A Ninth Circuit opinion on June 21 means that the bankruptcy court’s contempt power includes incarcerating someone for more than three years.

A man defied a turnover order by refusing to cough up $1.4 million belonging to the estate. Until he purged his contempt, Bankruptcy Judge Theodore C. Albert of Santa Ana, Calif., sent him to jail in May 2015. In addition, the bankruptcy judge imposed civil contempt sanctions of $1.4 million and $1,000 a day until the man complied.

The Ninth Circuit in substance upheld all the sanctions in July 2017, including what was then more than two years of incarceration.

Noting that the contemnor had been in jail for 26 months, the circuit court noted, however, that the $1,000 in daily sanctions “at some point” will have ceased to be coercive and would become punitive, requiring release from jail under “due process considerations.” Gharib v. Casey (In re Kenny G Enterprises LLC), 692 Fed. Appx. 950, 953 (9th Cir. July 28 2017); rehearing denied May 8, 2018. To read ABI’s discussion of the opinion and the denial of rehearing, click here and here.

Rather than seek his freedom from the Supreme Court, the man brought more appeals in district court, where he lost again in December 2017. He argued that his civil incarceration had become criminal because the passage of almost three years in jail had proven coercion to be futile.

Upholding incarceration a second time, the district judge paraphrased the bankruptcy court as describing how the man “defied a court order though a series of shady transfers to various shell companies.” With regard to futility, the district judge said that the only evidence in support of the claim was the man’s own uncorroborated testimony that he had transferred his “entire net worth to unknown foreign investors” and that his bank accounts had been cleaned out after he was jailed.

The district judge upheld the bankruptcy court’s finding that the man’s unsupported testimony did not show futility in further imprisonment.

Next, the man argued that incarceration for more than two years by itself made his confinement punitive, noting that he had been jailed longer than the minimum mandatory sentence for obstruction of justice.

The district court turned down the argument, finding no “authority for the proposition that length of confinement, on its own, renders contempt punitive and criminal, as opposed to civil and coercive.”

The man appealed once again to the Ninth Circuit and lost again in a nonprecedential, per curiam opinion on June 21. The appeals court said that the bankruptcy court “did not clearly err” by finding that the man failed to carry his burden by showing his inability to comply.

Because the man’s incarceration for noncompliance “remained coercive at the time of enforcement,” the Ninth Circuit rejected his due process argument.

In the new opinion, the appeals court said nothing about sanctions becoming punitive “at some point.”