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Taggart v. Lorenzen

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Supreme Court of the United States
Taggart v. Lorenzen
Term: 2018
Important Dates
Argument: April 24, 2019
Decided: June 3, 2019
Outcome
Vacated and remanded
Vote
9-0
Majority
Chief Justice John G. Roberts • Clarence Thomas • Ruth Bader Ginsburg • Stephen Breyer • Samuel Alito • Sonia Sotomayor • Elena Kagan • Neil Gorsuch • Brett Kavanaugh


Taggart v. Lorenzen is a case argued before the Supreme Court of the United States on April 24, 2019, during the court's 2018-2019 term.

On June 3, 2019, the court vacated and remanded the United States Court of Appeals for the 9th Circuit's ruling. In a unanimous opinion, the court held that a bankruptcy court can hold a creditor in contempt for violating a bankruptcy court's discharge order if "there is no fair ground of doubt" (emphasis in the opinion) that the order prohibited the creditor's conduct.[1][2]

The case came on a writ of certiorari to the 9th Circuit.[3]

HIGHLIGHTS
  • The case: In 2007, Bradley Taggart transferred his share in Sherwood Park Business Center, LLC (SPBC), to his attorney. Terry Emmert and Keith Jehnke, who also owned shares in SPBC, sued Taggart in state court, seeking attorneys' fees. In 2009, Taggart filed for bankruptcy and in 2010, he received his discharge from the bankruptcy proceedings. After the discharge, Emmert and Jehnke continued to seek attorneys' fees from Taggart. Following litigation in both state and federal court, Emmert, Jehnke, and SPBC were prohibited from pursuing attorneys' fees. A ruling from the Bankruptcy Appellate Panel, affirmed by the 9th circuit, also held that they did not knowingly violate Taggart's bankruptcy discharge.
  • The issues: Whether, under the Bankruptcy Code, a creditor's good-faith belief that the discharge injunction does not apply precludes a finding of civil contempt.[4]
  • The outcome: The court held that a bankruptcy court can hold a creditor in contempt for violating a bankruptcy court's discharge order if "there is no fair ground of doubt" (emphasis in the opinion) that the order prohibited the creditor's conduct.[1][2].


    • You can review the lower court's opinion here.[5]

    Timeline

    The following timeline details key events in this case:

    • June 3, 2019: U.S. Supreme Court vacated and remanded the ruling of the 9th Circuit.
    • April 24, 2019: Oral argument
    • January 4, 2019: U.S. Supreme Court agreed to hear case
    • October 15, 2018: Petition filed with U.S. Supreme Court
    • April 23, 2018: 9th Circuit affirmed the case.

    Background

    Bradley Taggart was a real estate developer who owned 25 percent interest in Sherwood Park Business Center (SPBC). Terry Emmert and Keith Jehnke also each owned a 25 percent interest in SPBC. In 2007, Taggart transferred his shares to his attorney, John Berman. Emmert and Jehnke challenged the transfer in Oregon state court. They also sought attorney's fees.[6]

    In November 2009, Taggart filed a bankruptcy petition, putting the SPBC legal challenge on hold. In February 2010, Taggart was discharged in the bankruptcy proceedings and the legal challenge proceeded. The state court ruled in favor of Emmert and Jehnke, undoing the transfer of interest, expelling Taggart from SPBC, and allowing for the petitioning of attorneys' fees.[6]

    Stuart Brown, who represented Emmert and Jehnke, filed a petition for attorneys' fees against Berman and Taggart. Brown's petition limited the fees to those incurred after the date of Taggart's bankruptcy discharge. While the attorneys' fee petition was pending, Taggart reopened his bankruptcy proceeding and asked the bankruptcy court to hold Brown, Jehnke, Emmert, and SPBC, in contempt for violating the bankruptcy discharge. The state court ruled Taggart could be held liable for the attorneys' fees. The bankruptcy court also denied Taggart's motion for contempt. Taggart appealed the decision.[6]

    The district court reversed and remanded the state court's decision, holding that Taggart could not be held liable for attorneys' fees. On remand, the bankruptcy court found Brown, Jehnke, Emmert, and SPBC had violated the bankruptcy discharge and held them in contempt. A ruling from the Bankruptcy Appellate Panel (BAP) reversed the court’s finding of contempt, holding they did not knowingly violate the bankruptcy discharge.[6]

    After several rulings and appeals in state and bankruptcy courts, the federal district court and the state appellate court both ruled that Brown, Jehnke, Emmert, and SPBC could not pursue attorneys' fees against Taggart. The 9th Circuit affirmed the BAP's decision.[6]

    Taggart appealed to the Supreme Court. On January 4, 2019, the court agreed to hear the case.

    Questions presented

    The petitioner presented the following questions to the court:[4]

    Questions presented:
    • Whether, under the Bankruptcy Code, a creditor’s good-faith belief that the discharge injunction does not apply precludes a finding of civil contempt.

    Outcome

    In a unanimous opinion, the court held that a bankruptcy court can hold a creditor in contempt for violating a bankruptcy court's discharge order if "there is no fair ground of doubt" (emphasis in the opinion) that the order prohibited the creditor's conduct.[1][2]

    Justice Stephen Breyer delivered the opinion of the court.

    Opinion

    In his opinion, Justice Breyer wrote:[1]

    “ A court may hold a creditor in civil contempt for violating a discharge order if there is no fair ground of doubt as to whether the order barred the creditor’s conduct. ...


    (a) ... A party’s subjective belief that she was complying with an order ordinarily will not insulate her from civil contempt if that belief was objectively unreasonable. Subjective intent, however, is not always irrelevant. Civil contempt sanctions may be warranted when a party acts in bad faith, and a party’s good faith may help to determine an appropriate sanction. These traditional civil contempt principles apply straightforwardly to the bankruptcy discharge context. Under the fair ground of doubt standard, civil contempt may be appropriate when the creditor violates a discharge order based on an objectively unreasonable understanding of the discharge order or the statutes that govern its scope.

    (b) The standard applied by the Ninth Circuit is inconsistent with traditional civil contempt principles, under which parties cannot be insulated from a finding of civil contempt based on their subjective good faith.[7]

    		”

    Text of the opinion

    Read the full opinion here.

    Audio



    Transcript

    See also

    External links

    Footnotes

    1. ↑ 1.0 1.1 1.2 1.3 Supreme Court of the United States, Taggart v. Lorenzen, June 3, 2019
    2. ↑ 2.0 2.1 2.2 SCOTUSblog, "Opinion analysis: Justices reject subjective standard on sanctions for violating the bankruptcy discharge," June 4, 2019
    3. ↑ Supreme Court of the United States, "18-489 Bradley Weston Taggart, Petitioner v. Shelley A. Lorenzen, Executor of the Estate of Stuart Brown, et al.," accessed March 7, 2019
    4. ↑ 4.0 4.1 Supreme Court of the United States, "18-489 Taggart v. Lorenzen," accessed March 7, 2019
    5. ↑ SCOTUSblog, "Taggart v. Lorenzen," accessed March 7, 2019
    6. ↑ 6.0 6.1 6.2 6.3 6.4 Oyez.org, "Taggart v. Lorenzen," accessed March 7, 2019
    7. ↑ Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
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