Just because you don’t pay ordered attorney fees doesn’t mean you’re in contempt of court, necessarily

New case out of the Central District of California Bankruptcy Court—Judge Robles’s court.

First a little background. For the past two years or so, the parties have been litigating in bankruptcy court. Not sure what the nature of the litigation was, but it doesn’t matter much for this opinion. Back in late 2019 (pre-pandemic era!), plaintiff won a $1.8 million dollar verdict (including attorney fees and costs of $600k). 

Defendant appealed the verdict to the 9th Circuit Bankruptcy Appellate Panel, but lost there too. When the matter came back to to the trial court, as the losing party on appeal, Judge Robles awarded $153k in additional attorneys’ fees (ouch) to be paid within 45 days. Defendant apparently did not make that payment.

The current case. Which brings us to the recent opinion. Because defendant didn’t pay the $153k in fees, plaintiff filed for an application for an order to show cause why the defendant should not be held in contempt and set a hearing on the application. Put a simpler way, the plaintiff wanted the judge to sanction the defendant for not paying the fees by calling it “contempt of court.” And they set a hearing.

Judge Robles, instead of holding the hearing on the application, issued an order denying the application and striking the hearing. He explained that the court would first have to grant the application and issue an order to show cause, which he had not done. He also explained that one cannot have a hearing about sanctions until the court issues that OSC order, which, again, did not happen.

Finally, he explained that using the court’s sanction power to enforce the attorney fee award was inappropriate because the fee award only made the plaintiff a judgment creditor.  Sanctions would only be appropriate if there had been some kind of misconduct, as the opinion reasons. 

For local practitioners, Judge Robles pointed to Local Bankruptcy Rule 9020-1 as the correct procedure to seek an order to show cause.

JL AM Plus v. MBN Real Estate Investments (Oct. 12, 2021).

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