States v. Hinkson, 585 F.3d 1247, 1262
11   (9th Cir. 2009)(en banc).
12        An award or denial of sanctions under § 105(a) is reviewed
13   for abuse of discretion.    Nash v. Clark County Dist. Attorney's
14   Office (In re Nash), 464 B.R. 874, 878 (9th Cir. BAP 2012)(citing
15   Missoula Fed. Credit Union v. Reinertson (In re Reinertson),
16   241 B.R. 451, 454 (9th Cir. BAP 1999)).    We review for clear error
17   the trial court's factual findings in support of a punitive
18   damages award.   Bergen v. F/V St. Patrick, 816 F.2d 1345, 1347
19   (9th Cir. 1987).
20        In applying the abuse of discretion standard, we first
21   “determine de novo whether the [bankruptcy] court identified the
22   correct legal rule to apply to the relief requested.”    Hinkson,
23   585 F.3d at 1262.    If the correct legal rule was applied, we then
24   consider whether its “application of the correct legal standard
25   was (1) illogical, (2) implausible, or (3) without support in
26   inferences that may be drawn from the facts in the record.”    Id.
27   Only in the event that one of these three apply are we then able
28   to find that the bankruptcy court abused its discretion.    Id.

                                      -9-
 1        We may affirm on any ground supported by the record.     Dittman
 2   v. Cal., 191 F.3d 1020, 1027 (9th Cir. 1999).
 3                                V. DISCUSSION
 4   A.   Contempt under § 105.
 5        In a chapter 7 case, with exceptions not relevant here,
 6   “[t]he [bankruptcy] court shall grant the debtor a discharge.”
 7   § 727(a).   When entered, that order “discharges the debtor from
 8   all debts that arose before the date of the [bankruptcy filing].”
 9   § 727(b).   To give the discharge teeth, § 524(a)(2) prescribes
10   that a discharge “operates as an injunction against the
11   commencement or continuation of an action . . . to collect,
12   recover or offset any such debt as a personal liability of the
13   debtor, whether or not discharge of such debt is waived[.]”
14        Unlike § 362, no specific provision exists in the Code to
15   provide redress for violations of the discharge injunction.
16   Nonetheless, an alleged violation of the discharge injunction can
17   be pursued, as in this case, by a motion invoking the contempt
18   remedies allowed for in § 105(a).    In re Nash, 464 B.R. at 879-80
19   (party that knowingly violates the discharge injunction can be
20   held in contempt under § 105(a))(citing Walls v. Wells Fargo Bank,
21   N.A., 276 F.3d 502, 507 (9th Cir. 2002) and Renwick v. Bennett
22   (In re Bennett), 298 F.3d 1059, 1069 (9th Cir. 2002)).
23        To be subject to sanctions for violating the discharge
24   injunction, a party’s violation must be “willful.”   The Ninth
25   Circuit applies a two-part test to determine whether the
26   willfulness standard has been met: (1) did the alleged offending
27   party know that the discharge injunction applied; (2) and did such
28   party intend the actions that violated the discharge injunction?

                                      -10-
 1   In re Nash, 464 B.R. at 880 (citing Espinosa v. United Student Aid
 2   Funds, Inc., 553 F.3d 1193, 1205 n.7 (9th Cir. 2008), aff'd,
 3   130 S. Ct. 1367 (2010)); Zilog, Inc. v. Corning (In re Zilog,
 4   Inc.), 450 F.3d 996, 1007 (9th Cir. 2006).     For the second prong,
 5   the bankruptcy court's focus is not on the offending party’s
 6   subjective beliefs or intent, but on whether the party’s conduct
 7   in fact complied with the order at issue.    Bassett v. Am. Gen.
 8   Fin. (In re Bassett), 255 B.R. 747, 758 (9th Cir. BAP 2000), rev'd
 9   on other grounds, 285 F.3d 882 (9th Cir. 2002).     “A party's
10   negligence or absence of intent to violate the discharge order is
11   not a defense against a motion for contempt.”    Jarvar v. Title
12   Cash of Mont., Inc. (In re Jarvar), 422 B.R. 242, 250 (Bankr. D.
13   Mont. 2009)(citing Atkins v. Martinez (In re Atkins), 176 B.R.
14   998, 1009-10 (Bankr. D. Minn. 1994)); see also In re Sanburg Fin.
15   Corp., 446 B.R. 793, 804 (S.D. Tex. 2011)(that the offending party
16   may have not understood its actions to violate the discharge
17   injunction does not negate the willfulness finding, even if true).
18        The moving party must prove by clear and convincing evidence
19   that the offending party violated the order.    In re Zilog, Inc.,
20   450 F.3d at 1007; Knupfer v. Lindblade (In re Dyer), 322 F.3d
21   1178, 1191 (9th Cir. 2003).   The moving party also has this same
22   burden to prove that sanctions are justified.    Espinosa, 553 F.3d
23   at 1205 n.7.   The burden then shifts to the offending party to
24   demonstrate why it was unable to comply.    In re Bennett, 298 F.3d
25   at 1069.   If a bankruptcy court finds that a party has willfully
26   violated the discharge injunction, it may award actual damages,
27   punitive damages and attorney's fees to the debtor.    In re Nash,
28   464 B.R. at 880 (citing Espinosa, 553 F.3d at 1205 n.7 (citing

                                     -11-
 1   2    COLLIER   BANKRUPTCY MANUAL ¶ 524.02[2][c] (3d rev. ed.))).   The
 2   bankruptcy court has broad discretion in fashioning a remedy for
 3   violation of the discharge injunction.          In re Bassett, 255 B.R. at
 4   758.
 5   B.      The bankruptcy court did not clearly err when it found that
             Appellants willfully violated the discharge injunction.
 6
 7           Appellants did not deny knowing about the discharge
 8   injunction when they filed the Complaint.           It is undisputed they
 9   were served with the discharge order.          At minimum, Appellants knew
10   something was in place, whether it be the automatic stay or the
11   discharge injunction, that precluded them from pursuing Wallace
12   personally for the debt.         With this in mind, we turn now to
13   Appellants’ arguments on appeal.
14           First, Appellants assign error to the bankruptcy court for
15   ruling that the discharge injunction applied to the Complaint
16   because actions intended only to recover against a debtor’s
17   insurance proceeds are permissible.           Despite Appellants’ belief,
18   the bankruptcy court never disputed the propriety of pursuing an
19   action against Wallace in order to collect on his CGL policy, and
20   it never ruled to the contrary.           What the court took issue with is
21   that insurance proceeds are not what Appellants sought in their
22   Complaint.
23           The discharge injunction does not inhibit a creditor from
24   collection efforts against non-debtor entities.           § 524(e).5     We
25
             5
26                  Section 524(e) provides:
27           Except as provided in subsection (a)(3) of this section
             [which is not relevant here], discharge of a debt of the
28                                                          (continued...)

                                            -12-
 1   have held that a post-discharge action against a debtor solely in
 2   order to collect on an insurance policy is permissible, so long as
 3   the creditor does not intend to enforce any judgment against the
 4   debtor or debtor’s property.   Ruvacalba v. Munoz (In re Munoz),
 5   287 B.R. 546, 550 (9th Cir. BAP 2002)(“Where the purpose of an
 6   action is to collect from a collateral source, such as insurance,
 7   . . . and the plaintiff makes it clear that it is not naming the
 8   debtor as a party for anything other than formal reasons, no
 9   bankruptcy court order is necessary.”)(citing Patronite v. Beeney
10   (In re Beeney), 142 B.R. 360, 363 (9th Cir. BAP 1992)(allowing
11   plaintiff’s suit against debtor to collect on an insurance policy
12   merely leaves debtor in the position of a witness who would appear
13   at trial).   It must be clear that recovery will be limited to
14   insurance proceeds.   In re Munoz, 287 B.R. at 550 n.2.
15        The bankruptcy court agreed that naming Wallace in the
16   Complaint was necessary in order to trigger coverage under his CGL
17   policy and/or surety bond, and it entered the Stay Relief Order
18   allowing Appellants to proceed with the state court action naming
19   Wallace for that purpose.   However, Appellants crossed the line
20   when they filed a complaint that failed to mention the CGL policy
21   or make clear that they were pursuing only the proceeds.6   Despite
22
23
          5
           (...continued)
24        debtor does not affect the liability of any other entity on,
          or the property of any other entity for, such debt.
25
          6
             Appellants asserted they were prohibited by California law
26   from directly suing the insurer, Colorado Casualty. However, they
     have never asserted anything to the effect that they were
27   prohibited by law from mentioning the existence of an insurance
     policy in the Complaint. In fact, they expressly named Travelers
28   and the surety bond.

                                     -13-
 1   Appellants’ assertions in the Stay Relief Motion and the directive
 2   in the Stay Relief Order that recovery would be limited to the
 3   proceeds of Wallace’s CGL policy and/or surety bond, the Complaint
 4   failed even to mention the CGL policy.    The Complaint went one
 5   step farther and expressly sought damages, including punitive
 6   damages, against all defendants, which necessarily included
 7   Wallace.   Therefore, the Complaint was far from clear that
 8   recovery would be limited only to Wallace's insurance proceeds.
 9        Appellants contend they had no intention of proceeding
10   against Wallace personally.   We reject this argument for two
11   reasons.   First, the Complaint reflects an intent to sue Wallace
12   personally.   Further, a prayer for punitive damages show an intent
13   to collect against Wallace only, especially since such damages
14   would not be covered under his CGL policy or surety bond.     Second,
15   what Appellants “intended” is not the test for whether they
16   violated the discharge injunction; the question is whether their
17   conduct complied with the court’s order.    In re Bassett, 255 B.R.
18   at 758.
19        Clearly, Appellants’ conduct did not comply and, despite
20   their assertion to the contrary, the Stay Relief Order did not
21   provide them a good faith basis to disregard the discharge
22   injunction and sue Wallace personally.7    Aardema even admitted
23   that the “boilerplate” Complaint had been drafted long before
24   Debtors’ bankruptcy, and that it was inadvertently not amended to
25
          7
             Like the bankruptcy court, we are not concerned that
26   Appellants erroneously sought relief from stay and obtained the
     Stay Relief Order even though Debtors had already received a
27   discharge and no stay existed. See § 362(c)(2)(C). It has no
     bearing on whether they violated the discharge injunction, and it
28   has no bearing on the outcome of this appeal.

                                     -14-
 1   reflect that recovery would be limited to the insurance proceeds
 2   only.8   Thus, Appellants knew the Complaint, as written, violated
 3   the discharge injunction.   Their attempt to “cure” the violation
 4   after the fact by stipulating that they were not proceeding
 5   against Wallace personally was too little too late.   Even if their
 6   conduct could be considered negligent at the time, negligence is
 7   no defense to a motion for contempt.   In re Jarvar, 422 B.R. at
 8   250; In re Atkins, 176 B.R. at 1009-10; In re Sanburg Fin. Corp.,
 9   446 B.R. at 804.   Besides, after being informed by Debtors’
10   counsel that the Complaint violated the injunction, Appellants had
11   still not amended it by the time of the hearing on the Contempt
12   Motion in November 2011, which was nearly seven months after the
13   Complaint had been filed.
14        We conclude that Appellants’ conduct was willful and a
15   continuing violation of the discharge injunction.   Therefore, we
16   see no clear error by the bankruptcy court.
17   C.   The bankruptcy court did not abuse its discretion in awarding
          Debtors the reopening fee and the attorney’s fees for
18        Appellants’ contempt, but it erred by not making sufficient
          findings to support the award for punitive damages.
19
20        Appellants next argue that the bankruptcy court erred by
21   awarding Debtors sanctions.   Specifically, Appellants contend that
22   § 524(a)(2) does not provide for an award of attorney’s fees and
23   costs and, in any event, such an award is contrary to Sternberg v.
24   Johnston, 595 F.3d 937 (9th Cir. 2009).   They further argue that
25   punitive damages were not warranted because nothing in the record
26
          8
             We further note that the Stay Relief Order was entered on
27   January 4, 2011, and the Complaint was filed on April 15, 2011.
     Appellants therefore had over three months to amend the Complaint
28   before filing it, yet they failed to do so.

                                     -15-
 1   suggests they willfully violated the discharge injunction.     We
 2   have already concluded that Appellants willfully violated the
 3   discharge injunction.    Once the bankruptcy court made that
 4   finding, it was well within its discretion to award sanctions.
 5   The question is whether the sanctions were appropriate.
 6        We, as well as the Ninth Circuit, have held that if a
 7   bankruptcy court finds that a party has willfully violated the
 8   discharge injunction it may award actual damages and attorney's
 9   fees to the debtor.   Espinosa, 553 F.3d at 1205 n.7; In re Dyer,
10   322 F.3d at 1195 (attorney’s fees are an appropriate component of
11   a civil contempt award); In re Nash, 464 B.R. at 880.     Sternberg
12   has not changed that rule.
13        In Sternberg, the Ninth Circuit held that a debtor may
14   recover attorney's fees under § 362(k)9 to the extent they are an
15   element of the debtor's “actual damages.”   595 F.3d at 947.
16   Therefore, attorney's fees may be recovered for work associated
17   with bringing about an end to the stay violation but not for fees
18   the debtor incurred in prosecuting an adversary proceeding for
19   damages.   Id. at 948.   Notably, Sternberg is a stay violation case
20   under § 362(k), not a proceeding for civil contempt of the
21   discharge injunction under § 105.   Contrary to Appellants'
22   assertion, Sternberg expressly limited its holding to the
23   application of § 362(k); it does not preclude a debtor from
24   seeking attorney's fees in a civil contempt enforcement proceeding
25   under § 105.   Id. at 946 n.3.   Arguably, even if Sternberg did
26
          9
             Section 362(k) provides that an individual injured by any
27   willful violation of a stay shall recover actual damages,
     including costs and attorney’s fees, and, in appropriate
28   circumstances, may recover punitive damages.

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 1   apply, the fees awarded to Debtors were only those fees associated
 2   with bringing about an end to Appellants' violation of the
 3   discharge injunction, which was still continuing up until the
 4   hearing on the Contempt Motion.    Why the bankruptcy court applied
 5   Sternberg is unclear, although it may have applied Sternberg by
 6   analogy, and it erred in doing so.       However, such error was
 7   harmless because once the court found that Appellants had
 8   willfully violated the discharge injunction, it was authorized to
 9   consider an award for actual damages and attorney's fees.
10   In re Nash, 464 B.R. at 880; Espinosa, 553 F.3d at 1205 n.7.
11        Because the Contempt Motion was a contested matter subject to
12   Rule 9014, the bankruptcy court was required to make sufficient
13   findings to support the sanctions award under Rule 7052(a).        See
14   Rule 9014(c).   As for the reopening fee and attorney’s fees, we
15   conclude the bankruptcy court complied with Rule 7052(a) and did
16   not abuse its discretion in awarding those compensatory damages.
17   However, because the court did not make sufficient findings to
18   support the award for punitive damages, we must vacate and remand
19   that portion of the Contempt Order.
20        Although we have held that punitive damages are available in
21   cases of discharge injunction violations, § 105 is a civil
22   contempt authority and, as such, it authorizes only civil
23   sanctions as an available remedy.    In re Dyer, 322 F.3d at 1192.
24   Bankruptcy courts also are authorized under inherent authority to
25   sanction a broader range of conduct, such as improper litigation
26   tactics, but the court must make an explicit finding of bad faith
27   or willful misconduct to support it --- i.e., something more
28   egregious than mere negligence or recklessness.      Id. at 1196.

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 1   Bankruptcy courts are not authorized to impose criminal sanctions.
 2   Id. at 1193.
 3        Dyer recognized that civil penalties must be either
 4   compensatory or designed to coerce compliance.       Id. at 1192.
 5   Thus, “‘a flat unconditional fine totaling even as little as $50'
 6   could be [a] criminal [sanction] ‘if the contemnor has no
 7   subsequent opportunity to reduce or avoid the fine through
 8   compliance,’ and the fine is not compensatory.”       Id. (quoting
 9   F. J. Hanshaw Enters., Inc. v. Emerald River Dev., Inc., 244 F.3d
10   1128, 1137-38 (9th Cir. 2001).     However, “‘relatively mild’
11   noncompensatory fines” may be necessary under some circumstances.
12   In re Dyer, 322 F.3d at 1193 (citing Zambrano v. Tustin, 885 F.2d
13   1473, 1479 (9th Cir. 1989)).     Nonetheless, such punitive sanctions
14   cannot be “serious.”    Id.   The Dyer court left open the question
15   of what is a “serious” punitive sanction, but implied that any
16   fine above $5,000.00 (presumably in 1989 dollars) would be
17   considered “serious.”   Id. (citing Hanshaw, 244 F.3d at 1140
18   n.10).
19        Thus, whether the $3,000.00 punitive damages awarded in this
20   case is considered a coercive civil sanction or a “relatively
21   mild” noncompensatory sanction, the bankruptcy court needed to
22   make sufficient findings to support it.        In re Dyer, 322 F.3d at
23   1192-98.
24                                 VI. CONCLUSION
25        For the foregoing reasons, we AFFIRM the bankruptcy court’s
26   award to Debtors for the $260.00 reopening fee and the $1,400.00
27   for attorney’s fees.    However, because the bankruptcy court did
28   not make sufficient findings to support the $3,000.00 award for

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 1   punitive damages, we VACATE and REMAND that portion of the
 2   Contempt Order so the bankruptcy court can conduct proceedings
 3   consistent with this decision.
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