Amicus Curiae Brief — Taggart v. Lorenzen, 139 S. Ct. 782 (2019) (No. 18-489)

No. 18-489

—————————————————

In the Supreme Court of the United States

BRADLEY WESTON TAGGART, PETITIONER

Vv.

SHELLEY A. LORENZEN, ET AL.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING NEITHER PARTY

NOEL J. FRANCISCO

Solicitor General

Counsel of Record

JOSEPH H. HUNT

Assistant Attorney General

MALCOLM L. STEWART

Deputy Solicitor General

SOPAN JOSHI

Assistant to the Solicitor

General

MARK B. STERN

SARAH CARROLL

THOMAS J. CLARK

PAUL A. ALLULIS

Attorneys

Department of Justice

Washington, D.C. 20530-0001

SupremeCtBriefs@usdoj.gov

(202) 514-2217

QUESTION PRESENTED

Whether, under the Bankruptcy Code, a creditor’s

subjective good-faith belief that the discharge injunc-

tion does not apply precludes a finding of civil contempt.

(I)

TABLE OF CONTENTS

Page

ee 1

IIIT as crisis nicest aetna tacaneebeaignnasasennnssmeenetinmecees 2

a 9

Argument:

A creditor’s subjective good faith does not preclude a

finding of civil contempt, but civil-contempt remedies

are not available if there is an objectively fair ground of

doubt about whether the creditor’s conduct violates a

discharge order 13

A. Traditional principles governing injunctive relief

apply to the enforcement of discharge orders

entered in bankruptcy Cases ............ssssssssssesesseeeenenes 13

B. The court of appeals erred in holding that a

creditor’s unreasonable good-faith belief that its

collection efforts are lawful precludes the

imposition of contempt sanctionsS.................00000eeeere 21

C. This Court should not adopt petitioner’s proposed

rule 24

D. The Court should vacate the judgment below and

remand the case to allow the court of appeals to

apply the correct standard in the first instance........... 29

COSMRTIIEIID censcrssasseunciencmenessenemnensemnscumnninenntnescsntantenssasennensescssses 32

TABLE OF AUTHORITIES

Cases:

Abbott Labs. v. Unlimited Beverages, Inc.,

BIB PDd BBB (11th Clr. BOB) 2nnceccccececscsccscsceseserssscscoseseese 20

Alyeska Pipeline Serv. Co. v. Wilderness Soc’y,

GE Ee, BED Ca recccscscccesnccsccescsesscenvessessesscesssrssonsneresssesees 28

Axia NetMedia Corp. v. Massachusetts Tech. Park

Corp., 889 F.3d 1 (ist Cir. 2018)...........c0sssssssssesesssenseseees 17

Ben Franklin Hotel Assocs., In re, 186 F.3d 301

i 20

IV

Cases—Continued: Page

CFE Racing Prods., Inc. v. BMF Wheels, Inc.,

798 F.3d 571 (Gth Cir. 2015).............csccsrssrssrssereseserseees 17, 22

California Artificial Stone Paving Co. v. Molitor,

BE TA, Ga ee rcerernsessccsessnmerssevcensvensssesnsessensmess passim

Canning, In re, 706 F.3d 64 (Ast Cir. 2013) ..........cccccceceeeneee 4

Chambers v. Nasco, Inc., 501 U.S. 32 (1991) 0.2.0.2... 4, 26

Chao v. Gotham Registry, Inc., 514 F.3d 280

(2d Cir. 2008) sesesiunssiigesinintssioesnssocesceccnmeees 20

City of New York v. Mickalis Pawn Shop, LLC,

645 F.3d 114 (2d Cir. 2011) ...........0.sesserssessesssserssssrenssesesnnes 17

Cox v. Zale Del., Inc., 239 F.3d 910 (7th Cir. 2001)............ 14

Cutter v. Wilkinson, 544 U.S. 709 (2005) ............ccccc000 12, 31

First State Bank of Roscoe v. Stabler, 914 F.3d 1129

a GR Fae rencrecesenertnensenensennensmsnmeecen 22

Food Lion, Inc. v. United Food & Commercial

Workers Intl Union, AFL-CIO-CLC,

108 F.3d 1007 (D.C. Cir. 1997)............ccccceccceeseeeeseeeeseeereeees 22

Gascho v. Global Fitness Holdings, LLC, 875 F.3d

795 (6th Cir. 2017), cert. denied, 138 S. Ct. 2576

i ncicnreceinirenmeninnmmantionmennen 17

Gervin, In re, 300 Fed. Appx. 293 (5th Cir. 2008).............. 20

Gompers v. Bucks Stove & Range Co., 221 U.S. 418

(BIDE 1) ......2..cececscsesecssssnsessecssosssessessssoessessenscesesocsocssocosoeosese 22, 31

Hardy, In re, 97 F.3d 1384 (11th Cir. 1996)............ 4, 5, 8,24

Hutto v. Finney, 437 U.S. 678 (1978) 28

International Longshoremen’s Ass'n v. Philadelphia

Marine Trade Ass'n, 389 U.S. 64 (1967) .......cccccececesesenees 15

Jove Eng’g, Inc. v. IRS, 92 F.3d 1589

(11th Cir. 1996) peanscsvenasscnseqnens 17, 18

Katchen v. Landy, 382 U.S. 323 (1966) ........cceeseresesees 4, 27

Latino Officers Ass'n City of N.Y., Inc. v. City of

New York, 558 F.3d 159 (2d Cir. 2009) .........ccccccceeseseerenes 16

Cases—Continued: Page

McComb v. Jacksonville Paper Co., 336 U.S, 187

Ce ccscrernscessennsmnnpeiemmcann 11, 22, 25, 26

Michaelson v. United States ex rel. Chicago, St.

Paul, Minneapolis & Omaha Ry. Co., 266 U.S. 42

(BEDI) .2n0cecceccocsnesessnessssressssssnsnessnecareenesvessessessasvesesnocsscvscsocoecs 14

Morissette v. United States, 342 US. 246 (1952) .......0000000 14

Northeast Women’s Ctr., Inc. v. McMonagle,

939 F.2d 57 (Bd Cir, 1991) ......cccccesseesevsereereesnrsneeeennsenennnes 20

Pertuso v. Ford Motor Credit Co., 233 F.3d 417

(6th Cir. 2000) ciedenhdiehinepnstubazaitianiisensmessiannevenesenenananen 14

Robin Woods Inc. v. Woods, 28 F.3d 396

Ga GD FE ercceresttistrtnimmmammamnnnnn 22, 23

Schmidt v. Lessard, 414 U.S. 473 (1974) ....cccccccceserseeneeenees 10

Sekhar v. United States, 570 U.S. 729 (2013) ........cc0ceeceeee 14

Sherwood Park Bus. Ctr., LLC v. Taggart,

341 P.3d 96 (Or. App. 2014).........sssrssrserssrsseesesseressereneres 7

Shillitani v. United States, 384 U.S. 364 (1966)........... 22, 31

Spencer, In re, 868 F.3d 748 (8th Cir. 2017) ......ccccceseeeeeee 20

Swift & Co. v. United States, 196 U.S. 375 (1905) .........00+ 16

Tennessee Student Assistance Corp. v. Hood,

541 U.S. 440 (2004) sprlanininntseenbammnnnesrencceneemmneien 27

TiVo Inc. v. EchoStar Corp., 646 F.3d 869

GHOE, GD. BEE) ccnsecnsscscvezsecnessessnssnasevsncvscscssnsecenscssssssnoeseneee 16

United States v. Saccoccia, 433 F.3d 19

CO Fee wrecnesesernnnsnenencemnennemanenscnmcnn 16, 17

United States v. Stitt, 189 S. Ct. 399 (2018) .........cccecceseene 31

United Student Aid Funds, Inc. v. Espinosa,

559 U.S. 260 (2010) eereeenndemapp nese erent 3

Williams, In re, 438 B.R. 679 (B.A.P. 10th Cir. 2010)....... 27

Ybarra, In re, 424 F.3d 1018 (2005), cert. denied,

ee es a cenitatdireencsnetianiinnicasticiiininniiteseniaiias 6, 12, 30

VI

Cases—Continued: Page

Young v. United States ex rel. Vuitton et Fils S. A.,

481 U.S. 787 (1987) suasimesnaneszesensascsnecueseneees 13

Zilog, Inc., In re, 450 F.3d 996 (9th Cir. 2006) ........0000 4,14

Statutes and rules:

Bankruptey Code:

Ch. 1, 11 U.S.C. 101 et seq :

BD Faas Be GIOD cenccecssecszvccscescsscconssesesevenssesnennsoeen 30

BS PEs Pi ecesestcnseseccsnscevesssesescnaccsessnenecsmnesesenssesestn 4,5

BS TERE, Ge cccnenveccssnecscssereessscsvsemesssnnee 4, 13, 14, 23

BS PRR Geet Rcccrsensncssseccsersescovsvsssessscscssnsensesssnanees 4

Ch. 3, 11 U.S.C. 301 et seq:

Be FS Ie eeterntecccevccssenesctncsnscesncncsenscesvennsosmeannnsesneenee 1

Bee Sas ele ncscsneiscersscceustscsovestenesesenrneursenessematnoncenneese 5

BD Fete SED cescczevncessvececsseveceinecescseccssussemnssnsuvnennsete 5

8 CEs Se ccnczsecsnsnscsceccceccenssresnevecescenssosasseeee 10, 23

BD CRs Ge Pncccnncsncscnsccscsserssceccrsvccczcsnesncevecnnsccsee 5

Ch. 5, 11 U.S.C. 501 et seq:

Be D ceetnrenevesetmnessennnememennesenee 2,19

eee 2

ER en 2

OS TB BIG) cencesscecezesecsseressescvsnscvecensentesenenses 2

RE WAI, BE ceccenccecevscccecssvesccccenvonscnsereness 3, 19, 26

11 U.S.C. B2B(a)(4) .......ccreecessssseserseessesssserseenees 3, 19, 26

BE CRs GD wesc escczcecccscenccecscesecssecseoscnsenss 3, 19, 26

BB CEB, GeO ccvensccccsnceszacesececesvcczscessecnsnssessessussines 2

BD Ps I cnesenceccsscsccenscssssninnsnssorsesnmmennerense 2,27

BD TEA, Ge Bd ccevcccccccnsccscccnsewrecssscvescsevcrscssnanesseese 2

Be Cs GEE crsccncecesucseusesnecnvcssensesnassesossevtoeneasee 2

Se Fairs SED ccceenescvenscseccovensesenseveesnenseesennniecennnte 2

11 U.S.C. B2B(aN(14B).........scsesserressresseseeseressesesseneesers 2

Vil

Statutes and rules—Continued: Page

Be Tai TE ci sciniiceniiicsicapntinnssicciitenpliniiensiabesaiilites 2

hig Te ° . | SSS ramen seme 2, 19

Oe Fee EE iaitencsanténcthsnieniinminerntiaiimaidonisniinned 28

a Re itdindhebbeescacensenecsinrpautdnnminnionividins 4, 5, 13, 14

BO UE Fe rsecescccncccncvencnscsenssccmnanramoneses passim

Cn, Fy ER a Fe OO Ge vawnicctenccincermssescorsenseenes 2, 3, 6, 30

BE Rts TET caessidsdtensdhactisuisteiinnpstniepitmasiniectiansttcacaieninaiinas 2, 30

BG es SD crncdisericentteeninetcnnennibintieintnnanmihaiian 30

Cs, 80, SS SEE. SEE 0 GOO werctenecresssccensescnsittinniinincimnsies 2

Fe ils Bt Rilenicertitinchiedntreiinicentsnienmeinitbeantaininiieii 2

Cha, BE BE TE, Be 0 O00 cnccccecnsenseserncinnvevisesnmenennctnasen 2

Be ela: ii itcihlectiscetiereebdeteidniicanieiennicetatishanniatinnaiaas 2

eS Ph Se FP 2, 20

ee Re cialis tteiceienreisainaniatsahiniiensphisnitniinaiibadaniinintaiys 2

Fair Labor Standards Act of 1938, 29 U.S.C. 201

8 BBG, «ecersceseesecescneccsceqeocssnenscesessoneonsesenecssncnscescenssoqneseccescsecsecs 25

Internal Revenue Code (26 U.S.C.):

EERE LP RS Se seme CC 10, 23

LADD nccoesstovesiesestiennentanenténieianeatemseumnnsentenmiensintnis 5

Internal Revenue Service Restructuring and Reform

Act of 1998, Pub. L. No. 105-206, § 3102(¢)(1),

112 Stat. 730-731 (26 U.S.C. T4BB(@)(1)) ...ccccccceeseeeeeeeeeeneees 5

es AN iciiinilshseneetiaicslenaihienintictidiniinitsiannnepniesenenios l

ees I Siaiidiicniserscsesktheddaeniddnientiisctiianiaaiiehacmeniicaatinetlt 3, 27

Fed. R. Bankr. P.:

IIIT tices seceseenenempennbiesineinentbibeinieemaesenenebainene 3

ITED dns asiiniraninacieneneesitentdpinteasenaunainanenmentinl 3

PTET 0. resinanraisinaenpnnenpininntpanaimmannsniessiamenennts 17

Vill

Rules—Continued: Page

Fed. R. Civ. P.:

Rule 8(¢)(1) advisory committee’s note

INI os so niceinsinbliecndleesinaicnedennientenitiiniiia 27

acti chink oiareenicstinshldecignabamsininiesbsiadeniaabataaiie 16, 17, 18

EE ree teens aeaeenen ene sun aye 16

REET EEE BAR tesa ee ee Bem ee 16

Miscellaneous:

5 Collier on Bankruptcy (16th ed. 2013) ......cccecereeeceeneeee 30

2 James L. High, A Treatise on the Law of

eneines 22

Injunctions (4th ed. 1905) ......cccccesersenereeenenenenerenees

Official Bankruptey Form No. 18: Discharge of

Debtor (Dec. 1, 2007), www.uscourts.gov/sites/

default/files/b 018 1207.pdf ...ccsssssssssssscsssessesssssseeee

Official Bankruptey Form No. 318: Order of Dis-

charge (Dee. 1, 2015), www.uscourts.gov/sites/

default/files/form b318_ O.pdf........ccecsssereesenersnennees

In the Supreme Court of the Anited States

No. 18-489

BRADLEY WESTON TAGGART, PETITIONER

Vv.

SHELLEY A. LORENZEN, ET AL.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURILAE SUPPORTING NEITHER PARTY

INTEREST OF THE UNITED STATES

The question presented in this case concerns the cir-

cumstances under which a creditor may be subject to

civil-contempt sanctions for attempting to collect a debt

after the entry of a discharge order under the Bank-

ruptey Code. The Attorney General appoints United

States Trustees to supervise the administration of

bankruptey cases and trustees throughout the country.

28 U.S.C. 581-589a. United States Trustees “may raise

and may appear and be heard on any issue in any case

or proceeding under” the Bankruptey Code. 11 U.S.C.

307. The United States also is the Nation’s largest cred-

itor. Federal agencies often seek to recover debts from

persons who have filed for bankruptcy, and the applica-

tion of the discharge order to debis owed to the govern-

(1)

2

ment is not always readily apparent. The question pre-

sented therefore is of substantial importance to the

United States.

STATEMENT

1. a. When a debtor successfully completes its

bankruptey case, the bankruptcy court typically enters

a discharge order releasing the debtor from liability for

most pre-bankruptcy debts. See 11 U.S.C. 727 (Chapter

7), 1141 (Chapter 11), 1228 (Chapter 12), and 1328

(Chapter 13). A discharge order “operates as an injunc-

tion against the commencement or continuation of an

action, the employment of process, or an act, to collect,

recover or offset any such [discharged] debt as a per-

sonal liability of the debtor.” 11 U.S.C. 524(a)(2).

Although most pre-bankruptcy debts are discharged

by such an order, certain debts are not, see 11 U.S.C.

523(a)(1)-(19), including various cate. ‘ies of debts

commonly held by the government, e.g., 11 U.S.C.

523(a)(1), (7), (8), (11), (12), (13), (14B), and (18). Often

it is clear whether a particular debt falls into one of

these exceptions to discharge. There rarely is any

doubt, for example, whether a debt is one for “payment

of an order of [criminal] restitution.” 11 U.S.C.

523(a)(13). Other times it is not so clear, as with tax

debts “with respect to which the debtor made a fraudu-

lent return or willfully attempted in any manner to

evade or defeat such tax.” 11 U.S.C. 523(a)(1)(C).

Whether a debtor “willfully attempted” to “evade or de-

feat” a tax can be a hotly contested question.

With respect to some of the potentially nondis-

chargeable debts listed in Section 523(a), the Code

states that a particular debt will be discharged unless a

party obtains an advance determination to the contrary

from the bankruptey court. 11 U.S.C. 523(c)(1); see

3

11 U.S.C. 523(a)(2), (4), and (6). And for student-loan

debts, a debtor must file an adversary complaint in the

bankruptey case, and obtain a determination that the

debt is dischargeable, or the debt will not be dis-

charged. See United Student Aid Funds, Inc. v. Espi-

nosa, 559 U.S. 260, 268-269 (2010). With respect to most

types of debts, however, no advance determination as to

dischargeability is necessary, and the question whether

a particular debt has been discharged is left for future

resolution. Cf. Fed. R. Bankr. P. 4007. That resolution

need not occur in the bankruptcy court. Rather, other

courts, including state courts, have concurrent jurisdic-

tion to resolve dischargeability disputes—as, for in-

stance, when discharge is raised as a defense in a state-

court collection action. See 28 U.S.C. 1334(b) (vesting

district courts with “original but not exclusive jurisdic-

tion of all civil proceedings arising under title 11”).

Dischargeability disputes arise most frequently in

Chapter 7 cases. Most Chapter 7 cases are resolved rel-

atively quickly, and the typical discharge order simply

identifies the debtor and states that a “discharge under

11 U.S.C. § 727 is granted.” Official Bankruptey Form

No. 318, at 1, www.uscourts.gov/sites/default/files/

form_b318 O.pdf; see Official Bankruptcy Form No.

18 (superseded Dec. 1, 2015), www.uscourts.gov/sites/

default/files/b_018_1207.pdf; see also Fed. R. Bankr. P.

9009(a). Rather than identify the particular debts of the

debtor that are (or are not) discharged, the standard

Chapter 7 discharge order typically includes an

“le)xplanation” stating that “[mJost debts are covered

by the discharge, but not all,” and that “[bJecause the

law is complicated, you should consult an attorney to de-

termine the exact effect of the discharge in this case.”

Official Bankruptey Form No. 318, at 1-2 (emphasis

4

omitted); see id. at 2 (listing “[e]xamples of debts that

are not discharged”). Asummary discharge of this type

is consistent with the need “‘to secure a prompt and ef-

fectual administration and settlement of the estate of all

bankrupts within a limited period,’” which is “a chief

purpose of the bankruptcy laws.” Katchen v. Landy,

382 U.S. 323, 328 (1966) (citation omitted).

b. Although Section 524 states that a discharge or-

der “operates as an injunction” against any attempt to

collect a discharged debt, 11 U.S.C. 524(a)(2), it does not

prescribe a remedy for violations of the discharge in-

junction. Section 105, however, authorizes a bank-

ruptcy court to “issue any order, process, or judgment

that is necessary or appropriate to carry out the provi-

sions of” the Bankruptcy Code. 11 U.S.C. 105(a).

Courts have read Sections 105(a) and 524(a)(2),

taken together, as authorizing civil-contempt actions

against creditors who attempt to collect discharged

debts. E.g., In re Canning, 706 F.3d 64, 69 (1st Cir.

2013); In re Zilog, Inc., 450 F.3d 996, 1007 (9th Cir.

2006); see Fed. R. Bankr. P. 9020 (recognizing that

bankruptcy courts may conduct contempt proceedings).

Since the United States has waived its sovereign im-

munity for purposes of Section 105, the power to impose

civil-contempt remedies generally extends to govern-

mental creditors. See 11 U.S.C. 106(a)(1). Some courts

have stated that a bankruptcy court also has inherent

power to enforce a discharge injunction through civil-

contempt sanctions, but that such power should be ex-

ercised with “restraint” and only when the creditor en-

gages in “bad-faith conduct.” Jn re Hardy, 97 F.3d

1384, 1389 (11th Cir. 1996) (quoting Chambers v. Nasco,

Inc., 501 U.S. 32, 44, 50 (1991)).

5

Two related provisions bear mention. First, under

Section 362, the filing of a petition for bankruptcy “op-

erates as a stay” of most collection or enforcement ef-

forts against the debtor during the pendency of the

bankruptcy case. 11 U.S.C. 362(a). Unlike with the dis-

charge injunction, the Bankruptcy Code prescribes a

specific remedy for certain violations of the automatic

stay: “an individual injured by any willful violation of

[the automatic] stay” generally “shall recover actual

damages, including costs and attorneys’ fees, and, in ap-

propriate circumstances, may recover punitive dam-

ages.” 11 U.S.C. 362(k)(1).

Second, Congress amended the Internal Revenue

Code in 1998 to provide that, if an IRS officer or em-

ployee “willfully violates” either the automatic stay or

the discharge injunction, the affected taxpayer “may

petition the bankruptcy court to recover damages

against the United States.” Internal Revenue Service

Restructuring and Reform Act of 1998, Pub. L. No. 105-

206, § 3102(¢)(1), 112 Stat. 730-731 (26 U.S.C. 7433(e)1)).

With respect to discharge violations, “such petition

shall be the exclusive remedy for recovering damages”

against the IRS. 26 U.S.C. 7433(e)(2)(A).

Both of these provisions require a “willful” violation

of the automatic stay or discharge injunction before a

court may award damages to the debtor. 11 U.S.C.

362(k)(1); see 26 U.S.C. 7433(e)(1). Although neither

Section 105 nor Section 524 uses that term, some courts

have said that the imposition of civil-contempt sanctions

under Section 105 likewise requires a “willful” violation

of the discharge injunction. E.g., Hardy, 97 F.3d at

1390; Pet. App. 58a (bankruptcy-court decision below).

2. a. This case arises out of a business dispute. Pe-

titioner once held an interest in an Oregon company.

6

Pet. App. 4a. Respondents are the company’s other

owners, their former attorney (now replaced by the ex-

ecutor of his estate), and the company itself. /d. at 4a-

5a. (For simplicity, this brief will use the term “re-

spondents” even when referring only to some of them,

unless the distinction is material.)

Believing that petitioner had improperly attempted

to transfer his interest in the company without offering

the other owners a right of first refusal, respondents

sued petitioner in state court. Pet. App. 5a. Shortly be-

fore trial, petitioner filed a voluntary petition for bank-

ruptey under Chapter 7. /bid. The state-court action

was stayed pending completion of the bankruptcy case.

Ibid.

After petitioner received a bankruptcy discharge, re-

spondents resumed the state-court litigation. Pet. App.

5a. In light of the discharge order, respondents aban-

doned their monetary claims and instead sought only in-

junctive relief to unwind the transfer of petitioner’s in-

terest in, and to expel petitioner from, the company. /d.

at 5a-6a. After the court granted that relief, respond-

ents filed a petition for attorney’s fees, limited to “those

fees that had been incurred after the date of [peti-

tioner’s] bankruptcy discharge.” /d. at 6a.

Respondents’ fee petition “alerted the state court to

the existence of [petitioner’s] bankruptcy discharge.”

Pet. App. 6a. Relying on in /n re Ybarra, 424 F.3d 1018

(9th Cir. 2005), cert. denied, 547 U.S. 1163 (2006), how-

ever, respondents contended that a claim for attorney’s

fees incurred after the bankruptcy case commenced,

even if arising from litigation that was initiated before

the bankruptcy, is not discharged if the debtor has “‘re-

turned to the fray’” by “willingly engag|ing]” in further

post-discharge litigation. Pet. App. 6a-7a. The state

7

court concluded that petitioner had returned to the

fray, and it therefore granted the fee petition. /d. at 7a.

Meanwhile, petitioner moved the bankruptcy court

to hold respondents “in contempt for violating the dis-

charge by seeking an award of attorneys’ fees against

him in the state court action.” Pet. App. 7a. The bank-

ruptey court at first denied the motion, Br. in Opp. App.

12a-35a, but the district court reversed that denial, find-

ing that petitioner’s actions “were not sufficiently af-

firmative and voluntary to be considered returning to

the fray” under Ybarra, id. at lla. Relying on the dis-

trict court’s reversal, the state appellate court then re-

versed the trial court’s grant of fees. Sherwood Park

Bus. Ctr., LLC v. Taggart, 341 P.3d 96, 104 (Or. App.

2014).

b. On remand from the district court, the bank-

ruptcy court held respondents in contempt for violating

the discharge injunction. Pet. App. 52a-64a.

The bankruptcy court stated that “[a]n alleged con-

temnor’s violation of the discharge injunction must be

‘willful’ in order to be subject to sanctions for violating

the discharge injunction.” Pet. App. 58a. To establish

willfulness, the court explained, petitioner was required

to prove “first, that the alleged contemnor knew that

the discharge injunction applied, and second, that the

alleged contemnor intended the actions that violated

the discharge injunction.” /bid. The court observed

that there was “no dispute” that the second element was

satisfied. /d. at 63a.

As to the first inquiry, and relying on the Eleventh

Circuit’s decision in Hardy, the bankruptcy court inter-

preted the phrase “knew that the discharge injunction

applied,” Pet. App. 58a (emphasis added), to mean

8

“knew the discharge was ‘invoked,’” id. at 59a (empha-

sis added). In the bankruptcy court’s view, that test “in

effect imposes a strict liability standard”: a creditor

need only be “‘aware of the discharge injunction,’” and

need not know that the injunction applies to the partic-

ular debt at issue. /d. at 60a (quoting Hardy, 97 F.3d at

1390); see ibid. (“Only lack of notice of the discharge

may serve as a defense to contempt sanctions.”). The

court observed that “it is not disputed that Respondents

had actual knowledge” of the existence of petitioner’s

discharge, id. at 6la, and were thus “on notice that seek-

ing fees from [petitioner] might implicate the discharge

injunction,” id. at 63a.

After an evidentiary hearing, the bankruptcy court

awarded petitioner slightly more than $105,000 in attor-

ney’s fees and costs; $5000 in damages for emotional dis-

tress; and $2000 in punitive damages. Pet. App. 69a, 75a.

ce. The bankruptcy appellate panel (BAP) reversed.

Pet. App. 21la-5la. In the BAP’s view, and contrary to

Hardy, civil contempt is an appropriate remedy for a

violation of a discharge order only if “the alleged con-

temnor was aware of the discharge injunction and

aware that it applied to his or her claim.” /d. at 44a; see

id. at 36a (criticizing the bankruptcy court for following

Hardy). The BAP found that “the scope of the dis-

charge order here was ambiguous with respect to the

post-discharge attorneys’ fees and costs,” id. at 46a, as

evidenced in part by the state trial court’s initial holding

“that the discharge did not bar [respondents’] claim for

attorneys’ fees,” id. at 47a. The BAP concluded that re-

spondents “could not possibly have been aware that the

discharge injunction was applicable to their fee request

until the Ybarra question was adjudicated.” /d. at 50a.

9

The BAP explained that “[a]lthough the discharge or-

der was in place at the time [respondents] made their

fee request in the state court, the order itself did not

advise [respondents] of the scope of the injunction un-

der the Ybarra rule.” Jd. at 5la.

3. The court of appeals affirmed. Pet. App. la-1l5a.

The court agreed with the bankruptcy court that civil

contempt requires a showing “that the creditor (1) knew

the discharge injunction was applicable and (2) intended

the actions which violated the injunction.” /d. at 11a (ci-

tation omitted). Like the BAP, however, the court of

appeals rejected the bankruptcy court’s near-strict-lia-

bility gloss on that test, explaining that “knowledge of

the applicability of the injunction * * * may not be in-

ferred simply because the creditor knew of the bank-

ruptcy proceeding.” /bid. Rather, the court of appeals

stated, a “creditor’s good faith belief that the discharge

injunction does not apply to the creditor’s claim pre-

cludes a finding of contempt, even if the creditor’s belief

is unreasonable.” /d. at 12a.

The court of appeals agreed with the BAP’s finding

that, when respondents sought attorney’s fees in the

state-court proceeding, they “possessed a good faith be-

lief that the discharge injunction did not apply to their

claims based on their contention that [petitioner] had

‘returned to the fray.’” Pet. App. 13a. The court stated

that respondents had “relied on the state court’s judg-

ment that the discharge injunction did not apply to their

claim for post-petition attorneys’ fees,” and that “their

good faith belief, even if unreasonable, insulated them

from a finding of contempt.” bid.

SUMMARY OF ARGUMENT

A. By specifying that a discharge order “operates as

an injunction,” 11 U.S.C. 524(a)(2), Congress indicated

10

that bankruptcy courts have the same powers to enforce

their discharge orders as courts have to enforce any

other injunction in the ordinary civil context. One of the

fundamental principles governing the enforcement of

ordinary civil injunctions is that civil-contempt sanc-

tions may not be imposed if there is a fair ground

of doubt that the conduct at issue violated the injunc-

tion. California Artificial Stone Paving Co. v. Molitor,

113 U.S. 609, 618 (1885). Indeed, “basic fairness re-

quires that those enjoined receive explicit notice of pre-

cisely what conduct is outlawed.” Schmidt v. Lessard,

414 U.S. 473, 476 (1974) (per curiam).

These principles should apply with equal force in the

bankruptey-discharge context. Nothing in the Bank-

ruptcy Code indicates that enforcement of a discharge

order should be governed by standards different from

those that apply to enforcement of ordinary civil injunc-

tions. The fact that Congress has expressly modified

the remedies for violations of other bankruptcy provi-

sions, but has not done so for violations of the discharge

injunction (except for violations committed by the IRS),

reinforces the inference that the traditional standard

for civil contempt should continue to govern here. Cf.

11 U.S.C. 362(k); 26 U.S.C. 7433(e).

Unlike an ordinary civil injunction, which typically

specifies the precise conduct that is prohibited, a bank-

ruptey discharge order usually does not state which

debts are and are not discharged. With respect to the

large majority of debts, however, the Bankruptcy Code

provides a clear answer to that question. But with re-

spect to the subset of debts whose dischargeability is

reasonably in doubt, it is both consistent with tradi-

tional equitable principles, and important to the proper

balancing of debtor and creditor interests, that the

1]

availability of civil-contempt sanctions be governed by

the traditional “fair ground of doubt” standard.

B. The court of appeals erred in suggesting that an

unreasonable subjective good-faith belief that particu-

lar conduct is consistent with a discharge order pre-

cludes a finding of civil contempt. “Since the purpose

[of civil contempt] is remedial, it matters not with what

intent the defendant did the prohibited act.” McComb

v. Jacksonville Paper Co., 336 U.S. 187, 191 (1949). A

putative contemnor’s good faith might be relevant to the

determination whether there exists, as an objective

matter, a fair ground of doubt about whether the debt

has been discharged. The court of appeals in this case,

however, did not treat respondents’ subjective good

faith as evidence of objective reasonableness. Rather,

the court erroneously held that respondents’ subjective

good faith standing alone precluded the imposition of con-

tempt sanctions, even if respondents’ belief in the legal-

ity of their conduct was objectively unreasonable.

C. Petitioner’s proposed standard also is incorrect.

Petitioner supports the near-strict-liability standard

for contempt adopted by the bankruptcy court below

and by the Eleventh Circuit in Hardy. Under that stan-

dard, a creditor is subject to contempt as long as it was

aware of the existence of the discharge and then inten-

tionally committed an act that a court later determines

violated the discharge injunction. That standard is in-

compatible with the traditional standards governing en-

forcement of injunctions, since it authorizes imposition

of civil-contempt remedies even in circumstances where

the applicability of the discharge order to a particular

debt was in reasonable doubt at the time the collection

efforts occurred.

12

Petitioner argues that, in order to insulate them-

selves from potential contempt sanctions, creditors

should be required to seek an advance determination of

dischargeability from the bankruptcy court rather than

litigating the question during collection proceedings

brought in other forums. That approach would often be

impractical, especially in cases involving governmental

creditors, and would unduly hamper creditors’ rights to

recover non-discharged debts owed to them. It also

would create artificial incentives for creditors to seek

advance bankruptcy-court determinations whenever

they believe particular debts to be nondischargeable,

despite Congress’s express judgment that only three

statutory exceptions to discharge require such advance

determinations.

D. Respondents may ultimately prevail under the

traditional standards governing injunctive relief and

civil contempt, by establishing a fair ground of doubt

about whether respondents’ conduct violated the dis-

charge order. See Jn re Ybarra, 424 F.3d 1018, 1026-

1027 (9th Cir. 2005), cert. denied, 547 U.S. 1163 (2006).

That the courts below disagreed on the question sup-

ports that conclusion. Cf. California Artificial Stone

Paving, 113 U.S. at 618 (“If the judges disagree there

can be no judgment of contempt.”). This Court, how-

ever, is one “of review, not of first view.” Cutter v. Wil-

kinson, 544 U.S. 709, 718 n.7 (2005). The Court accord-

ingly should vacate the judgment below and remand the

case to allow the lower courts to make that determina-

tion in the first instance.

13

ARGUMENT

A CREDITOR'’S SUBJECTIVE GOOD FAITH DOES NOT

PRECLUDE A FINDING OF CIVIL CONTEMPT, BUT

CIVIL-CONTEMPT REMEDIES ARE NOT AVAILABLE IF

THERE IS AN OBJECTIVELY FAIR GROUND OF DOUBT

ABOUT WHETHER THE CREDITOR’S CONDUCT VIO-

LATES A DISCHARGE ORDER

A. Traditional Principles Governing Injunctive Relief

Apply To The Enforcement Of Discharge Orders En-

tered In Bankruptcy Cases

Under traditional equitable principles, a litigant may

not be held in civil contempt for violating an injunction

if there exists a fair ground of doubt about whether the

injunction prohibited the challenged acts. That tradi-

tional principle applies to the enforcement of bank-

ruptey discharge orders as well.

1. Under the Bankruptcy Code, a discharge order

“operates as an injunction against the commencement

or continuation of an action, the employment of process,

or an act, to collect, recover or offset any [discharged]

debt as a personal liability of the debtor, whether or not

discharge of such debt is waived.” 11 U.S.C. 524(a)(2).

Although Section 524 does not specify a remedy for vio-

lations of the discharge injunction, Section 105(a) au-

thorizes a court to “issue any order, process, or judg-

ment that is necessary or appropriate to carry out the

provisions of” Title 11. 11 U.S.C. 105(a).

Taken together, these provisions incorporate gen-

eral principles of injunctive relief, including the princi-

ples that govern the imposition of sanctions for con-

tempt. Contempt is the traditional means by which

courts enforce their injunctions. See, e.g., Young v.

United States ex rel. Vuitton et Fils S. A., 481 U.S. 787,

796 (1987). Indeed, a court’s power to impose contempt

14

“is essential to the administration of justice.” Michael-

son v. United States ex rel. Chicago, St. Paul, Minne-

apolis & Omaha Ry. Co., 266 U.S. 42, 65 (1924).

“|W ]here Congress borrows terms of art in which are

accumulated the legal tradition and meaning of centu-

ries of practice, it presumably knows and adopts the

cluster of ideas that were attached to each borrowed

word in the body of learning from which it was taken

and the meaning its use will convey to the judicial mind

unless otherwise instructed.” Morissette v. United

States, 342 U.S. 246, 263 (1952); see Sekhar v. United

States, 570 U.S. 729, 733 (2013). Particularly when read

in light of that interpretive principle, the statutory di-

rective that a discharge order “operates as an injunc-

tion,” 11 U.S.C. 524(a)(2), is best understood to author-

ize bankruptcy courts to enforce their discharge orders

under Section 105(a) in accordance with the same prin-

ciples that govern courts’ traditional powers to enforce

their injunctions. Consistent with that natural under-

standing of the statutory text, courts of appeals largely

have recognized that the imposition of civil contempt for

violations of a discharge injunction “is governed by the

same standards *** applicable to all civil contempt

proceedings.” Jn re Zilog, Inc., 450 F.3d 996, 1008 n.12

(9th Cir. 2006); ef. Cox v. Zale Del., Inc., 239 F.3d 910,

916 (7th Cir. 2001) (Posner, J.) (looking to “standard

remedies in cases of civil contempt”); Pertuso v. Ford

Motor Credit Co., 233 F.3d 417, 421 (6th Cir. 2000) (ex-

plaining that “(t]he obvious purpose” of Section 524 “is

to enjoin the proscribed conduct,” and that “the tradi-

tional remedy for violation of an injunction lies in con-

tempt proceedings”).

2. One fundamental principle governing enforce-

ment of injunctions is that civil-contempt sanctions may

15

not be imposed if there is an objectively fair ground of

doubt that the conduct at issue violated the injunction.

In California Artificial Stone Paving Co. v. Molitor,

113 U.S. 609 (1885), for example, this Court agreed with

the lower court’s refusal to impose contempt, and it or-

dered that the case be dismissed. /d. at 618. The de-

fendant in California Artificial Stone Paving previ-

ously had been enjoined from infringing a patent that

protected “an improvement in concrete pavement.” /d.

at 610. The improvement consisted of “laying the pave-

ment in detached blocks” instead of in a “continuous

sheet,” which was “liable to crack in irregular directions.”

Id. at 610-611. After the injunction was issued, the de-

fendant “varied his mode of making” pavement by no

longer making “separate and detached blocks,” but “only

making a mark or indentation on the surface” of a large

sheet, which apparently was “sufficient to produce the re-

sults obtained by [the patented] process.” /d. at 613.

The lower-court judges disagreed about whether the

defendant’s new production method infringed the patent,

and the circuit judge decreed that the defendant could not

be held in contempt for violating the injunction. Califor-

nia Artificial Stone Paving, 113 U.S. at 613. On appeal,

this Court stated that “[i]f the [lower court] judges disa-

gree” about whether the defendant had violated the in-

junction, “there can be no judgment of contempt.” /d. at

618. The Court explained that “[p}rocess of contempt is a

severe remedy, and should not be resorted to where there

is fair ground of doubt as to the wrongfulness of the de-

fendant’s conduct.” /bid.

An objectively fair ground of doubt about the ap-

plicability of an injunction can arise from a lack of clar-

ity in the terms of the injunction itself. In Jnternational

Longshoremen’s Association v. Philadelphia Marine

16

Trade Association, 389 U.S. 64 (1967), this Court re-

versed a finding of contempt that had been entered

against a union for violating an order requiring compli-

ance with an arbitral award. /d. at 74. The Court ob-

served that the order “contain[ed] only an abstract con-

clusion of law, not an operative command capable of ‘en-

foreement.’” /bid. Echoing California Artificial Stone

Paving, the Court warned that “[t]he judicial contempt

power is a potent weapon” and that “[w]hen it is founded

upon a decree too vague to be understood, it can be a

deadly one.” Jd. at 76. To that end, this Court has long

cautioned that “defendants ought to be informed as ac-

curately as the case permits what they are forbidden to

do.” Swift & Co. v. United States, 196 U.S. 375, 401

(1905). An “injunction to obey the law” is thus unen-

forceable, ibid., in part because “a general injunction

against all possible breaches of the law” would be too

“vague” to justify putting a defendant “at the peri! of a

summons for contempt,” id. at 396. Federal Rule of

Civil Procedure 65(d) incorporates these traditional

principles, requiring “[e]very order granting an injunc-

tion” to “state its terms specifically” and to “describe in

reasonable detail * * * the act or acts restrained or re-

quired.” Fed. R. Civ. P. 65(d)(1)(B) and (C).

Lower courts routinely apply the “fair ground of

doubt” standard in deciding whether the defendant

should be sanctioned for violating an injunction in the

ordinary civil context. See, e.g., TiVo Inc. v. EchoStar

Corp., 646 F.3d 869, 882 (Fed. Cir. 2011) (en bane); La-

tino Officers Ass'n City of N.Y., Inc. v. City of New

York, 558 F.3d 159, 164-165 (2d Cir. 2009); United

States v. Saccoccia, 433 F.3d 19, 28 (1st Cir. 2005). Con-

sistent with that test, courts recognize that injunctions

must “have clearly and unambiguously forbidden the

17

precise conduct on which the contempt allegation is

based” before the court may impose contempt sanc-

tions. Saccoccia, 433 F.3d at 28 (emphasis omitted);

see, e.g., CPE Racing Prods., Inc. v. BMF Wheels, Inc.,

793 F.3d 571, 598 (6th Cir. 2015) (contempt available

only for violation of “a definite and specific order of the

court” listing “particular act or acts” that are forbidden)

(citations omitted); City of New York v. Mickalis Pawn

Shop, LLC, 645 F.3d 114, 144 (2d Cir. 2011) (“an injune-

tion must be more specific than a simple command that

the defendant obey the law”) (citation omitted); cf. Jove

Eng’g, Inc. v. IRS, 92 F.3d 1539, 1546 (11th Cir. 1996)

(statutory injunctions must be “clear, definite and un-

ambiguous” to support contempt). And in applying that

test, courts generally resolve ambiguities in favor of the

putative contemnor. See, e.g., Aria NetMedia Corp. v.

Massachusetts Tech. Park Corp., 889 F.3d 1, 13 (ist Cir.

2018); Gascho vy. Global Fitness Holdings, LLC,

875 F.3d 795, 800 (6th Cir. 2017), cert. denied, 138 S. Ct.

2576 (2018).

3. There is no reason these traditional principles

cannot apply to the bankruptcy context here. To be

sure, Rule 65(d) does not directly apply to a bankruptcy

discharge order or to bankruptcy contempt proceed-

ings. See Fed. R. Bankr. P. 9014(c), 9020. And neither

Rule 65(d) nor Section 524(a)(2) requires a discharge

order to identify which debts are discharged with the

kind of specificity that Rule 65(d) requires for an ordi-

nary civil injunction. Application of Rule 65(d)’s speci-

ficity requirements to bankruptcy discharge orders

would be both undesirable and inconsistent with long-

standing bankruptcy practice. See pp. 3-4, supra. But

Congress’s directive that a discharge order “operates as

an injunction,” 11 U.S.C. 524(a)(2) (emphasis added),

18

nevertheless has important implications for enforce-

ment of a discharge order once it has been entered. In

particular, that directive indicates that contempt-like

remedies should be unavailable when a creditor had rea-

sonable grounds for doubting that particular conduct

would violate the discharge order, even if the court ulti-

mately determines that a violation occurred.

In one important respect, application of that princi

ple in the bankruptcy-discharge setting differs from en-

forcement of a usual civil injunction. If an ordinary in-

junction complies with the specificity requirements of

Rule 65(d), the requisite clear notice that particular

conduct is prohibited usually will appear within the four

corners of the injunction itself. Bankruptcy discharge

orders, by contrast, typically decree that all discharge-

able debts are discharged, without specifying which

debts are dischargeable. Cf. Jove Eng’g, 92 F.3d at

1546. To determine whether a discharge order prohib-

its continued efforts to collect a particular debt, a cred-

itor therefore must look beyond the four corners of the

order itself and consult the applicable provisions of the

Bankruptcy Code.

Despite that difference, the “no fair ground of doubt”

standard can cogently be applied to circumstances

where a creditor continues to undertake collection ef-

forts after a discharge order has been entered. But in

determining whether a fair ground of doubt exists, the

court in deciding whether contempt sanctions are war-

ranted should not limit its inquiry to the express terms

of the discharge order. A bankruptcy discharge could

not serve its intended purpose if a creditor could con-

tinue efforts to collect discharged debts and then avoid

contempt sanctions simply by pointing out that the or-

19

der itself did not specify which debts had been dis-

charged. Rather, the court should ask whether the dis-

charge order, read in light of and in conjunction with

the applicable Code provisions, left legitimate doubt as

to the discharge of a particular debt.

With respect to the large majority of debts owed by

persons who obtain bankruptcy discharges, the applica-

ble law will leave no fair ground of doubt that the debt

has been discharged, even if the discharge order stand-

ing alone does not speak to the point. Absent an allega-

tion of fraud, for example, prepetition consumer debts

(including credit-card debts) are unlikely to fall within

any of the statutory exceptions to discharge listed in

11 U.S.C. 523(a). A creditor who attempts to collect

such debts thus likely could not show a “fair ground of

doubt” that the debt survived the discharge. California

Artificial Stone Paving, 113 U.S. at 618. And for cer-

tain categories of debt, the Code provides that the debt

will be discharged unless the bankruptcy court makes

an advance determination to the contrary. 11 U.S.C.

523(c)(1); see 11 U.S.C. 523(a)(2), (4), and (6). A creditor

who fails to obtain an advance determination before at-

tempting to collect these types of debts also would have

no valid defense to contempt.

Moreover, under established equitable principles,

the “fair ground of doubt” inquiry should be conducted

on a debt-by-debt basis. Even when real doubt exists

as to whether one debt has been discharged, there may

be no similar uncertainty as to the dischargeability of

the debtor’s other debts. A creditor who attempts to col-

lect a clearly- discharged debt in that circumstance can

be subjected to contempt sanctions, notwithstanding

the existence of real uncertainty about a different as-

pect of the discharge order’s scope. That result follows

20

from the established rule that, even if an injunction is

unclear in some respects, the court may impose civil-

contempt sanctions if there is no fair ground of doubt

that the injunction prohibited the specific conduct in

which the alleged contemnor engaged. See, e.g., Chao

v. Gotham Registry, Inc., 514 F.3d 280, 292 (2d Cir.

2008) (evaluating “not whether the decree is clear in

some general sense, but whether it unambiguously pro-

scribes the challenged conduct”); Abbott Labs. v. Un-

limited Beverages, Inc., 218 F.3d 1238, 124' (11th Cir.

2000); Northeast Women’s Ctr., Inc. v. McMonagle, 939

F.2d 57, 64 n.11 (3d Cir. 1991).

But where there is an objectively reasonable dispute

about whether a particular debt has been discharged, it

is both consistent with traditional equitable principles,

and important to the achievement of an appropriate bal-

ance between debtor and creditor interests, to hold that

a creditor’s attempt to collect that debt cannot subject

it to civil contempt. In an analogous Chapter 13 context

involving a claimed violation of a plan confirmation, the

Eighth Circuit recently declined to hold a state agency

in civil contempt for seeking to collect domestic-support

obligations from the debtors because the agency “had a

reasonable basis for believing that the * * * debt would

survive the Chapter 13 bankruptcy case.” /n re Spen-

cer, 868 F.3d 748, 752 (2017). “Even if [the agency] was

wrong on the merits,” the court held, “its action did not

warrant a contempt order and sanctions.” /bid.; see,

e.g., In re Gervin, 300 Fed. Appx. 293, 301 (5th Cir.

2008) (per curiam) (no contempt where applicability of

the discharge injunction to the claim was unsettled and

“caused extensive litigation”); Jn re Ben Franklin Hotel

Assocs., 186 F.3d 301, 309 (3d Cir. 1999) (no contempt

where creditor had “at least a colorable argument”).

21

The fact that contempt remedies are unavailable in

those circumstances does not mean that no relief can be

awarded. If a creditor successfully collects a dis-

charged debt after the discharge order has been en-

tered, the bankruptcy court can direct the creditor to

return the property it has collected in violation of the

order, even if the existence of reasonable doubt about

dischargeability at the time of collection precludes the

imposition of contempt sanctions. And going forward,

an order directing the creditor to return the property in

those circumstances would remove any fair ground of

doubt about whether the debt had been discharged,

thus exposing the creditor to contempt sanctions if it re-

newed its collection efforts.

B. The Court Of Appeals Erred In Holding That A Credi-

tor’s Unreasonable Good-Faith Belief That Its Collec-

tion Efforts Are Lawful Precludes The Imposition Of

Contempt Sanctions

Consistent with the principles described above, the

court of appeals observed that civil contempt is availa-

ble only where the movant can establish that the alleged

contemnor “violated a specific and definite order of the

court.” Pet. App. lla. Relying on Ninth Circuit prece-

dent, however, the court also stated that “the creditor’s

good faith belief that the discharge injunction does not

apply to the creditor’s claim precludes a finding of con-

tempt, even if the creditor’s belief is unreasonable.” /d.

at 12a. The court found it to be undisputed that re-

spondents “possessed a good faith belief that the dis-

charge injunction did not apply to their claims because

[petitioner] had ‘returned to the fray,” id. at 13a, and it

held that respondents’ “good faith belief, even if unrea-

sonable, insulated them from a finding of contempt,”

22

ibid. The court of appeals erred in treating subjective

bad faith as a prerequisite to contempt remedies.

Under traditional principles governing the enforce-

ment of ordinary civil injunctions, subjective bad intent

is not required to support a finding of civil contempt.

Unlike criminal contempt, civil contempt is “remedial,”

not “punitive.” Gompers v. Bucks Stove & Range Co.,

221 U.S. 418, 441 (1911); Shillitani v. United States,

384 U.S. 364, 369 (1966). “Since the purpose is remedial,

it matters not with what intent the defendant did the

prohibited act.” McComb v. Jacksonville Paper Co.,

336 U.S. 187, 191 (1949); see 2 James L. High, A Trea-

tise on the Law of Injunctions § 1418, at 1427 (4th ed.

1905) (“Nor does the question of the motive or intent

with which the writ was disobeyed alter or vary the re-

sponsibility for the violation.”).

Courts of appeals thus generally recognize that

“{t}he ‘intent of the recalcitrant party is irrelevant’ in a

civil contempt proceeding,” Food Lion, Inc. v. United

Food & Commercial Workers Int’l Union, AFL-CIO-

CLC, 103 F.3d 1007, 1016 (D.C. Cir. 1997) (citation omit-

ted), and that “good faith is not a defense to civil con-

tempt,” Robin Woods Inc. v. Woods, 28 F.3d 396, 399

(3d Cir. 1994). See CFE Racing Prods., 793 F.3d at 598

(“no requirement to show intent” to impose contempt);

but see First State Bank of Roscoe v. Stabler, 914 F.3d

1129, 1140 (8th Cir. 2019) (“Sanctions generally should

be unavailable where a creditor acts * * * in good faith

reliance on the belief that their actions are permissi-

ble.”). Respondents have identified no reason why a dif-

‘svent rule should apply in the bankruptcy context. Cf.

br. in Opp. 26 n.9 (discussing McComb).

23

With respect to certain bankruptcy-law violations—

e.g., Violations of the automatic stay and certain viola-

tions by the IRS—Congress has specified a particular

mental-state requirement and the penalties that may be

imposed. See 11 U.S.C. 362(k); 26 U.S.C. 7433(e). By

contrast, the Bankruptcy Code does not specify any

mental-state requirement to discipline violations of a

discharge order under Section 105(a). The Code’s di-

rective that a discharge order should “operate|] as an

injunction,” 11 U.S.C. 524(a)(2), therefore, is best un-

derstood to incorporate the traditional principles gov-

erning ordinary civil injunctions, under which a subjec-

tive good-faith belief, standing alone, does not preclude

a finding of civil contempt.

To be sure, a defendant’s subjective good-faith belief

that it is complying with an injunction might sometimes

be relevant to the determination whether the belief was

objectively reasonable, i.e., whether there was “fair

ground of doubt” that the injunction proscribed the de-

fendant’s conduct. But the court of appeals in this case

did not treat respondents’ subjective good faith as evi-

dence of objective reasonableness. Rather, the court

stated that respondents’ “good faith belief, even if wn-

reasonable, insulated them from a finding of contempt.”

Pet. App. 13a (emphasis added); see id. at 12a. That

holding has no basis in the general principles that gov-

ern enforcement of civil injunctions. If there is no ob-

jectively reasonable ground for disputing that an in-

junction proscribes particular conduct, a party who en-

gages in that conduct cannot avoid civil contempt by

claiming confusion about the order’s scope. See, e.g.,

Robin Woods, 28 F.3d at 399 (imposing sanctions where

the injunction left “no ground to doubt the wrongfulness

24

of the cenduct” at issue). And given Congress’s di-

rective that a bankruptcy discharge order “operates as

an injunction,” 11 U.S.C. 524(a)(2), there is no sound ba-

sis for treating subjective good faith as determinative in

the discharge-violation context.

C. This Court Should Not Adopt Petitioner's Proposed

Rule

Although the court of appeals erred in treating re-

spondents’ subjective good faith as precluding imposi-

tion of contempt sanctions, petitioner’s proposed rule

also is flawed. Petitioner endorses (Br. 18-19; Pet. 27-

31) the standard applied by the bankruptcy court below

and by the Eleventh Circuit in Jn re Hardy, 97 F.3d

1384 (1996). Under that approach, a creditor who vio-

lates a discharge order can be held in contempt, even if

it reasonably believed that its conduct was consistent

with the order, so long as the creditor was “aware of the

discharge injunction” and “intended the actions” that

violated it. Jd. at 1390. That standard is incorrect and

leads to impractical results.

1. The standard that petitioner advocates is incon-

sistent with the principles that govern imposition of

ci-il-econtempt sanctions for violations of ordinary civil

injunctions. Under petitioner’s proposed rule, civil con-

tempt is justified as long as the creditor (1) knows of the

existence of the discharge injunction and (2) intention-

ally takes an act that a court later determines was pro-

hibited by that injunction. Pet. Br. 19; Hardy, 97 F.3d

at 1390. If a court determines that the debt at issue was

discharged, the second element almost always will be

satisfied, since the sorts of collection efforts (such as fil-

ing a collection lawsuit) that would violate a discharge

order rarely will be undertaken accidentally (7.e., unin-

25

tentionally). As a practical matter, adoption of peti-

tioner’s approach thus would mean that, whenever the

bankruptey court determines that a violation of its dis-

charge order has occurred, the violator can be subjected

to contempt sanctions so long as it knew of the dis-

charge order itself, no matter how reasonable the cred-

itor’s position that its own collection activities involved

a nondischargeable debt.

That expansive conception of civil contempt is incon-

sistent with the traditional equitable principles de-

scribed above. Under those principles, a person who is

found to have violated an injunction cannot be held in

contempt based solely on proof that he knew the injunc-

tion existec. Rather, it must be shown that the injunc-

tion left no fair ground of doubt that it prohibited

the specific actions in which the putative contemnor

engaged. See California Artificial Stone Paving,

113 U.S. at 618. Similarly in the bankruptcy-discharge

context, a creditor who violates the discharge order can-

not be held in contempt if there was fair ground of doubt

that the discharge covered the specific debt that the

creditor sought to collect.

This Court’s decision in McComb is not to the con-

trary. The injunction in that case “enjoined any prac-

tices which were violations of [certain] statutory provi-

sions” of the Fair Labor Standards Act of 1938,

29 U.S.C. 201 et seg., while specifying that its scope was

limited to provisions dealing with “minimum wages,

overtime, and the keeping of records.” 336 U.S. at 191-

192. The Court observed that the decree violated in that

case “provides the formula by which the amounts” that

the defendants were required to pay “can be simply

computed.” Jd. at 194. That characterization of the in-

junction suggests that the Court did not view the fact of

26

the defendants’ non-compliance as subject to reasona-

ble dispute. The Court also stated that the defendants

had demonstrated a “proclivity for unlawful conduct”

and “persistent contumacy” in committing “continuing

and persistent violations of the Act,” id. at 192, thereby

finding not only a lack of objectively reasonable doubt

about the injunction’s scope but something akin to

bad faith, which also has traditionally supported civil-

contempt sanctions. See Chambers v. Nasco, Inc.,

501 U.S. 32, 50 (1991). The McComb Court’s conclusion that

the defendants there were in contempt thus does not sug-

gest approval of petitioner’s approach here, under which

contempt sanctions can be based solely on a creditor’s

awareness that a discharge injunction existed and a court’s

ex post determination that the injunction was violated.

2. Petitioner’s proposed rule also would produce im-

practical results. Petitioner argues (Br. 22 & n.11, 23

n.12; Pet. 28-29) that, in order to avoid the risk of being

found in contempt, a creditor who is unsure about

whether its claim is barred can seek a determination

from the bankruptey court before undertaking any col-

lection action. Cf. McComb, 336 U.S. at 189. The exist-

ence of that alternative, however, provides no sound ba-

sis for the near-strict-liability approach that petitioner

advocates for cases where the creditor elects to proceed

in another forum instead.

The Bankruptey Code identifies only three types of

debts for which creditors are required to obtain an ad-

vance determination from the bankruptcy court that an

exception to discharge applies before continuing collec-

tion efforts. See 11 U.S.C. 523(a)(2), (4), and (6). The

other discharge exceptions are “self-executing,” so that

a creditor need not “obtain a judgment declaring the

debt excepted from discharge” before seeking to collect.

27

In re Williams, 438 B.R. 679, 687 (B.A.P. 10th Ci».

2010); see Tennessee Student Assistance Corp. v. Hood,

541 U.S. 440, 450 (2004) (describing the discharge ex-

ception in Section 523(a)(8) as “self-executing”) (cita-

tion omitted). The Code contemplates that any disputes

about the applicability to particular debts of these self-

executing exceptions typically will be litigated in the

collection action itself. See 28 U.S.C. 1334(b); Fed. R.

Civ. P. 8(¢)(1) advisory committee’s note (2010 Amend-

ment) (“The issue whether a claim was excepted from

discharge may be determined either in the court that

entered the discharge or—in most instances—in an-

other court with jurisdiction over the creditor’s claim.”).

The rule that petitioner advocates would create a

strong incentive for creditors to seek advance judicial

determinations from the bankruptcy court as to all

claims they believe to be excepted from discharge, even

when the exception at issue is self-executing under the

terms of the Code. That approach would effectively

override Congress’s decision to require advance deter-

mination only under specified exceptions. It also would

create undue delay and expense for all parties to the

bankruptcy proceedings, and thereby thwart “a chief

purpose of the bankruptcy laws”: “‘to secure a prompt

and effectual administration and settlement of the es-

tate of all bankrupts within a limited period.’” Katchen

v. Landy, 382 U.S. 323, 328 (1966) (citation omitted).

That is particularly true for government creditors, for

whom it would be infeasible to institute adversary pro-

ceedings for each debt they attempt to collect from in-

dividual debtors, especially as the individual debts often

are quite small.

Such delay also would unduly hinder a creditor’s le-

gitimate efforts to collect non-discharged debts. Under

28

petitioner’s rule, a creditor could not safely pursue a

collection action until all appeals over dischargeability

have been exhausted. As this case illustrates, that pro-

cess could take years. Indeed, the limitations period for

a suit to collect the debt could expire before a final judi-

cial determination of dischargeability, thereby extin-

guishing the creditor’s rights altogether. Petitioner’s

proposed rule thus would be unfair to creditors and

would upset the Bankruptcy Code’s careful balancing of

debtor and creditor rights.

Petitioner’s proposed rule would create a further

anomaly as well. As the damages award in this case il-

lustrates, the principal economic harm a debtor is likely

to suffer from a violation of the discharge injunction is

the attorney’s fees he will incur in contesting the credi-

tor’s efforts to collect the relevant debt. Cf. Hutto v.

Finney, 437 U.S. 678, 691 (1978). Because respondents

sought to litigate the dischargeability question in the

state-court collection action, petitioner argues that he

can recover his fees as a contempt sanction for respond-

ents’ purported violation of the discharge order. But if

(as petitioner recommends) a creditor instead asks a

bankruptey court to render an advance determination

that a particular debt is nondischargeable, and the

debtor wishes to contest the point, the debtor is likely

to incur substantially the same attorney’s fees. And if

the bankruptcy court finds that the debt has been dis-

charged, the debtor generally will not be entitled to at-

torney’s fees under the traditional “American Rule.”

See Alyeska Pipeline Serv. Co. v. Wilderness Soc’y,

421 U.S. 240, 247 (1975); ef. 11 U.S.C. 523(d) (requiring

the creditor to pay the debtor’s attorney’s fees only if it

unsuccessfully attempts to collect a debt under the

29

fraud exception to dischargeability in Section 523(a)(2),

and only if its position is “not substantially justified”).

Thus, if the Court adopted petitioner’s proposed rule

and future creditors responded by asking bankruptcy

courts to render advance determinations as to the dis-

chargeability of particular debts, debtors in petitioner’s

position still would suffer the same economic harm (at-

torney’s fees incurred to litigate dischargeability) for

which the contempt sanction in this case was intended to

compensate. That regime would simply create an artifi-

cial incentive for creditors to litigate such issues in bank-

ruptey court rather than in other forums. Given Con-

gress’s decision to require advance determinations of

dischargeability only with respect to three specified cat-

egories of debts (see pp. 26-27, supra), there is no reason

to suppose that creation of such an incentive would fur-

ther the purposes of the Bankruptcy Code.

D. The Court Should Vacate The Judgment Below And

Remand The Case To Allow The Court Of Appeals To

Apply The Correct Standard In The First Instance

The court of appeals held that respondents’ “good

faith belief” that their collection efforts were consistent

with the discharge order, “even if unreasonable, insu-

lated them from a finding of contempt.” Pet. App. 13a.

For the reasons set forth above, that holding was erro-

neous. In this as in other contexts where litigants re-

quest contempt sanctions for violations of injunctive or-

ders, the propriety of such sanctions turns on whether

there was an objective “fair ground of doubt” that the

alleged contemnor’s conduct was prohibited. The Court

therefore should vacate the judgment below and re-

mand the case so that the court of appeals can apply the

correct standard.

30

Under that standard, and in light of the Ninth Cir-

cuit’s prior decision in Jn re Ybarra, 424 F.3d 1018

(2005), cert. denied, 547 U.S. 1163 (2006), respondents

may ultimately prevail by demonstrating an objectively

fair ground of doubt about whether the discharge in-

junction prohibited their state-court collection efforts.

In accordance with typical practice in Chapter 7 cases,

the discharge order in petitioner’s bankruptcy case

stated that petitioner “shall be granted a discharge un-

der § 727 of Title 11, United States Code,” and it pro-

vided an “explanation of bankruptcy discharge in a

Chapter 7 case” from Official Bankruptcy Form No. 18.

09-39216 Bankr. Ct. Doc. 15, at 1 (Feb. 23, 2010) (capi-

talization and emphasis omitted). The discharge order

itself did not specify which of petitioner’s debts was dis-

charged.

The applicable statutory provisions likewise do not

specifically address whether a discharge order like this

one precludes efforts to collect the attorney’s fees at is-

sue here. Section 727 states that a discharge “dis-

charges the debtor from all debts that arose before the

date of the order for relief.” 11 U.S.C. 727(b). Under

Ybarra, attorney’s fees incurred after the discharge or-

der are not discharged if the debtor “return|s] to the

fray” of litigation. 424 F.3d at 1026-1027; but see

11 U.S.C. 101(5)(A) (prepetition “claim” includes a “con-

tingent” or “disputed” claim); 5 Collier on Bankruptcy

{ 553.03[1}[h][i], at 553-20 (16th ed. 2013) (attorney’s

fees incurred post-bankruptcy “in connection with * * *

a prepetition claim” are themselves “prepetition in na-

ture”). The first two courts to address the issue in this

case (the state trial court and the bankruptcy court)

held that petitioner had “returned to the fray,” and that

31

the discharge injunction therefore did not prohibit re-

spondents’ attempts to collect post-discharge attorney’s

fees. Cf. California Artificial Stone Paving, 113 U.S.

at 618 (“If the judges disagree there can be no judgment

of contempt.”). Objectively viewed, these circumstances

may well lead the courts below to conclude that, at the

time respondents initiated their collection efforts, there

was at least a fair ground of doubt about whether the

discharge injunction prohibited their actions. At a min-

imum, the bankruptcy court’s imposition of punitive

damages would seem to be in significant tension with

the non-punitive purposes of civil contempt. See Shil-

litani, 384 U.S. at 369; Gompers, 221 U.S. at 441.

This Court has repeatedly emphasized, however,

that it is a “court of review, not of first view.” Cutter v.

Wilkinson, 544 U.S. 709, 718 n.7 (2005); United States

v. Stitt, 139 S. Ct. 399, 407 (2018) (citation omitted). Be-

cause none of the courts below applied the correct legal

standard in determining whether respondents could be

subjected to contempt sanctions for violating the dis-

charge order, they should be given the first opportunity

to apply that standard to the circumstances of this case.

32

CONCLUSION

The judgment of the court of appeals should be

vacated and the case remanded for further proceedings.

Respectfully submitted.

NOEL J. FRANCISCO

Solicitor General

JOSEPH H. HUNT

Assistant Attorney General

MALCOLM L. STEWART

Deputy Solicitor General

SOPAN JOSHI

Assistant to the Solicitor

General

MARK B. STERN

SARAH CARROLL

THOMAS J. CLARK

PAUL A. ALLULIS

Attorneys

FEBRUARY 2019