In Re: Christian Thomas Ritter

Filing 9

ORDER AND REASONS. ORDERED that the decision of the bankruptcy court is REVERSED. Signed by Judge Carl Barbier.(gec, )

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

IN RE: CHRISTIAN THOMAS
RITTER

CIVIL ACTION
NO: 11-1513
SECTION: "J” (1)

ORDER AND REASONS
Before the Court is the bankruptcy appeal of William G.
Cherbonnier, Jr. (“Appellant”), counsel for debtor Christian
Thomas Ritter (“Debtor”) in an underlying Chapter 13 bankruptcy
case pending in the Bankruptcy Court for the Eastern District of
Louisiana.

Appellant has filed a brief (Rec. Doc. 7); there is

no appellee.

Having considered the Appellant’s brief, the

record, and the applicable law, the Court finds that the decision
below should be REVERSED.

PROCEDURAL HISTORY AND BACKGROUND FACTS
Appellant represented Debtor in a Chapter 13 bankruptcy
case.

The plan was confirmed subject to Appellant filing an

amended plan to include language orally specified by the
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bankruptcy court.

Rec. Doc. 55.1

The bankruptcy court found

that the amended plan did not comply with the court’s ruling, and
thus it ordered, sua sponte, Appellant to appear and show cause
“as to why the Court should not reconsider confirmation of the
debtor’s plan for failure to comply with the order of the Court.”
Id.

The bankruptcy court held a hearing on the show-cause order

on May 10, 2011, and issued an “Order of Sanctions” on the
following day, May 11, 2011.

In that order, Appellant was held

in contempt of court “for failure to timely file the appropriate
amended plan as ordered by the Court,” and the bankruptcy court
ordered sanctions in the amount of $500 to be paid into the
bankruptcy court’s registry.

Rec. Doc. 58.2

Appellant paid the

fine under protest and filed a notice of appeal.
The order to appear and show cause did not mention the
possibility of monetary sanctions or a finding that Appellant was
in contempt of court.

At the hearing, Appellant’s case

concerning Debtor was one of at least three show-cause hearings
set for May 10, 2011.

Appellant’s brief presents the “entire

1

All docket citations are to Eastern District of Louisiana Bankruptcy
Case No. 10-13169, unless specifically noted otherwise.
2

Although in open court the bankruptcy judge stated that the fine was
“for failure to be able to advise the Court on to [sic] what’s being done by
this [the filing of an amended plan],” Rec. Doc. 70, at 10, the order imposing
sanctions stated that the fine was for Appellant’s failure to comply with the
prior court order that required the filing of an amended plan. Rec. Doc. 58.

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hearing” regarding the Ritter matter as containing the following
colloquy:
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5
6
7
8
9
10
11
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[THE COURT:] Next case, Ritter, 10-13169. Have
you filed this
one?
MR. CHERBONNIER: Your Honor, --THE COURT: Yes or no?
MR. CHERBONNIER: Your Honor, -- I
thought that --THE COURT: Five hundred dollar fine for failure
to
be able to advise the court what’s being done by
this [sic].
THE COURT: Next case, Taylor, 09-12925, Order
to Show Cause.

Civil Action No. 11-1513, Rec. Doc. 7, at 7.

However, the

official transcript of the hearing reveals that the bankruptcy
court gave more opportunity for argument than that indicated by
the above-quoted portion of the transcript.
On May 10, there were three show-cause orders set for
hearing, and Appellant was counsel for the debtor in each of
those three cases.

Rec. Doc. 70, at 3.3

When the bankruptcy

judge called the first case regarding a debtor named Jenny Ho,
Appellant proceeded to mention not only that case, but also the
one concerning the Debtor in the present case.

Appellant then

informed the bankruptcy court of the reasons for his failure to

3

The bankruptcy judge stated that Appellant was the subject of five
orders to show cause. Rec. Doc. 70, at 5.

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file the amended plan in the Jenny Ho case.

Appellant

subsequently mentioned both Jenny Ho’s and Debtor’s cases
together in the context of an emergency room visit that allegedly
precluded him from complying with the bankruptcy court’s prior
order.

Id. at 7.

Although, per the transcript portion quoted by

Appellant, the hearing on Debtor’s case appears to have been
almost nonexistent, the record shows that Appellant in the Jenny
Ho hearing was able to present his arguments concerning office
troubles and personal issues that apparently were relevant to
Debtor’s case.
The bankruptcy court also imposed upon Appellant two other
$500 fines on May 10, one in the Jenny Ho case and one in the
case immediately following Debtor’s case.

Id. at 9-10.

The

Court’s research indicates that Appellant has separately appealed
these two other decisions in Civil Action Nos. 11-1512 and 111592.

Those appeals are pending in this Court.

The legal

arguments raised in Appellant’s briefs in those other appeals are
nearly (if not exactly) identical to those presented in the
instant appeal.

THE PARTIES’ ARGUMENTS
Appellant primarily argues that the bankruptcy court abused

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its discretion in finding Appellant in contempt of court and
imposing sanctions without a meaningful hearing.

He argues that

because the purpose of the fine in this case was to punish
Appellant and vindicate the bankruptcy court’s authority, it was
a criminal fine for which criminal procedure and process should
have been followed.

He argues that the bankruptcy court lacked

the power to find Appellant in criminal contempt of court because
the bankruptcy court is not an Article III court.

Additionally,

because this was a finding of criminal contempt, Appellant was
constitutionally entitled to prior and adequate reasonable notice
of the charge and an opportunity for a hearing.

Appellant did

not receive this due process because there was no prior notice of
the possibility of being held in contempt or sanctioned.

Rather,

the bankruptcy court summoned Appellant to explain why a motion
should not be dismissed for non-compliance with a court order.
Appellant argues that the bankruptcy court abused its
discretion in imposing sanctions without a specific finding of
bad-faith conduct.

A court may in certain situations use its

inherent sanctioning power.

However, this power must be

exercised with restraint and discretion.

Because the court did

not make a specific finding that Appellant was in bad faith,
Appellant argues, the imposition of sanctions was improper.

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Therefore, Appellant requests that this Court reverse the
bankruptcy court order appealed from and set it aside in its
entirety.

DISCUSSION
A.

Standard of Review
This Court has previously stated the standard of review

applicable to bankruptcy appeals:
For a bankruptcy appeal, the applicable standard of
review by a district court is the same as when the
Court of Appeals reviews a district court proceeding.
28 U.S.C. § 158(c). Findings of fact by the bankruptcy
courts are to be reviewed under the clearly erroneous
standard. In re Killebrew, 888 F.2d 1516, 1519 (5th
Cir.1989). Conclusions of law are reviewed de novo. In
re Kennard, 970 F.2d 455 (5th Cir.1991). Mixed
questions of fact and law are also reviewed de novo. In
re Bowyer, 916 F.2d 1056 (5th Cir.1990).
Hurstell v. Clement, 2000 WL 1100387, at *2 (E.D. La. August 4,
2000).
B.

Analysis
Appellant appeals both (1) the finding of contempt and (2)

the imposition of the $500 fine.

To a certain extent, the

contempt and the fine present overlapping legal issues.

However,

the Court begins its analysis with the criminal contempt finding.
1.

Contempt Order

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The Fifth Circuit Court of Appeals has held that
“[b]ankruptcy courts have no inherent or statutory power . . . to
preside over section 401(3) criminal contempt trials for
violation of bankruptcy court orders or to acquit, convict, or
sentence for such offenses.”

Matter of Hipp, Inc., 895 F.2d

1503, 1521 (5th Cir. 1990).4

Therefore, the Court must first

classify the contempt order at issue as either criminal or civil.
If it is criminal, the bankruptcy court lacked the power to issue
it.5

A contempt order is classified as civil or criminal

according to its primary purpose.
F.2d 564, 566 (5th Cir. 1990).

Lamar Fin. Corp. v. Adams, 918

It is criminal “[i[f the purpose

of the sanction is to punish the contemnor and vindicate the
authority of the court.”

Id.

It is civil “[i]f the purpose of

the sanction is to coerce the contemnor into compliance with a
court order, or to compensate another party for the contemnor’s
violation.”

Id.

Further, “[a] key determinant in this inquiry

is whether the penalty imposed is absolute or conditional on the
contemnor’s conduct.”

Id.

4

The reference to “section 401” is to Title 18 U.S.C. Section 401,
which provides criminal contempt authority to federal courts.
5

The Fifth Circuit left open the possibility of bankruptcy court
criminal contempt power for contempts committed in or near the bankruptcy
court’s presence. See Matter of Hipp, 895 F.2d at 1509 (limiting its holding
to contempts not committed in (or near) the bankruptcy court’s presence).
However, Appellant’s failure to file a document does not meet this
description.

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It is difficult to classify the contempt order at issue
because of its lack of explicit nexus to anything outside of the
language of the order.

The rule to show cause did not mention

the possibility of contempt, but rather only the possibility of
the sanction of the bankruptcy court’s reconsideration of
confirmation of the Debtor’s plan for Appellant’s failure to
comply with a prior court order.

Even after the bankruptcy court

went beyond the scope of the show-cause order to impose a fine in
open court, the bankruptcy judge did not then mention the
possibility of a contempt finding.

See Rec. Doc. 70, at 9-10

(imposition of three fines without mention of contempt).

The

contempt order for Appellant’s failure to comply with a prior
court order appeared in the “Order Imposing Sanctions.”
Doc. 58.

Rec.

Although there is no trail of reasoning to follow, the

Court must determine the primary purpose of the contempt order.
The contempt order was for Appellant’s failure to timely
file the amended plan as had been previously ordered by the
bankruptcy court.

The bankruptcy court was clearly concerned

with punishing prior conduct—Appellant’s failure to file the
court-ordered document.

Although the contempt order is not

expressly tied to the $500 fine, the fact that both the contempt
order and the fine are listed consecutively in the sanction order

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(Rec. Doc. 58) indicates that there is some connection between
the two.

Thus, it is appropriate to look to what the bankruptcy

judge stated in open court during the show-cause hearing to
determine the primary purpose of the contempt order.

From the

hearing transcript, it is evident that the contempt order was a
vindication of the bankruptcy court’s authority.

Although

perhaps it is less clear as to the two other cases for which
fines were imposed, as to the fine imposed in the instant case,
the judge imposed a fine “for failure to be able to advise the
Court” on the case’s status.
added).

Rec. Doc. 70, at 10 (emphasis

This was not a penalty meant to coerce future conduct,

but rather a punishment for Appellant’s lack of preparation and a
vindication of the bankruptcy court’s power to conduct wellinformed, efficient proceedings.

Thus, the Court finds that the

contempt was criminal in nature.6

Because the contempt was

criminal, the portion of the bankruptcy court order appealed from
that found Appellant in contempt of court must be reversed.7

6

This finding is buttressed by the fact that the contempt proceeding,
to the extent there was one, was initiated by the bankruptcy court sua sponte.
See In re Hunt, 754 F.2d 1290, 1293 (5th Cir. 1985) (finding that a contempt
proceeding was civil in nature, where it was initiated by an adverse party and
not by the court).
7

Further, because the bankruptcy court lacked the authority to make the
criminal contempt finding, this Court may not proceed to de novo review of the
finding. See Matter of Hipp, 895 F.2d at 1519 (stating that even where the
district court could perform de novo review of a contempt finding, “the fact
that the initial proceeding lacked a constitutionally competent adjudicator

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2.

Fine

The fine presents a quandary. If the fine was a sanction
imposed for Appellant’s contempt of court, clearly it was
improper because the contempt order was criminal in nature.
However, as previously discussed, the fine was imposed in open
court, and only in the later-issued written order was there a
finding of contempt.

And yet, the written order suggests that

the sanction arises from the contempt.

The order states, “IT IS

ORDERED that [Appellant], is in contempt of Court,” and then
immediately follows with “IT IS FURTHER ORDERED that [Appellant]
tender sanctions in the amount of $500.00 to the Clerk . . . .”
Rec. Doc. 58.

Logically, that an order of sanctions immediately

follows a finding of contempt seems to imply that the sanctions
are imposed to punish the contempt.
If the fine was not the result of the contempt finding,
arguably the bankruptcy court properly imposed the fine under the
congressional grant of authority in Title 11 U.S.C. Section 105.8

may nonetheless be fatal”).
8

This possibility has not been briefed.

Section 105 provides:

The court may issue any order, process, or judgment that is
necessary or appropriate to carry out the provisions of this
title. No provision of this title providing for the raising of an
issue by a party in interest shall be construed to preclude the
court from, sua sponte, taking any action or making any
determination necessary or appropriate to enforce or implement
court orders or rules, or to prevent an abuse of process.

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Additionally, a bankruptcy court may use its inherent sanction
authority “in some circumstances . . . to impose relatively mild
non-compensatory fines.”

In Re Fjeldsted, 293 B.R. 12, 28 (BAP

9th Cir. 2003) (quotation marks omitted).

However, the Fifth

Circuit “has held that ‘[i]n order to impose sanctions against an
attorney under its inherent power, a court must make a specific
finding that the attorney acted in “bad faith”’.”
Tilton, 64 F.3d 213, 217 (5th Cir. 1995).
was no specific finding of bad faith.

Elliott v.

In this case, there

Thus, if the bankruptcy

court had inherent sanction authority to impose the fine, it
appears that the bankruptcy court did not properly exercise its
inherent authority.
The Court need not resolve whether the bankruptcy court
could have statutory or inherent authority to impose a fine like
the one at issue, because the Court finds that the fine was a
sanction for Appellant’s criminal contempt of court.

The

original show-cause order concerned Appellant’s failure to comply
with a prior court order to amend the reorganization plan.

At

11 U.S.C. § 105(a). Courts have held that this statute implicitly gives
bankruptcy courts the power to impose sanctions in certain circumstances.
See, e.g., Matter of Volpert, 110 F.3d 494, 501 (7th Cir. 1997) (stating “that
the plain language of § 105 furnishes the bankruptcy courts with ample
authority to sanction conduct that abuses the judicial process, including
conduct that unreasonably and vexatiously multiplies bankruptcy
proceedings.”).

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the hearing, the bankruptcy court discussed this failure to
comply and then ordered a $500 fine.

The contempt order states

that it is for Appellant’s failure to timely file the plan as
ordered by the court, and it is followed by a written
memorialization of the $500 fine previously ordered in open
court.

Thus, the fine is sufficiently connected with the

contempt finding for the fine to be a sanction for contempt.
Because the bankruptcy court lacked the power to impose the $500
fine as a sanction for criminal contempt, that decision must be
reversed.9
For the foregoing reasons, IT IS ORDERED that the decision
of the bankruptcy court is REVERSED.
New Orleans, Louisiana this 28th day of November, 2011.

____________________________
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE

9

The Court is respectful of the bankruptcy court’s desire to maintain
efficiency and proper decorum in court proceedings. The bankruptcy court is
not powerless in situations involving potential criminal contempt. Bankruptcy
courts may certify criminal contempt matters to district courts for further
proceedings. See In re Rodriguez, 2007 WL 593582, at *16 (W.D. Tex. Feb. 20,
2007).

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