Circuits Split on Sovereign Immunity and Emotional Distress Damages for a Stay Violation

The waiver of sovereign immunity in Section 106(a) allows an individual to collect damages for emotional distress resulting from the government’s willful violation of the automatic stay, according to the Ninth Circuit. The Ninth Circuit created a split of circuits because the First Circuit had held in U.S. v. Rivera (In re Rivera), 432 F.3d 20 (1st Cir. 2005), that Section 106(a) does not waive sovereign immunity for emotional distress damages resulting from a stay violation. Daniel Geyser of Dallas, who prevailed in the Ninth Circuit on behalf of the debtors, told ABI that “Congress waived sovereign immunity to put the government on equal footing with private parties.” The damage award, he said, “holds the government accountable for its actions — just as Congress intended.”

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