Flynn v. Internal Revenue Service (In Re Flynn)

MEMORANDUM AND ORDER

A trial of the above-captioned case was conducted on February 2, 1994. After considering the evidence, applicable authorities and the argument of counsel, I make the following Findings of Fact and Conclusions of Law.

FINDINGS OF FACT

Debtor filed a petition for relief under Chapter 13 of the Bankruptcy Code on April 17, 1992. Debtor properly scheduled the Internal Revenue Service (“IRS” or “Service”) as a creditor in her case, and the IRS duly received notice of the pendency of Debtor’s case pursuant to notice given by the Clerk of this Court. On August 26, 1992, the IRS filed two proofs of claim in Debtor’s case, and both claims were allowed for payment under Debtor’s Plan, which was confirmed on November 19, 1992. Copies of the Order of Confirmation were mailed to all creditors scheduled by the Debtor, including the Service.

Debtor and her husband were divorced prior to her bankruptcy, and Debtor had custody of, and provided support to, their two minor sons. A significant portion of the claim of the Internal Revenue Service stems from tax liabilities that arose during the time that Debtor and her husband were married, living together, and filing joint returns. Debtor testified that the liability arose because her ex-husband had under-reported his income, unknown to her, leading to the assessment of additional taxes.

On or about January 14, 1993, Debtor received a letter, dated January 12, 1993, from NationsBank of Georgia, N.A., advising her *1010 that the IRS had served NationsBank with a levy against the checking account which she maintained there. (Exhibit “P^l”). The letter advised her that the levy required the bank to remit the sums in her account, up to the amount of the levy, within twenty-one days from the date of service of the levy, unless the bank received a release of the levy from the Service before the expiration of that time period. The letter further advised her that her account would remain frozen in the meantime.

Debtor was in an extreme state of distress after she received the letter from the bank. She testified that her attorney had assured her that the filing of her Chapter 13 petition would stay any collection activities by any creditor, including the Internal Revenue Service. At the time she filed her ease she had been struggling to maintain her obligations, but the large tax obligation from her marriage, for which she was legally liable, but which she apparently had no actual participation in creating, ultimately forced her to file a Chapter 13 petition. Debtor stated that she believed that “the court had let her down and that the IRS was above the law if it could act in such fashion.”

NationsBank had enclosed a copy of the notice of levy with the January 12 letter, and the notice provided a toll free telephone number for the Jacksonville office of the Service. On January 15th, Debtor called that number and spoke with one or more persons in the collection unit of the IRS. She first spoke with a Service employee who verified on the Service’s computer that the Debtor had filed a Chapter 13 bankruptcy. Debtor told the employee that she needed the Service to release the levy. The representative admitted the levy should not have been filed, and stated that a release of the levy would be processed by the end of the day.

The United States’ witness, Ms. Marciano, an IRS employee in the Jacksonville office, stated that she did not speak to the Debtor on January 15th, but that a Ms. Frederick in the Jacksonville office did. Ms. Marciano produced computer records of all the contacts between the Jacksonville office and Debtor or her ex-husband. (Exhibit “P-11”). The records revealed that, on January 15, the “taxpayer’s ex-wife” (i.e., Debtor) had contacted the IRS and stated that she needed the Service to fax a release of the levy to her bank. Entries on this form are made chronologically. Above that line but undated was the following notation: “PREV CMTS TPXW FILED BANKRUPTCY, REQUESTED LP 68 TO LI//.” The Service’s witness could not identify the source of that information or the date it was entered, but translated the various codes to yield a message of “previous comments, taxpayer’s ex-wife filed bankruptcy, requested LP 68 to LI//,” the latter symbols being internal codes describing different forms or notices issued by the Service. The fax from the Service was processed on the 15th as promised by the IRS employee, but due to a limited number of fax machines and a large volume of work, it was not actually faxed until the following week. The original notice releasing the levy, however, was mailed from Jacksonville on the 15th and received by Nations-Bank on Tuesday, January 19,1993. On that same day, Debtor again contacted the Service and spoke with Ms. Marciano and discussed the situation with her.

The IRS’ levy had several unfortunate consequences. First, because the Debtor learned that she could not access her bank account and because she had very limited cash on hand, she was forced to cancel a birthday party that she had planned for her eleven-year-old son on January 16, 1993. This fact added to the distress that she originally experienced upon receipt of the letter from NationsBank informing her of the levy. She spent the entire three day weekend in a state of agitation, what she described as being “in a wreck,” worried specifically that her rent and other cheeks would be dishonored by the bank. She subsequently received notice that several checks issued prior to January 15th, at a time when her account held adequate funds to cover the checks, were dishonored because the checks were presented for payment during the period of time that her account was frozen. See Exhibits P-1, P-2 and P-5. In each ease, the bank returned the item to the payee of the check and charged $20.00 directly to the Debtor for the dishonor. Additionally, Debtor was re *1011 quired, in making good on the dishonored checks, to pay an additional $20.00 insufficient fund charge to each of the payees. All told, Debtor incurred $120.00 in “NSF” charges.

The Service ultimately faxed a copy of the release of levy to NationsBank. Thus, by January 21, 1993, NationsBank had been advised by mail and by fax that the levy had been released. Debtor was forced to endure, however, the final indignity of being stopped in the checkout line of a Kroger supermarket as she was attempting to purchase groceries. Kroger was one of the payees whose check NationsBank refused to honor during the period that Debtor’s account was frozen. Thus, although the levy had been removed from Debtor’s account, Debtor was still unable to negotiate another check without leaving the checkout line, going to the manager’s office and making additional arrangements for payment because Kroger’s computer identified her account as being one on which a bad check had previously been drawn. All of this occurred in full view of others in the line and caused her great embarrassment.

Debtor initiated this proceeding on January 26, 1993, alleging that the post-petition levy upon her account constituted a “willful violation” of the automatic stay under Section '362(h) of the Bankruptcy Code. As actual damages, Debtor claims a total of $120.00 in check charges, three days lost wages in the total amount of $360.00, and travel and meal expenses in the total amount of $108.55 due to the fact that she was required to travel to the hearing on this matter from Birmingham, Alabama, where she now resides. She further seeks compensatory damages for mental embarrassment, humiliation and anxiety in the amount of $25,000.00, as well as an award of attorney’s fees for her representation in this adversary proceeding. Finally, Debtor seeks an award of punitive damages against the IRS in the sum of $100,000.00.

As part of its defense, the United States sought to show that, notwithstanding the fact that notice was provided to the IRS in accordance with the requirements of the Bankruptcy Rules, that the IRS filed two proofs of claim in the case, and that counsel for the United States appeared on behalf of the IRS at a hearing on confirmation and to consider the Debtor’s objection to the IRS’ claim, the notice of levy was issued by the Service’s Jacksonville office, which did not have actual knowledge of Debtor’s bankruptcy case. In an effort to explain why the Jacksonville office did not have actual notice of Debtor’s bankruptcy, Ms. Marciano testified that the bankruptcy unit of the Internal Revenue Service, located in Atlanta, Georgia, receives all notices of bankruptcy filings for this region. Thus, Debtor’s bankruptcy filing was properly noted in the records of the bankruptcy unit in Atlanta. However, Debtor and her former husband previously resided in Florida. As a result, the notice of levy was issued by the office located in Jacksonville, Florida, which did not have any information regarding Debtor’s bankruptcy. (Exhibit “P-3”). The question, then, is why was the Jacksonville office without notice of Debtor’s bankruptcy.

The answer to this question, according to Ms. Marciano, revolves around the fact that the past-due taxes at issue in this proceeding arise from joint returns filed by Debtor and her husband. The collection file for these joint tax obligations contained two Social Security numbers, the first being that of Debt- or’s ex-husband, and the second being that of Debtor’s. According to Ms. Marciano, when dealing with a tax obligation on which a husband and wife are jointly hable, the Service’s current collection system is keyed exclusively to the name and Social Security number of the spouse who appears first on the joint return, in this case Debtor’s ex-husband. As a result, if the spouse, whose name and Social Security number appear first on the joint return, does not file a bankruptcy, the collection unit of the IRS does not put a “bankruptcy hold” on the collection file for that particular obligation. In other words, when, as in this case, the spouse not appearing first on the joint return, is the only party filing bankruptcy, the Service’s current system is incapable of transmitting any information regarding the spouse’s bankruptcy to the collection file for the joint tax obligation.

After a taxpayer contacts it, however, the Service is apparently capable of manually *1012 entering the information regarding the taxpayer’s bankruptcy into the collection file. Thus, in response to some post-petition collection activity, a taxpayer will often notify the IRS that he or she has filed a bankruptcy ease, and at that point, the Service will respond by verifying the information, releasing all levies, and manually entering the information in their records so as to suspend further collection activity. This is accomplished by adding the information concerning the bankruptcy debtor coded to her Social Security number to the Internal Revenue Service collection file under the name of the primary taxpayer. Under the IRS’ current system, then, it is virtually certain that the IRS will not transfer the bankruptcy information of a taxpayer, whose name does not appear at the top of a joint return, into the collection file for that joint tax obligation until the IRS has initiated post-petition collection activities against the taxpayer, despite actual notice of debtor’s filing.

Ms. Marciano further testified that she did speak with the Debtor by telephone on January 19th, and she informed the Debtor that the release of levy had been mailed on the 15th. Debtor informed her that, as a result of the post-petition levy, she would lose over $300.00 in bank fees and rent penalties. Ms. Marciano explained to the Debtor that she had certain rights in the event of a wrongful levy, and that there was an administrative procedure whereby Debtor could recover the costs incurred as a result of the wrongful levy. Ms. Marciano also took Debtor’s new address information, and forwarded copies of the taxpayers’ rights brochure to Debtor. However, that letter was returned to the Service on January 26th. Ms. Marciano also attempted on more than one occasion to notify Debtor’s counsel Mr. Gastin of her contact with the Debtor and of the fact that the Service would make appropriate restitution for out-of-pocket expenses but received no response.

. Many of the internal procedures and nearly all of the capability of the Internal Revenue Service’s computers are beyond the understanding of the Court. Certainly no extensive evidence has been introduced on either point. As a result, the Court is faced with the difficult task of gleaning whether the conduct of the Internal Revenue Service is such as that will make it legally responsible to the Debtor for actual or punitive damages while looking through the proverbial “glass darkly.” Because the Court cannot speculate on the full scope of the Service’s procedures or of its computer capability, it is limited to the specific evidence before it in this case. The uncontradicted evidence is that the collection branch of the Service cannot determine independently, and is not routinely notified when a debtor, who happens not to be the primary taxpayer on a joint tax obligation, files bankruptcy. Despite notice to the Service, in accordance with applicable law, the Service does not notify its internal collection unit, and the result is that it continues its collection efforts in accordance with the provisions of federal, non-bankruptcy, law. It is also uncontradicted that an entry was made in the computer records of the collection branch prior to the January 15, 1993, entry, that the “taxpayer’s ex-wife” had filed bankruptcy. Interestingly, although the testimony was that collection information is stored and retrieved exclusively under the Social Security number of the Debtor’s ex-husband, the collection files of the Internal Revenue Service nevertheless contain the Debtor’s Social Security number and other information about her, including the fact that she had a bank account at the NationsBank in Savannah, Georgia.

The Court takes judicial notice of the fact that this is not the first time that a debtor in this Court has filed an adversary proceeding against the Internal Revenue Service seeking damages and/or declaratory relief under similar circumstances. 1 Counsel for the government has acknowledged this fact, forthrightly stating that, because of the inability of the Service’s computer program to flag the collection file of a taxpayer when only the so- *1013 called secondary taxpayer files bankruptcy, Debtor’s situation is not an isolated case.

The United States raises a number of defenses to Debtor’s claim for damages under Section 362(h). First, it contends that it is immune from an award of damages in this proceeding under the doctrine of sovereign immunity. Second, it contends that the testimony of Ms. Marciano demonstrates that there was no willful violation of the automatic stay because the acts of the IRS were wholly inadvertent. Third, the United States argues that Debtor has not adequately proven any damages, disputing particularly the com-pensability of Debtor’s emotional distress on the grounds that such damages are not supported by medical testimony and that the evidence demonstrates that she had a preexisting state of emotional distress. The government also points out that it has stood ready since the filing of this case to compensate Debtor for her actual out-of-pocket expenses. Fourth, the government disputes any liability for attorney’s fees based upon the fact that, merely by telephonic contact or perhaps some correspondence on the part of counsel, the Service would have compensated the Debtor for her out-of-pocket losses. Finally, the United States argues that the actions of the IRS do not warrant the imposition of punitive damages because there has been no showing that the IRS acted with the sort of malice that is required for such an award under section 362(h).

CONCLUSIONS OF LAW

This ease presents three basic issues. The first is whether the IRS “willfully violated” the automatic stay under section 362(h) of the Bankruptcy Code when it attempted to collect on a pre-petition tax obligation by levying upon Debtor’s bank account post-petition. The second issue is whether the United States of America, as the true party in interest in this case, has waived its sovereign immunity under section 106 of the Code as to any damages which are properly awarded under section 362(h). The final issue is whether Debtor has proven any damages under section 362(h).

1. Willful Violation of the Automatic Stay

Section 362(a) of the Bankruptcy Code imposes an “automatic stay” upon the filing of a petition in bankruptcy, which prohibits, among other things, any act to obtain possession of estate property or to collect, assess, or recover a claim against a debtor that arose before the commencement of the debtor’s bankruptcy case. 11 U.S.C. §§ 362(a)(3) and (a)(6). 2 “The automatic stay is one of the fundamental debtor protections provided by the bankruptcy laws,” 3 and section 362(h) was added to the Bankruptcy Code to provide courts with an enforcement mechanism to protect a debtor from creditors who willfully violate the stay. See In re Solis, 137 B.R. 121, 124 (Bankr.S.D.N.Y.1992). In this regard, section 326(h) provides:

An individual injured by any willful violation of a stay provided by [§ 362(a) ] shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.

11 U.S.C. § 362(h).

The requirement that a stay violation be “willful” does not mean that an entity must act with the specific intention of violating the stay. To the contrary, this court has previously held that “willful”, as the term is used in section 362(h), is satisfied when an entity engages in a deliberate act that is done in violation of the automatic stay with knowledge that the debtor has filed a petition *1014 in bankruptcy. See McDougald v. Internal Revenue Service (Matter of McDougald), Adv. No. 9CM177, slip op. at 12 (Bankr. S.D.Ga. April 24, 1991) 4 “[W]here there is actual notice of the bankruptcy it must be presumed that the violation was deliberate or intentional.” Homer Nat’l Bank v. Namie, 96 B.R. 652, 654 (W.D.La.1989).

The IRS does not dispute that it is subject to the automatic stay imposed under 11 U.S.C. § 362(a). Nor does it dispute that, after receiving notice of Debtor’s Chapter 13 bankruptcy, it violated the automatic stay by effecting a post-petition levy upon Debtor’s checking account. I therefore conclude that the IRS’ actions in sending a notice of levy to Debtor’s bank constituted a willful violation of the automatic stay under section 362(h) of the Code.

2. Waiver of Sovereign Immunity

Debtor has named both the IRS and the United States of America as Defendants in this action. The IRS is a bureau within the Department of the Treasury of the United States of America, and it is not authorized to sue or be sued in its own right. 5 The United States of America, therefore, is the only party properly named as a Defendant in this ease. Accordingly, the Internal Revenue Service is dismissed as a Defendant in this action. 6

The doctrine of sovereign immunity bars all lawsuits against the United States of America unless Congress has provided an express and unequivocal waiver of such immunity. Block v. North Dakota, 461 U.S. 273, 280, 103 S.Ct. 1811, 1816, 75 L.Ed.2d 840 (1983); U.S. v. Nordic Village, Inc., — U.S. -,-, 112 S.Ct. 1011, 1014-15, 117 L.Ed.2d 181 (1992); U.S. v. Mitchell, 445 U.S. 535, 538, 100 S.Ct. 1349, 1351, 63 L.Ed.2d 607, 613 (1980); U.S. v. King, 395 U.S. 1, 4, 89 S.Ct. 1501, 1503, 23 L.Ed.2d 52, 56 (1969). Moreover, any waiver of immunity “must be construed strictly in favor of the sovereign, and not enlarged beyond what the language requires.” U.S. v. Nordic Village, Inc., — U.S. at -, 112 S.Ct. at 1015 (quoting Ruckelshaus v. Sierra Club, 463 U.S. 680, 685, 103 S.Ct. 3274, 3278, 77 L.Ed.2d 938 (1983)). Congress provided for a limited waiver of sovereign immunity in section 106 of the Bankruptcy Code, which provides:

(a) A governmental unit is deemed to have waived sovereign immunity with respect to any claim against such governmental unit that is property of the estate and that arose out of the same transaction or occurrence out of which such governmental unit’s claim arose.

(b) There shall be offset against an allowed claim or interest of a governmental unit any claim against such governmental unit that is property of the estate.

(c) Except as provided in subsections (a) and (b) of this section and notwithstanding any assertion of sovereign immunity—

(1) a provision of this title that contains “creditor”, “entity” or “governmental unit” applies to governmental units; and

(2) a determination by the court of an issue arising under such a provision binds governmental units.

11 U.S.C. § 106.

In construing section 106, the Supreme Court has characterized subsections (a) and (b) as unequivocal expressions of very limited exceptions to the doctrine of sovereign immunity:

Subsections (a) and (b) of section 106 meet this “unequivocal expression” requirement with respect to monetary liability ... [Tjhey plainly waive sovereign immunity *1015 with regard to monetary relief in two settings: compulsory counterclaims to governmental claims, 11 U.S.C. § 106(a); permissive counterclaims to governmental claims capped by a setoff limitation, 11 U.S.C. § 106(b). 7

U.S. v. Nordic Village, Inc., — U.S.-, -, 112 S.Ct. 1011, 1015, 117 L.Ed.2d 181 (1992). See also In re Solis, 137 B.R. 121 (Bankr.S.D.N.Y.1992); Taborski v. U.S., 141 B.R. 959, 964 (N.D.Ill.1992); Taylor v. United States (In re Taylor), Ch. 13 Case No. 89-11583, Adv. No. 90-1036, slip op. at 3 (Bankr. S.D.Ga. Sept. 24, 1990) (Dalis, B.J.). Both subsections require that the government have a claim against the estate as a prerequisite to their application, although only subsection (b) expressly requires that the governmental unit have an “allowed claim” in the debtor’s case. The key difference between the two provisions, however, is that subsection (a) waives immunity with regard to an affirmative recovery of damages where the debtor’s claim and the government’s claim arise out of the same transaction, while subsection (b) permits a narrower recovery (limited to the value of any claim the government has against the estate) in a greater number of circumstances because the claims do not have to be transactionally related. In re Solis, 137 B.R. 121, 125 (Bankr.S.D.N.Y.1992); U.S. v. McPeck, 910 F.2d 509, 512-13 (8th Cir.1990).

Because the Service has two allowed claims in Debtor’s case, there is no question that the United States’ has waived its immunity with regard to any damages which Debt- or might offset against those claims under subsection (b). Debtor, however, is seeking an affirmative recovery of damages from the IRS. As a result, the requirements of section 106(a) must be satisfied before the IRS can be deemed to have waived its sovereign immunity with regard to such a recovery. In applying section 106(a), this court has previously held that sovereign immunity is waived for affirmative recovery against governmental unit only when all of the following conditions are met:

(1) the estate has a claim against the governmental unit and the governmental unit has a claim against the estate;

(2) the claim against the governmental unit is property of the estate; and

(3) the claims of both the estate and the governmental unit must arise out of the same transaction or occurrence.

See McDougald v. Internal Revenue Service (Matter of McDougald), Adv. No. 90-4177, slip op. at 12 (Bankr.S.D.Ga. April 24, 1991); Matter of Cowart, 128 B.R. 492, 497 (Bankr.S.D.Ga.1990). See also Taylor v. United States (In re Taylor), Ch. 13 Case No. 89-11583, Adv. No. 90-1036, 1990 WL 424983, slip op. (Bankr.S.D.Ga. Sept. 21, 1990) (Dalis, B.J.), aff'd, CV191-093, 1991 WL 537024 (S.D.Ga. Sept. 5, 1991), reaff'd, 148 B.R. 361 (S.D.Ga.1992); In re Solis, 137 B.R. 121 (Bankr.S.D.N.Y.1992) (citing Matter of Co-wart, 128 B.R. at 497).

*1016 The first prong of the test simply requires that the estate have a claim against the governmental unit and that the governmental unit have a claim against the estate. Although there has been some disagreement among the courts as to whether the governmental unit must have filed a proof of claim against the estate, this court has previously concluded that the express language of section 106(a) makes clear that it merely requires that the governmental unit have a claim against the debtor’s estate:

A “claim” means a right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured. “The express language of § 106(a) says nothing about the necessity of the government unit filing a proof of claim in order to trigger the waiver of sovereign immunity. By the dear terms of the statute, the waiver is triggered by the existence of the government’s ‘claim’, not the filing of the proof of claim.”

McDougald, supra, at 8-9 (quoting Taylor, supra, at 5-6 (emphasis original, citations omitted). Cf. Matter of Cowart, 128 B.R. at 497 (no waiver of immunity under section 106(a) because IRS did not have a claim against debtor). Contra In re Nichols, 143 B.R. 104 (Bankr.S.D.Ohio 1992) (IRS must file proof of claim before Chapter 7 debtor could have affirmative recovery of damages for IRS’ alleged intentional violation of the automatic stay). Under either view, this prong is satisfied in this case because the IRS filed a proof of claim in Debtor’s case, and Debtor has a claim against the United States based upon the IRS’ willful violation of the stay.

As to the second prong, this court has previously determined that a debtor’s claim for damages under section 362(h) is property of the estate under 11 U.S.C. Sections 541(a)(1) and 1306(a)(1). McDougald, supra, at 9-10. Most courts are in agreement. See e.g., United States v. McPeck, 910 F.2d 509, 512-13 (8th Cir.1990) (where IRS violated stay by continuing its tax collection efforts after debtor filed a Chapter 13 case, debtor’s § 362(h) claim for damages (including attorney’s fees) against the IRS belongs to debt- or’s estate): In re Solis, 137 B.R. at 126 (“Debtor’s claim [against the IRS under § 362(h) ] is property of the estate by operation of §§ 541 and 1306”). Therefore, any damages that Debtor successfully proves that she suffered as a result of the IRS’ willful violation of the stay are property of the estate.

As to the third prong of the test, a determination of whether the claims arise out of the same transaction or occurrence requires the court to employ the same analysis that it would use in determining whether a claim is a “compulsory counterclaim” under Rule 13 of the Federal Rules of Civil Procedure. See McDougald, supra, at 10; Taylor, supra, at 6. Rule 13 defines a compulsory counterclaim as a claim which “arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim.” Fed.R.Civ.P. 13(a). In applying Rule 13, the “logical relationship” test is the appropriate standard within the Eleventh Circuit. Taylor, supra, at 7 (citing U.S. v. Aronson, 617 F.2d 119, 121 (5th Cir.1980) 8 ). In applying the “logical relationship” test to section 106(a) of the Bankruptcy Code, this court has formerly adopted Ninth Circuit Bankruptcy Appellate Panel’s analysis of this issue in In re Bulson, 117 B.R. 537, 541 (9th Cir. BAP 1990) aff'd 974 F.2d 1341 (9th Cir.1992), as follows:

The basic approach under the [“logical relationship”] test is to analyze whether the essential facts of the various claims are so logically connected that considerations of judicial economy and fairness dictate that all issues should be resolved in one lawsuit. A logical relationship exists when the counterclaim arises from the same aggregate set of operative facts as the initial claim, in that the same operative facts serve as the basis of both claims or the aggregate core of facts upon which the *1017 claim rests activates additional legal rights otherwise dormant in the defendant.

In this case, the IRS’s claim against' the debtor arises from the debtor’s failure to pay taxes owed. The debtor’s claim arises pursuant to the attempt by the IRS to collect these taxes owed by the debtor. The basis of both cases revolve around the aggregate core of facts regarding the debt- or’s unpaid taxes. Therefore, ... under these circumstances the essential facts related to the tax claim itself are logically related to the government’s collection activities.

McDougald, supra, at 10-12 {quoting Bulson, 117 B.R. at 541.). 9

The instant case presents the identical situation to that which the Court faced in Bul-son. The IRS’ claim against Debtor arises from Debtor’s failure to pay certain tax obligations, while the Debtor’s claim against the IRS arises out of the IRS’ post-petition activity in attempting to collect on those tax obligations. Thus, both claims have their origin in the same aggregate core of facts; Debtor’s failure to pay her tax obligation. Therefore, the facts which gave rise to the IRS’ claim against Debtor (i.e., Debtor’s failure to pay certain tax obligations), are “logically related” to the facts which form the basis of Debtor’s claim under section 362(h) (i.e., IRS’ post-petition collection activities on these tax obligations).

Accordingly, I find that all three of the necessary conditions for a waiver of sovereign immunity under section 106(a) have been satisfied. The United States is, therefore, deemed to have waived sovereign immunity with respect to the debtors’ claim for damages under section 362(h). 10 This conclusion does not, however, completely resolve *1018 this issue because the United States raises sovereign immunity as a separate and distinct defense to Debtor’s claim for punitive damages. The United States, relying upon a line of eases originating with the Supreme Court’s decision in Missouri Pacific R. Co. v. Ault, 256 U.S. 554, 41 S.Ct. 593, 65 L.Ed. 1087 (1921), asserts that any waiver of immunity under sections 106(a) or 106(b) of the Code does not encompass a waiver of immunity with regard to an award of punitive damages. Thus, an examination of Ault and its progeny is in order.

In Ault, the President of the United States had taken possession and control of the Missouri Pacific Railroad during World War I pursuant to the Federal Control Act of 1918. The railroad was operated through the Director General of Railroads under the Act. Ault was a discharged employee who brought an action against the railroad for failing to remit his final wages within the time limits imposed by an Arkansas statute. The statute imposed a penalty for failure to comply with the time limits set therein. Judgment was awarded jointly against the Director General and the railroad company in the amount of $50.00 in actual wages and $390.00 as a penalty. The award was affirmed by the Supreme Court of Arkansas, and the Director General appealed to the United States Supreme Court.

Section 10 of the Federal Control Act provided that carriers operated by the Director General “shall be subject to all laws and liabilities as common carriers, whether arising under state or federal laws or at common law,” while Section 15 of the Act provided in part that the “lawful police regulations of the several states shall continue unimpaired.” Ault, 256 U.S. at 563, 41 S.Ct. at 597. Based upon these provisions of the Act, the Director General argued on appeal to the Supreme Court that his office enjoyed immunity as to the penalty imposed under the Arkansas statute. The Court agreed with the Director General, concluding that Congress did not, in enacting Section 10 and 15 of the Federal Control Act, intend to waive the United States’ sovereign immunity with respect to penalties:

By these provisions the United States submitted itself to the various laws, state and federal, which prescribed how the duty of a common carrier by railroad should be performed and what should be the remedy for failure to perform ... But there is nothing either in the purpose or the letter of these clauses to indicate that Congress intended to authorize suit against the government for a penalty, if it should fail to perform the legal obligations imposed. The government undertook as carrier to observe all existing laws; it undertook to compensate any person injured through a departure by its agents or servants from their duty under such law; but it did not undertake to punish itself for any departure by the imposition upon itself of fines and penalties or to permit any other sovereignty to punish it.

Id. 256 U.S. at 563, 41 S.Ct. at 597. In reaching this conclusion, however, the Court was simply enforcing the limitations expressly reserved by the General Orders which had been issued under the Act, one of which expressly excluded “fines, penalties, or forfeitures” from the list of actions which could be brought directly against the Director General. Id. 256 U.S. at 564-65, 41 S.Ct. at 597, n. 5.

Courts have since applied Ault expansively in construing the waiver of immunity effected under a “sue and be sued” clause of a federal agency or instrumentality. See e.g., Smith v. Russellville Production Credit Ass’n, 777 F.2d 1544, 1549 (11th Cir.1985) (finding the “established rule” to be that “punitive damages cannot be recovered from the United States or its agencies.”); Painter v. Tennessee Valley Authority, 476 F.2d 943, 944 (5th Cir.1973) (Congress, in enacting provision allowing TVA to sue and be sued in tort or contract, did not waive sovereign immunity with respect to punitive damages); Commerce Federal Sav. Bank v. Federal Deposit Ins. Co., 872 F.2d 1240, 1246 (6th Cir.1989) (absent express waiver of immunity to such damages, F.D.I.C. is immune from the imposition of punitive damages against it); Matter of Sparkman, 703 F.2d 1097 (9th Cir.1983) (Production Credit Association, a federally chartered but privately owned corporation, cannot, under its “sue and be sued” clause, *1019 be held liable for punitive damages); In re Three Mile Island, Litigation, 605 F.Supp. 778, 784 (M.D.Penn.1985) (“[T]he United States, its agencies and instrumentalities may not be held liable for punitive damages without the express consent of Congress.”).

Two related principles emerge from Ault and its progeny. The first is that “the United States, its agencies, and instru