For failure to comply with a turnover order, the bankruptcy court can properly incarcerate someone for more than two years and impose $1,000 a day in civil contempt sanctions, according to a nonprecedential opinion from the Ninth Circuit.
After extensive discovery, briefing, and trial, Bankruptcy Judge Theodore C. Albert of Santa Ana, Calif., decided that an individual had refused, after demand, to turn over some $1,420,000 belonging to a chapter 7 estate. As sanctions for contempt, Judge Albert imposed civil contempt sanctions of $1,420,000 and $1,000 a day until he complied. The judge also ordered the man incarcerated until he complied.
On appeal, the district judge upheld the sanctions except for the $1,000 a day. In the opinion of the district judge, the sanction could not exceed the amount to be turned over.
In its July 28 per curiam opinion, the Ninth Circuit reinstated all of Judge Albert’s sanctions.
Because the findings of fact were not clearly erroneous, the circuit court held that the $1,420,000 sanction was within the bankruptcy court’s civil contempt powers under Section 105(a).
The appeals court reasoned that the amount of the citation was not “cabined” by the withheld funds, because the contempt power under Section 105(a) allows entry of “any order” to “carry out the provisions of this title.”
“As long as the sanctions are coercive in nature and not punitive, Section 105(a) articulates no specific monetary limit on the scope of contempt sanctions available to the court,” the Ninth Circuit held.
Noting that the contemnor had been in jail for 26 months, the circuit court noted 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.”