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Johnston v. Sternberg

The automatic stay is the most important protection in bankruptcy law. When a bankruptcy petition is filed, the automatic stay immediately bars creditors from taking action to collect from the debtor in bankruptcy. When a person is injured by a creditor’s willful violation of the automatic stay, the bankruptcy laws authorize that person to “recover actual damages, including costs and attorneys’ fees.”

This case concerned the scope of the “actual damages” remedy. The creditor, Sternberg, filed a petition for certiorari to the U.S. Supreme Court challenging the Ninth Circuit’s holding that “actual damages” encompasses damages for emotional distress. Public Citizen, representing the debtor, Johnston, opposed Sternberg’s petition for certiorari and filed a conditional cross-petition challenging the Ninth Circuit’s holding that “actual damages” does not include attorneys’ fees incurred in prosecuting the action for damages. The Court denied both petitions on October 4, 2010.