Background
This appeal arises from the Chapter 7 bankruptcy of With Purpose, Inc., a financial technology start-up. Toby Neugebauer, a co-founder, and the Ayers parties, who were co-founders and early investors, engaged in disputes following the company’s collapse. The Ayers parties pursued a deposition of Neugebauer in an arbitration proceeding that continued after With Purpose filed for bankruptcy. Neugebauer moved to enforce the automatic stay, and the bankruptcy court awarded him actual damages for the willful violation.
The court’s reasoning
The court first addressed standing, holding that Neugebauer, as a creditor, falls within the zone of interests protected by the automatic stay and suffers a classic pocketbook injury. The court then found that the Ayers parties willfully violated the stay because they knew of the stay and intentionally pursued a deposition related to a breach-of-fiduciary-duty claim that belonged to the bankruptcy estate. Finally, the court ruled that attorney fees are mandatory damages under Section 362(k) and that the bankruptcy court’s calculation was not clearly erroneous.
This is a classic pocketbook injury sufficient to give [him] standing.
Tyler v. Hennepin County, 598 U.S. 631, 636 (2023)
What it means going forward
The decision clarifies that creditors can enforce the automatic stay against non-debtors when the underlying claim belongs to the bankruptcy estate and reinforces that attorney fees for enforcing the stay are mandatory damages subject to clear error review.