In re: Gravel, No. 20-1 (2d Cir. 2021)
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The Second Circuit vacated and reversed the bankruptcy court's order imposing punitive sanctions in three chapter 13 cases. In this case, PHH sent monthly mortgage statements listing fees totaling $716 that had not been properly disclosed in the three cases. PHH was sanctioned $75,000 for violation of Bankruptcy Rule of Procedure 3002.1 and $225,000 for violation of bankruptcy court orders.
The court agreed with PHH that Rule 3002.1 does not authorize punitive monetary sanctions, and that PHH did not violate the court orders as a matter of law. The court explained that a broad authorization of punitive sanctions is a poor fit with Rule 3002.1's tailored enforcement mechanism and limited purpose. Therefore, punitive sanctions do not fall within the "appropriate relief" authorized by Rule 3002.1.
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